On December 27, 2020 President Trump signed the Consolidated Appropriations Act, 2021(CAA), which includes $900 billion of COVID relief measures. Below we highlight the legislation included in this bill that affects Cafeteria Plans.
Please note that these actions are all optional and will require an amendment if you so choose to offer one or more of the benefits.
FSA Carryover/Rollover Increase
Carryover/rollover, an employer may increase what they allow participants to rollover from 2020 to 2021 (or 2021 to 2022). We are recommending that you notify us by February 28 if you would like to offer this option.
FSA and DCA Election Changes
Employers offering health FSAs and dependent care FSAs (DCAs) may permit a prospective change in election amounts for plan years ending in 2020 and 2021 without a corresponding change in status event.
Grace Period Extension
Employers offering health FSAs and DCAs may extend (but are not required to extend) grace periods for up to 12 months for plan years ending in 2020 and 2021.
Health FSA “Spend Down” Option for Terminated Employees
Employers offering health FSAs may allow (but are not required to allow) employees who terminate during 2020 or 2021 to spend down unspent balances through the end of the plan year. This is similar to what is already permitted for DCAs.
Dependent Care Age Limit Increase
Employers offering dependent care FSAs may extend (but are not required to extend) the age limit for qualifying children from 13 to 14 for a plan year for which open enrollment ended before January 31, 2020, and for any unspent funds from that plan year that are available (either by rollover or grace period) to the employee during the following plan year.