As noted in our prior blog posts here and here, Section 214 of the Consolidated Appropriations Act of 2021 (“Act”) permits employers to amend their flexible spending account (FSA) plans to help participants avoid forfeiting unused amounts for the 2020 and 2021 plan years. The Act offers employers a myriad of temporary relief options for health FSAs—including expanded carryover relief, extended grace period relief, mid-year election change relief and post-termination spend down relief. The IRS recently issued Notice 2021-15 (“Notice”) giving employers significant flexibility to tailor these relief options to their particular concerns and objectives. This blog post answers common questions about how the guidance applies to health FSA benefits; the application to dependent care FSA benefits will be discussed in a forthcoming blog post.
Employers should keep in mind that:
- All of the relief options are optional. An employer can choose not to adopt any of them or can adopt only some options.
- All of the relief options require plan amendments.
- The options do not permit participants to receive refunds of their unused contributions.
- The options do not permit participants to use health FSA balances for dependent care expenses or vice versa.
