![]() ![]() ![]() An employer can limit the carryover to an amount less than the full unused balance.An employer can adopt a carryover now even if the FSA did not previously have one, and can adopt a carryover for some, but not all, participants (subject to the nondiscrimination rules).The Act – An employer can allow employees to carryover an unlimited amount of unused HCFSA and DCFSA funds from a plan year ending in 2020 to 2021 and a plan year ending in 2021 to 2022.Employees cannot carryover unused DCFSA funds. General Rule – An employer can allow employees to carryover up to $550 (indexed) of unused HCFSA funds from one plan year to the next.Clarification regarding the ability to add provisions to a cafeteria plan pertaining to the reimbursement of over-the-counter drugs and menstrual care products.īelow, we summarize the rules that normally apply (i.e., without application of the Act or Notice) and then how the Act and Notice change those rules for the applicable time period (generally, 20).Special mid-year election changes for FSAs, as well as medical, dental and vision elections for plan years ending in 2021 and.Special claims period and carryover for DCFSA dependents who “age out” during 20.Īnd, as a bonus, it also provides some additional flexibility for cafeteria plans:.Extended claims period for employees who cease participation in HCFSAs and.Grace period extensions for plan years ending in 20.Carryovers for plan years ending in 20.The highly-anticipated Notice provides the following temporary relief for health flexible spending arrangements (“HCFSAs”) and dependent care assistance programs (“DCFSAs”) (together, “FSAs”): Fortunately, the IRS guidance is generally good news, as it presents a lot of plan design options for employers, clear rules for administrators and ultimately, if adopted by the employer, a path for FSA participants to avoid forfeiting their FSA dollars, even if those participants are also enrolled in Health Savings Accounts for 2021. Because the Act was signed into law with a mere four days left in 2020, but applies to FSAs with 2020 plan years, there had been much uncertainty and speculation as to how the IRS would interpret these provisions and whether IRS guidance would adopt stringent or complicated rules that limit the flexibility Congress seemed to intend. On February 18, 2021, the IRS released Notice 2021-15 (the “Notice”) interpreting section 214 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Act”), enacted as Division EE of the Consolidated Appropriations Act, 2021 (Dec. ![]()
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