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IRS Update, News & Updates

January 8, 2021

Consolidated Appropriations Act, 2021. What You Need to Know About the New COVID Relief Bill.

Sunday December 27th, 2020 President Trump signed the Consolidated Appropriations Act, 2021 (CAA) into law. The CAA includes $900 billion of COVID relief measures. Highlighted below are sections of the bill that affect health and welfare plans – as well as next steps needing to be taken.

If you choose to put any of these changes into place, they will require an Amendment to your Section 125 Plan Document. Plan Amendments are an optional service that FBA provides and will provide you with a quote for this service.

  • All employers offering FSA (HealthCare, Limited Purpose, and/or Dependent Care) rollover, an employer may increase (but not required to increase) what they will allow participants to rollover from 2020 to 2021 (or 2021 to 2022).
    • Employer Action: Communicate to your dedicated account manager at FBA if you wish to make this update as soon as possible. If you have an existing rollover provision, communicating this prior to your Plan Year ending will allow FBA to facilitate this sooner.
    • FBA is creating a solution for employers who request rollover changes after the close of the 2020 year plan. Please be advised that the solution is still being developed and it may be several weeks before the roll out can begin.

  • A Grace Period for HealthCare FSA, Limited Purpose FSA, and/or Dependent Care FSA Plan Year ending in 2020 or 2021 may be extended (but not required to extend) for up to 12 months following the end of the Plan Year. This will allow spending of all unused balances remaining in these plans.

  • Employers who offer HealthCare FSAs may allow (but not required to allow) employees who terminated during 2020 or 2021 to continue spending down unused benefits through the end of the Plan Year in which their participation terminated.
    • Manual claim forms or electronic claim submissions will be utilized for claim reimbursement following termination.

  • Employers who offer Dependent Care FSA may extended (but are not required to extend) the age limit for qualifying children from 13 to 14 for a Plan Year for which open enrollment ended before January 31, 2020, and for any unspent funds from that plan year that are available (either by rollover or grace period) to the employee during the following plan year.

  • Option to allow for prospective mid-year changes for Flexible Spending Accounts without the need for a qualifying life event through the end of your Plan Year ending in 2021. (Similar to the previous provision put into place by IRS Notice 2020-29.)

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