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Thursday, 21 January 2021 10:32

Flexible Spending Accounts Get Even More Flexible

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It’s likely not a surprise that last year saw a decline in healthcare spending due to closed medical offices and many other factors related to COVID-19. Because of this, provisions were included in December’s Consolidated Appropriations Act for both health Flexible Spending Accounts (FSAs) and Dependent Care flexible spending accounts (DCAs).

FSA accounts usually have a use-it-or-lose-it provision stating that funds must be used by the calendar year’s end or any remaining funds are lost. Included in the new provisions are relaxed rules for use of these funds, but employers have a choice as to whether or not to amend their plans to include the new, more lenient policies. If the employer does choose to amend their plans, some of the new provisions allowed are:

  • Employees who had unused FSA funds at the end of 2020 can carry over ALL such funds into the 2021 plan year. The same applies for 2021 funds, which can now be carried into the 2022 plan year.

  • There is an extended grace period for use of the previous year’s funds. Previously, health or dependent care FSA expenses in one calendar year could be submitted and reimbursed in the first 2½ months of the next year. The recent Act allows for those funds to be reimbursed during the full 12 months of the next year.

  • We believe the previous restriction that plans could either have the carryover option or provide the grace period, but not both, is still in place.

  • Employees can continue to receive reimbursements after termination of employment without electing COBRA.

  • Employees may change their 2021 health or dependent care contributions without an event such as a marriage, divorce, or birth of a child. Previously there needed to be a life change event in order to make changes to your contributions.

Please see the National Law Review for further details on the Act and its provisions. To find out how to amend your plan to include these changes, please see this article.

Remember, we’re here to help! If you have any questions about FSAs, DCAs, or any other benefits-related topics, click here to schedule a call with a member of the Fall River Team.

Read 826 times Last modified on Thursday, 28 January 2021 10:42