In case you missed it……  Embedded in the recently passed Covid Relief Bill are new optional FSA provisions that give employers the option to immediately amend FSA Plans to create markedly more account flexibility. 

FSA dollars tend to expire at the end of the calendar or plan year.  Due to the Covid disruption many employees haven’t used their FSA funds as expected with many opting to defer medical, dental, or other care.  Others opted not to enroll or drop the FSA benefit during annual enrollment due to the uncertainty surrounding the pandemic.  Many employees faced possibly losing their contributions.

The recent changes allow employers help employees by increasing carryover amounts, extending grace periods, allowing election changes without regard to change in status rules, and permitting termed participants to receive reimbursements from unused contributions after termination.

The key provisions include:

  • The Carryover of Unused Funds: Employers can allow the carryover of unused FSA funds (with no dollar limit) from a plan year ending in 2020 and/or 2021 to a plan year ending in 2021 and/or 2022.
  • Extending the Grace Period: Employers can extend the FSA grace period to up to 12 months after the end of the plan year for a plan year ending in 2020 and/or 2021. This option allows employees and dependents to file a claim much later for an eligible expense incurred in the previous year.
  • Reimbursement After Termination: Employers can allow employees who stopped participating in an FSA in 2020 or 2021 to continue receiving reimbursements from unused benefits or contributions through the end of the plan year when their participation ended.  The funds contributed to the health FSA can remain available for spending for those who leave the company during the plan year.

Under these Covid Relief Act provisions, employers are allowed, but not required, to change their FSA Benefit plans. Amendments have to be made by the last day of the calendar year following the plan year in which the amendment is effective.  So, for example, calendar year 2020 plan amendments must be put in place on or before December 31, 2021.

Additionally, Dependent Care FSAs, which are separate from health-related FSAs, are also addressed in the Covid Relief Bill.  Provisions include carryover for unused funds, the extension of grace periods, contribution adjustments, and a carry-forward option for dependents who have aged out of the qualified dependent care range. Reimbursement expenses can now be permitted for children up to age 14 instead of up to age 13.

For more information go here .