These 5 Provisions May Make Your 2021 FSA More Flexible
Good news for those who are still looking to master the ever-complex art of FSA budgeting: this year’s FSA rules may make your pre-tax spending more flexible than ever.
Thanks to the Consolidated Appropriations Act (CAA), provisions are being put into place that will provide relief for Health FSA and Dependent Care FSA users across the country. Of course, they are all completely optional for employers to adopt — so check if your employer has enacted them before making any big spending decisions.
With that in mind, here are 5 big changes you may see in your FSA this year:
1. Carryover of Remaining FSA Balances for Plan Year Ending in 2020 or 2021
Currently, rollover of unused funds is capped at $550 for Health FSA users, and not allowed for DCFSA users. If your employer opted into this provision in December, however, all of your remaining funds should have rolled over, and you’ll be able to use your 2020 FSA money in 2021.
2. 12 Month Grace Period Allowed for Plan Years Ending in 2020 or 2021
For employers who don’t allow FSA carryovers, grace periods have always been a great option to extend FSA spending. Similar to #1, this rule allows your employer to extend your grace period from 2.5 months to 12 months, though they would have had to do so before January for it to count this year.
3. You Can Modify Your Prospective FSA Contribution Outside of Open Enrollment
Previously, in order to change your FSA contribution during your plan year, you needed to experience a Qualifying Life Event, like getting married, or the birth of a child. Now, depending on your employers rules, you may be able to change your elections at any time. This is a big win, especially for those who majorly misjudged this year’s health and dependent care costs!
4. DCFSA Maximum Age Increased to 14 for 2020 Childcare Expenses
Previously, DCFSA childcare funds were only available for children 13 and younger. Luckily, this year, the rule is a little more flexible.
For parents who A) have carryover funds in their DCFSA from 2020 and B) have a child of qualifying age, it is perfectly fine to continue to use DCFSA funds for children 14 or under. Again, this only applies to expenses incurred in 2020.
5. Terminated Employees Can Use FSA Funds Through Remaining Plan Year
Historically, once an employee was terminated, they were limited to submitting reimbursements for expenses incurred before their termination, subject o a run-out period (often around 90 days).
This new rule allows employers to grant terminated employees full access to their FSA for the remainder of their plan year. That means they’ll be able to incur and spend their funds until the plan year has ended, regardless of when in the year they were terminated.
Of course, with great changes, comes great administrative burden. If you’re interested in hearing how Benepass can help your company administer better benefits, please reach out to us at email@example.com.