On December 27, 2020, President Donald Trump signed the Financial Help to Laborious Hit Small Companies, Nonprofits and Venues Act into legislation. It makes non permanent adjustments to guidelines governing well being and dependent care versatile spending accounts (FSAs) and permits employers that sponsor the plans to supply staff with extra time to make use of the advantages. Here’s a abstract of the non permanent provisions.
For plan years ending in 2020, employers might allow individuals to hold over any unused advantages or contributions remaining of their FSA to the following plan yr with out limitation. For instance, if the plan yr ended on December 31, 2020, you could allow individuals to hold over any unused steadiness to December 31, 2021. Earlier than the Act’s passage, carryover quantities had been allowed just for well being FSAs and had been restricted to $550.
Employers might lengthen the grace intervals for plan years ending in 2020 or 2021 for as much as 12 months after the top of the plan yr for each well being and dependent care FSAs.
You could allow staff who stop taking part in well being FSAs through the 2020 or 2021 calendar yr to proceed to obtain reimbursements from unused advantages by way of the top of the plan yr through which their participation ceases together with any grace interval.
You could enable staff to prospectively change their elections midyear for well being and dependent care FSAs for a plan yr ending in 2021, topic to the utmost contribution quantity allowed by legislation.
For dependent care FSAs, the age for qualifying dependents whose care may be paid for was raised to age 13 however just for plans with an enrollment interval ending on or earlier than January 31, 2020, and just for staff who had dependents who turned 13 throughout that plan yr (or the following plan yr if the worker is carrying over quantities to the following plan yr). Solely the quantities for the plan yr whose enrollment interval ended on or earlier than January 31, 2020, can be utilized for the dependents turning 13 throughout that point.
For instance, an worker taking part in a calendar yr plan may use her 2020 dependent care FSA steadiness for care supplied to her baby who turns 13 in 2020. If the worker didn’t use her total steadiness in 2020 and the plan implements the non permanent change permitting a carryover of the unused steadiness to the 2021 plan yr, she may use the 2020 quantities for any baby who turns 13 in 2021 additionally. (Be aware, as worded within the Act, this explicit change might be interpreted as being required, and you must monitor IRS steering concerning its implementation.)
Employers ought to take into account the implications the adjustments might have on plan administration and monitor any regulatory steering about its implementation.
If you happen to determine to implement the adjustments, you’re required to amend the plans no later than the final day of the primary calendar yr starting after the top of the plan yr through which the modification is efficient. For calendar-year plans, you have to amend them no later than December 31, 2021. For these of you with noncalendar-year plans who wish to implement the adjustments on your present plan years, the amendments would have to be adopted by December 31, 2022.
These of you with noncalendar-year plans might discover adopting retroactive adjustments for plan years ending in 2020 to be administratively difficult. If you happen to’d wish to undertake the adjustments for a plan yr that resulted in 2020, the modification must be adopted by December 31, 2021.
Further steering on implementing the adjustments is predicted from the IRS. Apart from the attainable exception famous above for the restricted change within the definition of “dependent” for dependent care FSAs, the adjustments are permissive, that means you aren’t required to implement them.