As noted in our prior blog post, the Consolidated Appropriations Act, 2021 (the Act) includes several types of relief for flexible spending accounts (FSAs), impacting both health FSAs and dependent care FSAs. The FSA relief provisions in the Act address a concern raised frequently by employees and employers in 2020 — must employees forfeit their remaining 2020 FSA funds based on the rules that normally apply to FSAs under the Internal Revenue Code (the Code), given that, due to the COVID-19 pandemic, many employees’ actual 2020 health and dependent care expenses were significantly less than employees anticipated when they elected FSA coverage for 2020?
The Consolidated Appropriations Act of 2021 (Act), enacted on December 27, 2020, contains a number of provisions that may impact the design and administration of employer-sponsored group health plans and flexible spending account (FSA) benefits. Below, we summarize the primary provisions. In the days and weeks ahead, Spotlight on Benefits will provide a series of blog posts that will address the provisions in more detail. We encourage health and FSA plan sponsors to review the blog posts and consider the preparations needed to comply with applicable changes in the law, including coordinating with insurers and third-party administrators, the various effective dates, and whether plan sponsors will have to amend their health plans or FSA plans to implement any applicable changes.
On May 12, 2020, the Internal Revenue Service (IRS) issued Notice 2020-33 (the Notice), which increases the maximum health flexible spending account (FSA) carryover limit. The Notice also addresses a gap in existing guidance related to reimbursement of individual insurance premiums by an individual coverage health reimbursement arrangement (ICHRA). Along with the Notice, the IRS also issued Notice 2020-29 to provide temporary relief related to the cafeteria plan mid-year change in status rules (Notice 2020-29 is discussed in our earlier blog post, here).
On May 12, 2020, the Internal Revenue Service (IRS) issued Notice 2020-29 (the Notice), an important piece of guidance for employers that sponsor health & welfare plans.
The Notice provides much-needed flexibility for employers who are dealing with unexpected requests and circumstances as a result of the 2019-nCoV (COVID-19) pandemic. As discussed below, the Notice permits – but does not require – cafeteria plans to provide additional opportunities for mid-year election changes for health coverage, health flexible spending account (health FSA) coverage and dependent care FSA (dependent care FSA) coverage. It also permits plans to extend the claims periods for health FSA and dependent care FSA expense reimbursement, and it clarifies earlier guidance regarding coverage of telehealth and COVID-19-related items under a high deductible health plan (HDHP).