President Trump signed the HR 133 Consolidated Appropriations Act (CAA) on December 27th, which contains five FSA changes to help employees avoid losing funds. The new provisions temporarily do away with the “use-it-or-lose-it” rule through 2022 by providing unlimited carryover and allowing mid-year election changes without a qualifying status event like getting married or having a child. Dependent Care FSAs also got a big win with an opportunity to add a carryover feature for the first time ever.
Employers wishing to offer any of these FSA changes must amend their Section 125 cafeteria plan to incorporate the changes (all Navia clients will be automatically opted in to the Navia recommended FSA changes on 1/20/21 unless otherwise communicated). The amendment may be retroactive if it is adopted no later than the last day of the calendar year following the year in which the amendment is effective.
Navia put together a guide detailing each provision, its effective dates, whether its temporary or permanent, and whether we recommend adoption or not. On the whole, Navia recommends adopting most of the provisions and we suggest this is a great time to add carryover to your FSA plan if you don’t already have it.
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FSA changes from the stimulus bill
Unrestricted Carryover – Employers can change their health and dependent care FSAs to allow carryover of all unused amounts from 2020 to 2021 and from 2021 to 2022. This is the first time carryover has been available for dependent care FSAs!
Extended 12-Month Grace Periods – Employers can adopt a 12-month grace period for unused benefits or contributions in health and dependent care FSAs for plan years ending in 2020 or 2021. Please note that extending the FSA grace period may have consequential impacts on eligibility for employers who also offer Heath Savings Accounts (HSAs).
Allowances for Terminated Employees – Health FSA participants who terminate their employment during the 2020 or 2021 plan year can 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 has been previously permitted for dependent care amounts).
Increased Eligibility Age for Dependent Care – The age for eligible dependents can be increased from 12 to 13 for the 2020 plan year. Expenses for children that turned 13 during the 2020 plan year can be reimbursed if your open enrollment period ended on or before 1/31/20.
Election Changes without Qualifying Status Events – Employers can permit prospective changes 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 released by the IRS in the early stages of the COVID outbreak).
Have more questions about how COVID is impacting your benefits?
Check out our COVID Resource page! Navia has compiled a comprehensive library of resources to help you navigate benefit changes during the COVID-19 pandemic. Learn about the stimulus bill and CARES ACT changes, download plan amendments, get resources for participants, and much more! We update this site regularly in accordance to the latest updates and change.
