Stimulus Package Increases Flexibility For FSAs and DCAs
Sec. 214 allows but does not mandate employers:
- to permit health and dependent care flexible spending arrangements (FSAs) to carryover all unused amounts from 2020 to 2021 and from 2021 to 2022
- to permit a 12-month grace period for unused benefits or contributions in health and dependent care FSAs for plan years ending in 2020 or 2021
- to permit Health FSA participants who terminate during the 2020 or 2021 plan year to spend down their unused balances for expenses incurred through the end of the plan year in which the termination occurred, including any grace period (similar to what is and has always been permitted for Dependent Care amounts)
- to extend the maximum age of eligible dependents from 12 to 13 for dependent care FSAs for the 2020 plan year and for unused amounts from the 2020 plan year carried over into the 2021 plan year; and
- to permit a prospective change in election amounts for health and dependent care FSAs for plan years ending in 2021 without a corresponding change in status event (similar to Notice 2020-29)
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