Employers offering FSAs need to be aware of some new opportunities for employees, enacted with the recent passing of a Covid-19 Relief Bill. Aimed at helping employees with surplus funds in their health care flexible spending accounts (HCFSAs) and dependent care flexible spending accounts (DCFSAs), new extensions have been enabled for carryover balances as well as enrollment periods.
Naturally, with many care options closed or under-utilized in 2020, many participants will have significant surplus funds that they don’t want to lose. Here’s what employers need to know so that they can adopt updated plans which help their employees get the most from their FSAs.
HCFSA & DCFSA Carryover Funds
Employers can now permit participants to carryover all funds from their 2020 and 2021 plan years. This is a direct change from the prior situation, which did not permit any carryover.
Retained Access to Terminated Accounts
This change allows employees who terminated their FSAs in 2020 or who terminate in 2021 to access their funds for the remainder of the plan year. Employees can continue to receive reimbursements from their qualifying expenses through the end of the plan year in which they terminated. This will include any applicable grace periods.
Extension of Grace Periods
Grace periods for FSA plans ending in 2020 or 2021 can now be extended for a total of twelve months. Grace periods for using remaining contributions to an FSA were previously capped at two and a half months. However, plans cannot utilize both a carryover and a grace period.
Flexibility for Mid-Year Election Changes
This change allows employers to permit mid-year election changes for their plan ending in 2021, without requiring status-change events.
Dependent Care FSA Age Change
If dependents aged out of a dependent care FSA in 2020, the applicable dependent age has now been bumped to fourteen years old from thirteen years old.
Deadline for Employers to Make Changes
If employers are ready to bring some of these temporary rules online, they have until the last day of the 2021 plan year to make retroactive changes to the 2020 plan year. Amendments have to be made by the employers — the changes are not automatically applied to plans.
Does your team need help updating your dependent care and FSA plans? WBD’s benefit administration professionals can help. Contact us today for details on the ben admin solutions that can make any organization’s HR run smoothly.