Congress Passes Consolidated Appropriations Act, 2021
On December 21, 2020, Congress passed The Consolidated Appropriations Act, 2021 (CAA).
The CAA includes relief for plan sponsors offering Health Care and/or Dependent Care Flexible Spending Accounts (FSAs).
These voluntary rules will benefit participants who have FSA funds left over due to medical care provider and school/daycare closures in 2020 as a result of the Covid-19 pandemic.
- Health FSAs (HCA) and Dependent care FSAs (DCA) may allow any remaining balances at the end of plan years ending in 2020 and 2021 to roll into the following plan year. Employers that currently have a carryover, can elect to allow this for FSA and/or DCA accounts. This would be a full balance carry forward into the next plan year.
- Health FSAs and dependent care FSAs may extend grace periods for plan years ending in 2020 and 2021 to up to 12 months. Accounts currently using a grace period can extend this from the current 2.5 month up to 12 months (essentially 12/31/2021 for 2020 plans).
- Health FSAs may allow employees who terminate participation during 2020 or 2021 to spend down unspent balances through the end of the plan year. This is similar to the DCA spend down currently offered to groups and will now be allowed for FSA accounts as well. This allows terminated members to continue to use any remaining balances on claims incurred after their date of termination but before the end of the plan year.
- Health FSAs and dependent care FSAs may allow prospective election changes during 2021 without regard to any change of status requirements. This is similar to the last COVID Relief Bill in 2020.
- Dependent care FSAs may extend the age limit for qualifying children from 13 to 14 for a plan year for which open enrollment ended before January 31, 2020, and for any unspent funds from that plan year that are available (either by rollover or grace period) to the employee during the following plan year.