Expanded FSA Guidelines Explained

In an effort to keep all of our employer plan sponsors and their participants informed, OneBridge Benefits has provided an overview of the flexible spending account (FSA) temporary relief provisions included in the Consolidated Appropriations Act. This legislation was passed by Congress on December 21, 2020 to provide relief for employer-sponsored Flexible Spending Accounts amidst the COVID-19 pandemic.

FSA Temporary Relief Provisions in the Consolidated Appropriations Act, 2021

Listed below are the temporary relief provisions that FSA Plan Sponsors can optionally adopt for their 2020 and/or 2021 FSA Plans (unless noted otherwise):

1. Carryover Increase: Previously, only up to $550 of unused FSA funds could be carried over by a participant to the following Plan Year. The Act’s provision now makes it possible to carry over up to the full amount of unused FSA funds. Furthermore, the Act also temporarily allows Plan Sponsors to add this temporary carryover relief option to their Dependent Care FSA Plans.
2. Grace Period Extension: Before the Consolidated Appropriations Act, the maximum Grace Period an FSA Plan Sponsor may add to their FSA Plans could not exceed 2½ months. The new legislation now permits the FSA Plan Sponsor the ability to extend their Plan’s grace period up to the end of the respective Plan Year for their 2020 and/or 2021 Plans.  
3. Flexible Election Changes: FSA participants in a 2021 Plan can now more flexibly increase or decrease their election amounts during the Plan Year without having a required Qualifying Life Event (QLE). It’s important to note, however, that the election amount change cannot exceed the plan sponsor’s allowed maximum election limit.  Additionally, Plan Sponsors can also allow for new elections from eligible employees that didn’t previously enroll during the plan’s open enrollment period.
4. Extended Grace Period for Termed Health FSA Participants: Separated Health FSA participants can now be reimbursed for eligible expenses through the last day of any applicable grace period or the end of the last day of the Plan, whichever is greater. For example, if a participant ceased participation in a health FSA during 2020 with a remaining balance, the participant may seek reimbursement for healthcare expenses incurred after termination or participation up to the end of the Plan Year or grace period.
5. Increased Dependent Age: Dependent Care FSA participants can now seek reimbursement on dependent care expenses for dependents who attained the age of 13 during the Plan Year, providing the “eligible employee” was enrolled in the dependent care FSA during the most recent plan year with a regular enrollment period ending on or before January 31, 2020.

Plan Sponsors wishing to adopt any of the changes or special provisions under the Act will be required to amend their current plan documentation.

To learn more about these new, temporary relief and optional provisions, as well as how OneBridge can continue to lessen your plan administration burden, please contact us at 888-338-4415 (Option 2).