Legal Update 12/29/20 Update: On Sunday, December 27, 2020 the Consolidated Appropriations Act, 2021 was signed into law. Sentinel is currently awaiting interpretive guidance from the IRS to ensure that we properly articulate and administer the new provisions that have been made available to employers.  As soon as this additional guidance is issued and processed, Sentinel will reach out via email to each client for which we administer an FSA plan to provide a more in-depth overview of the provisions as well as a way to opt-in to each option.

On Monday, December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021. Included in the volume of text were several items related to Flexible Spending Account (FSA) relief. This bill has not yet been signed into law by President Trump; however, if it is executed in its current state, employers will have several appealing provisions that they can adopt to help provide relief to employees who are enrolled in an FSA. Here is an overview of the key FSA provisions:
  • Full FSA Carryovers from 2020-2021 and 2021-2022 Plan Years For both the Health FSA and the Dependent Care FSA, a plan may allow carryovers of the full unused balance from plan years ending in 2020 and 2021 into the subsequent plan years ending in 2021 and 2022, respectively.
  • Extension of Grace Periods for 2020 and 2021 Plan Years For both the Health FSA and the Dependent Care FSA, the plan may have a 12-month grace period after the plan years ending in 2020 or 2021.
  • Post-Termination Health FSA Spend Down A plan may permit employees who are enrolled in a Health FSA and who terminate participation mid-year during calendar year 2020 or 2021 to continue to incur reimbursable claims for the remainder of the plan year in which participation ceased.
  • Special Carry Forward Rule for Dependent Care FSA Arrangements Where Dependent Aged Out During Pandemic Employees whose children reached age 13 during the last Dependent Care FSA plan year for which the enrollment period was on or before January 31, 2020 may continue to treat the child as eligible up to age 14 for such plan year.
  • Change in Election Amount As a follow-up to the mid-year changes provision offered in IRS Notice 2020-29 issued earlier this year, the bill provides that the cafeteria plan may permit employees to change their Health FSA or Dependent Care FSA election during plan years ending in 2021 without experiencing a permitted election change event.
If you’d like to read only the portions of the bill that apply to FSAs as they were written, you can find that text here.
 
Employers will not be able to opt-in to these provisions until the bill is signed into law. If and when that happens, Sentinel will send out an email to any employer for which we administer an FSA plan. In that email communication, we will provide a more detailed overview of the options, as well as a way for your organization to opt-in to any one of the available provisions.Opt-in will be required for any of these relief options to be applied to an employer’s FSA plan.
 
Sentinel is very excited to hear about the possibility of these provisions being signed into law as it means more options would be available for individuals who were unable to spend their FSA funds in 2020. If we administer an FSA plan for your organization, expect to hear from the Sentinel Health & Welfare Team via email if and when the bill is signed into law.