![]() Employers may amend their plans to allow employees, on an employee-by-employee basis, to opt out of the carryover or extended grace period in order to preserve their HSA eligibility.Individuals may not contribute to an HSA during a month in which they participate in a general purpose health FSA with a carryover, or during any grace period.Employers may choose to adopt an extended grace period of less than 12 months.Employers may limit the carryover amount to less than all unused amounts and limit the carryover to apply only up to a specified date during the plan year.Dependent care FSAs may adopt a carryover subject to the same rules that apply to health FSAs.The relief with respect to an increase in carryover amount or extension of a grace period is available to plans that both do and do not currently have a carryover or grace period (subject to the existing rule that health FSAs may adopt a grace period or carryover, but not both).Notice 2021-15 clarifies the following FSA provisions of the CAA: Increase in carryover of unused amounts and extension of grace periods Expenses under a dependent care FSA may be reimbursed for dependents who aged out during the COVID-19 pandemic.Plan participants may make prospective changes to their health and/or dependent care FSAs during 2021 (regardless of change of status).Plan participants who stop participating in the plan during 2020 and/or 2021 (terminated participants) may continue to be reimbursed for eligible expenses through the end of that plan year if they have unused amounts in their health and/or dependent care FSA.Health and dependent care FSA grace periods for plan years ending in 2020 and/or 2021 may be extended for up to 12 months after the end of the plan year. ![]() Amounts that are unused in 2020 may be carried over to 2021 amounts that are unused in 2021 may carried over into 2022.Specifically, the CAA allows the following: 1 The FSA changes were designed to help participants with unused balances (such as for childcare expenses that were not incurred during the COVID-19 pandemic) who would normally lose the value of the FSA balance at the end of the tax year (due to the “use it or lose it” rule in the tax code).Įmployers may adopt any or all of the relief provided in the CAA at their discretion. The CAA provides flexibility for unused amounts in health and dependent care FSAs for 20, among other changes. The Internal Revenue Service has issued Notice 2021-15 clarifying the flexible spending account (FSA) provisions of the Consolidated Appropriations Act, 2021 (CAA).
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