The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA) includes temporary relief for employees participating in Health Flexible Spending Arrangements (FSAs) and Dependent Care Assistance Programs (DCAPs). These plans may be amended to increase carryover amounts (i.e., rollover amounts), extend grace periods, and allow mid-year election changes for any reason.  Options and details are outlined below.

Considerations.

All CRRSAA changes are optional and Plan Sponsors must decide which (if any) to adopt. Employers and Plan Sponsors should consider their employee population demographics and the impact of the COVID-19 pandemic on their lives, as well as the possible financial impact the change will have on the Plan. Further, employers should consider the implications these changes may have on an employee’s eligibility to contribute to a Health Savings Account. PrimePay cannot provide legal advice and recommends that employers and plan sponsors consult with their benefit advisor or legal counsel for specific guidance on how the changes will impact their plan.

Carryover & Grace Period.

Unlimited Carryover*: Allow any unused benefits remaining in a participant’s FSA or DCAP account to carryover (i.e., rollover) to the following plan year.

  • Maximum Relief: Amend Plan Years ending 2020 and 2021 to allow unlimited carryover of unused FSA and DCAP funds into the next plan year.
  • Moderate Relief: Amend either Plan Year ending 2020 or 2021 (i.e., not both) to allow unlimited carryover of unused FSA and DCAP funds into the next plan year.
  • Minimum Relief: Amend either Plan Year ending 2020 or 2021 (i.e., not both) to allow a limited carryover (i.e., capped, not unlimited) of unused FSA and DCAP funds into the next plan year.
  • No Relief: Do not amend plan to change carryover provision.

Extend Grace Period*: Allow participants additional time to incur eligible FSA or DCAP expenses for the prior plan year.

  • Maximum Relief: Amend Plan Years ending 2020 and 2021 to extend FSA and DCAP grace period to 12 months.
  • Moderate Relief: Amend either Plan Year ending 2020 or 2021 to extend FSA and DCAP grace period to 12 months.
  • Minimum Relief: Amend either Plan Year ending 2020 or 2021 to extend FSA and DCAP grace period up to 12 months (i.e., less than 12 months).
  • No Relief: Do not amend plan to extend grace period.

*These temporary rule changes are very significant, and Plan Sponsors should understand the impact to their plan. Previously, FSA plans could offer a carryover provision or a grace period but not both. Further, DCAPs could offer a grace period but could not offer a carryover provision. Under CRRSAA, both FSAs and DCAPs may temporarily allow a carryover; however, until further guidance is issued, consider that the prohibition on both grace periods and carryovers within a single plan year applies to DCAPs as it does to FSAs.

Post-termination FSA Reimbursement.

Allow employees whose participation ended in calendar year 2020 or 2021 to use their unused benefits for post-termination expenses incurred through the end of the plan year in which such participation ceased. This is commonly referred to as a “spend down” provision.

  • Maximum Relief: Amend plan to include post-termination FSA reimbursements up to the participant’s full unused benefit (i.e., annual election less year-to-date reimbursements). This may create an experience loss for the plan.
  • Moderate Relief: Amend plan to include post-termination FSA reimbursements up to the participant’s year-to-date contributions less year-to-date reimbursements (i.e., underspent account access). This will not create an experience loss for the plan.
  • No Relief: Do not amend plan to include post-termination FSA reimbursements.

Expanded Changes.

Allow participants to change FSA and/or DCAP elections during plan year without concern for a qualified life event.

  • Maximum Relief: Amend Plan Year ending 2021 to allow any mid-year FSA and DCAP election changes. This may create an experience loss for the plan.
  • Moderate Relief: Amend Plan Year ending 2021 to allow mid-year FSA and DCAP election changes but to limit changes that lower coverage to the participant’s year-to-date disbursement amount.
  • Minimum Relief: Amend Plan Year ending 2021 to allow mid-year FSA only or DCAP only election changes but limit changes that lower coverage to the participant’s year-to-date disbursement amount.
  • No Relief: Do not amend plan to allow expanded election changes.

DCAP Dependent Eligibility.

Extend the maximum age from 12 to 13 for eligible dependents who aged out of eligibility during the last plan year with a regular enrollment period ending on or before Jan. 31, 2020 and allow employees with unused balances for that plan year to apply this rule to claims for reimbursement of the unused balance in the following plan year.

Maximum Relief: Amend plan to incorporate special dependent eligibility rule.

No Relief: Do not amend plan to incorporate special dependent eligibility rule.

Additional resources.

For additional information on the Consolidated Appropriations Act, 2021 (CAA 2021), please review our recent blogs by clicking the below links:

How PrimePay can help.

PrimePay helps with the administration of pre-tax benefits for your company, including HRAs, HSAs, and FSAs. When you choose PrimePay’s pre-tax benefit plan administration, you receive a dedicated service team, access to our support portal, automated claims processing, and a PrimePay debit card and mobile app.

Fill out the form below to learn more:

 

Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.