FSA Provisions in the Consolidated Appropriations Act

This article highlights some of the FSA provisions in the Consolidated Appropriations Act- i.e., the new COVID relief package passed by Congress on 12/21/20.

OVERVIEW

As part of the latest COVID relief bill- the Consolidated Appropriations Act, passed by Congress on 12/21/20- employers have the option to permit the following allowances around health and dependent care flexible spending accounts (FSAs).

STAY UP TO DATE:

Stay up to date with American Rescue Plan Act: Dependent Care FSA.

For both health and dependent care FSAs

  • Carryover of unused funds from plan year ending in 2020 to plan year ending in 2021.

  • Carryover of unused funds from plan year ending in 2021 to plan year ending in 2022.

  • Grace periods for plan year ending in 2020 or 2021 may be extended to 12 months after the end of the plan year.

  • Prospective modification of election amount for health and dependent care FSAs (for plan years ending in 2021).

For health FSAs

Employees who cease participation in a health FSA during calendar year 2020 or 2021 may be provided with an opportunity to receive reimbursements from unused benefits or contributions through the end of the plan year in which their participation ceases (including a grace period, if applicable).

  • Note: at this point, it is not clear whether this permits reimbursement of expenses incurred after termination, or if it is simply an extended run-out period.

For dependent care FSAs

Employers may increase the maximum age (by one year) for dependent care beneficiaries who aged out during the pandemic.

NEXT STEPS

The allowances above are not required of employers— the bill states that they are optional.  If your organization would like to allow for any of the provisions above, please work with your broker and carriers and make any necessary changes by the following deadlines:

  • If the plan year you wish to amend runs from January 1, 2020, through December 31, 2020, plan amendments must be adopted by December 31, 2021.

  • If the plan year you wish to amend runs from July 1, 2020, through June 30, 2021, plan amendments must be adopted by December 31, 2022.

FREQUENTLY ASKED QUESTIONS

Are the health and dependent care FSA provisions outlined in the Consolidated Appropriations Act mandatory for employers?

No- the bill states that the updated FSA provisions are allowed, but not required.

What should I do if my organization would like to implement any of the allowed changes in the bill?

Please work with your broker to determine what is best for your organization, then work with your carrier to make sure that your plan and any affected employee accounts are updated appropriately on the carrier’s side.

Is any action required in the Namely system?

No- these changes do not require benefit or deduction changes in the Namely system; however, if any of the provisions affect individuals’ enrollment eligibility or election amounts, you may need to process a life event to update those details for particular employees.