Employers may provide FSA relief through new COVID-19 bill
Date posted: December 30, 2020
On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021. The bill includes several provisions to provide relief for health care and dependent care flexible spending accounts (FSAs), which may impact employers and their benefit plans.
Under these provisions, employers are allowed, but not required, to amend their Cafeteria Plans. Amendments must be made by the last day of the calendar year following the plan year in which the amendment is effective. For example, calendar year 2020 plan amendments must be adopted on or before December 31, 2021. The following is permitted:
- Carryover extension (HCFSA/DCFSA): Unused funds from plan years ending in 2020 and 2021 may be carried over into the next plan year.
- Grace period extension (HCFSA/DCFSA): For plan years ending in 2020 or 2021, the grace period may be extended up to 12 months after the end of plan year.
- Election amount changes (HCFSA/DCFSA): Plans ending in 2021 may allow election amount changes for any reason.
- Terminated participants (HCFSA): Allow participants who cease participation in a 2020 or 2021 plan the opportunity to receive reimbursements from unused contributions through the end of the plan year in which the participation ceased (including any applicable grace period).
- Maximum age increased (DCFSA): For a plan year that had an election period ending on or before January 31, 2020, participants may claim expenses for dependents who turned 13 during the applicable plan year and any extension to that plan year.
These provisions are options for employers to consider. Should you elect to amend your plan, please contact your Relationship Manager or Optum Bank client services.
Self-directed mutual fund investment options are made available through the services of an independent investment advisor, or your plan sponsor. Discretionary advisory services are provided by Betterment LLC, an SEC-registered investment adviser, with associated brokerage transactions provided by Betterment Securities, Member FINRA/SIPC. For details and disclosures visit betterment.com. The Schwab Health Savings Brokerage Account is offered to certain account holders through Charles Schwab & Co., Inc., Member FINRA/SIPC. For details and disclosures, visit schwab.com. Brokerage services are offered to certain accountholders through TD Ameritrade, Inc., Member FDIC/SIPC and a subsidiary of The Charles Schwab Corporation. For details and disclosures, visit tdameritrade.com.
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Health savings accounts (HSAs) are individual accounts offered through Optum Bank®, Member FDIC, or ConnectYourCare, LLC, an IRS-Designated Non-Bank Custodian of HSAs, each a subsidiary of Optum Financial, Inc. Neither Optum Financial, Inc. nor ConnectYourCare, LLC is a bank or an FDIC insured institution. HSAs are subject to eligibility requirements and restrictions on deposits and withdrawals to avoid IRS penalties. State taxes may apply. Fees may reduce earnings on account.
Flexible spending accounts (FSAs), dependent care assistance programs (DCAPs), health reimbursement arrangements (HRAs), Commuter and Parking Benefits, Tuition Assistance Plans, Adoption Assistance Plans, Surrogacy Assistance Plans, Wellness Benefits, and Lifestyle Accounts (collectively, “Employer-Sponsored Plans”) are administered on behalf of your plan sponsor by Optum Financial, Inc. or ConnectYourCare, LLC (collectively, "Optum Financial") and are subject to eligibility and restrictions. Employer-Sponsored Plans are not individually owned and amounts available under the Employer-Sponsored Plan are not FDIC insured. This communication is not intended as legal or tax advice. Federal and state laws and regulations are subject to change. Please contact a legal or tax professional for advice on eligibility, tax treatment, and restrictions. Please contact your plan administrator with questions about enrollment or plan restrictions.
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Your employer sponsored plan may exclude reimbursement for certain categories of items. Check your plan document and summary plan description or contact your benefits department for specific coverage details.
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