News alert: Trump signs COVID relief bill with provisions for FSAs

On Sunday, Dec. 27, 2020, President Trump signed into law a $900 billion stimulus bill to provide economic relief during the continuing coronavirus pandemic. The $600 stimulus checks for Americans included in the relief package, which passed both bodies of Congress last week, has garnered the most attention. However, several provisions in the bill relate to benefit accounts.

The proposed legislation would give employers the option to:

  • Amend their FSA and DCFSA plans to allow for a carryover of any unused funds from 2020 to 2021 and from 2021 to 2022.
  • Create more expansive grace periods for FSAs and DCAFSAs for plan years ending in 2020 or 2021 to 12 months after the end of such plan year.
    • FSAs and DCFSAs can reimburse individuals who are no longer active participants in the plan.
    • Employers can raise the last eligible age for children’s dependent care to 13 for the 2020 plan year.
  • Amend FSA and DCFSA plans to permit a prospective change in election amounts for plan year ending in 2021, without a corresponding change in status event (similar to Notice 2020-29 passed in May 2020).

Employers who wish to make any of the above proposed optional changes would have to do so by the end of the calendar year following the plan year they wish to amend. For example, employers would have to amend changes to the plan year ending in 2020 by the deadline of Dec. 31, 2021.

We will continue to monitor this legislation and provides updates.