COVID Stimulus Includes FSA Changes

and other important details employers may need to know


Temporary Special Rules for FSAs

On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021 into law. The ACT provides temporary special rules for health and dependent care FSAs giving employees additional time to use these funds.

Extended periods— For plan years ending in 2020 and 2021

  • Employees can be permitted to carry over unused amounts remaining to next plan year.
  • Grace periods are extended to 12 months after end of such plan year.
  • Employees who cease plan participation during 2020 or 2021 can continue to receive reimbursements from unused amounts through the end of the plan year in which their participation ended.

Dependent Care FSA — Special Carry Forward Rule

In circumstances where dependent aged out during the pandemic, the maximum age is increased from 13 to 14 years of age for the purpose of determining assistance that may be paid or reimbursed.

Election Amount Changes

Employees can elect to prospectively modify the amount of their FSA contributions for plan years ending in 2021, with or without a change in status. Applicable dollar limitations did not change and will continue to apply.

Employer Requirements

Employers can retroactively adopt plan amendments incorporating these provisions as long as:

  • The plan is operated consistently with the amendment terms until the amendment is adopted.
  • The amendment is adopted by the last day of the first calendar year following the plan year in which it is effective.

Other significant details

The wide-sweeping Bill contains a number of key provisions that will impact both public and private sector employment in 2021. A high-level look at some of these details reveals:

  • The Bill does not extend the mandates of the Emergency Family and Medical Leave Expansion Act (“EFMLEA”) or the Emergency Paid Sick Leave Act (“EPSLA”) enacted under the Families First Coronavirus Response Act (“FFCRA”).
  • The Bill allows tax credits to employers for “FFCRA like” paid leave benefits paid to employees through March 31, 2021
  • The Bill provides no economic incentive for public employers to continue FFCRA’s paid leave benefits.
  • The Bill expands upon the previously enacted CARES Act and provides for continued federal assistance to unemployed workers with supplemental weekly benefit payments of $300 and an extension of the maximum benefit period.