On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (“CAA”) bill including new provisions for Cafeteria Plans.
Employers have the option to:
- Amend their Medical FSA and Dependent Care Flex Accounts to carryover 100% of the unused funds from 2020 to 2021 and from 2021 to 2022 and can be used for expenses in the following plan year.
- Create more expansive grace periods for FSAs and Dependent Care FSAs for plan years ending in 2020 or 2021 to 12 months after the end of such plan year.
- FSAs and Dependent Care FSAs can reimburse individuals who are no longer active participants in the plan. (Note: If you wish to make this amendment, simply do not send a termination. This will extend coverage for that participant.)
- Employers can raise the last eligible age for children’s dependent care to 13 for the 2020 plan year.
- Amend FSA and Dependent Care FSA 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. They are not automatic. For example, employers would have to amend changes to the plan year ending in 2020 by the deadline of Dec. 31, 2021.
Employers Should Notify Employees of the Change(s)
Employers that want to amend their plans to allow for such changes should notify their employees of the change as soon as possible, so they are aware of the changes allowed, but have until the following plan year to amend their plan.
We’re Here to Help
Please contact your Employee Benefits Administrator at (320) 214-2909 if you are interested in amending your Cafeteria Plan to allow for these changes or if you have any questions.
