The new legislation in the Consolidated Appropriations Act 2021 will help reduce employee financial hardship when they participate in a Flexible Spending Account plan(s). Several provisions are now available for plans that ended in 2020 or will end in 2021. These include benefits for employees to take advantage of.
TASC will automatically update all FSA plan(s) housed on our Universal Benefit Account system to include the new provisions outlined in the legislation. That means that our clients have even less to worry about because we are making the necessary adjustments to help employees take full advantage of these changes. This will help employees maximize their benefits without adding additional paperwork or action required from employers to ensure employees see these benefits.
What exactly are these new provisions and plan changes and how could they affect your employees?
Carryover or Grace Period: Plans with “none” will be updated to offer unlimited carryover for plan years ending in 2020 and 2021. Under the Act, health care FSAs and dependent care FSAs may permit participants to carry-over any unused funds from the 2020 plan year to the plan year ending in 2021. Similarly, health care and dependent care FSAs may permit participants to carry-over unused funds from the 2021 plan year to the plan year ending in 2022.
- When both an HFSA and DCFSA are in place, the DCFSA year- end processing election will mirror the HFSA. Example: If HFSA has grace period, the DCFSA will be receive the grace period provision.
- When both an HFSA and LPFSA are in place, the LPFSA year- end processing election will be updated to mirror the HFSA.
- Employers who have High-Deductible Health Plans (HDHPs) that allow employees to open Health Savings Accounts (HSAs) should exercise caution in allowing the extended grace period or carryover to avoid adversely impacting their employees’ ability to contribute to or receive employer contributions to their HSA.
Midyear Election Changes: All plans will be updated to accept election changes from participants at any time without a change in status for plan years ending in 2021. The Act temporarily permits cafeteria plans to allow participants to make prospective mid-year election changes with respect to health care and dependent care FSAs for plan years ending in 2021 for any reason
HFSA/LPFSA Post-Termination Reimbursements: Participants who cease their participation in the HFSA during calendar years 2020 or 2021 may incur expenses and receive reimbursements from unused contributions through the end of the plan year in which participation ceased (including the grace period).
DCFSA Age Limit Increase: DCFSA plans will now be accepting reimbursements for dependent children up to age 14. Prior to this Act, the age limit was 13. This will allow reimbursements to be received from funds that were carried over from the precious plan year.
In addition to the outlined changes above the Act also addresses Student loan repayment and Partial Universal Charitable Deduction. The Act extends employers ability to provide a tax advantaged student loan repayment benefit to their employees. Employers can pay up to $5,250 toward employee education costs or toward their student loan debt and can take advantage of the credit for any loan payments made on or after the act took effect and before Jan. 2, 2021.
For Partial Universal Charitable Deduction, the Act extends and modifies the non-itemizer charitable deduction for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing a joint return.
I want to encourage employers to communicate these changes to employees to increase awareness and understanding of these changes.
A lot of changes with a lot of implications for employees taking advantage of these account offerings.
For more information on how this latest legislation affects your employees and your business visit the TASC Universal Benefit Account website.
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