On Sunday, Dec. 27, 2020, the President signed the Consolidated Appropriations Act of 2021 (CAA) into law, and contained in the massive 5,593 page law is the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA or Act). The new relief has a broad number of extensions of existing relief as well as new benefits changes impacting employers sponsoring group health plans.
The Act significantly modifies certain rules for health flexible spending arrangements (FSAs) and dependent care assistance programs (DCAPs).
- FSAs and DCAPs can allow unused amounts (without being subject to current rollover limits for FSAs and despite the fact that no such option has ever been available for DCAPs) from a plan year ending in 2020 to be carried over to 2021, and unused amounts (also without being subject to current rollover limits) from a plan year ending in 2021 to be carried over to 2022.
- Alternatively, FSAs and DCAPs may have grace periods for plan years ending in 2021 or 2022 that may be extended to 12 months after the end of the plan year.
- Health FSAs may allow employees who ceased participation during the 2020 or 2021 calendar year to continue to receive reimbursements from unused benefits or contributions through the end of plan year in which participation ceased (including any grace period) even if the expense was incurred after the employee’s plan termination date.
- For plan years ending in 2021 only, FSAs and DCAPs may allow employees to make a prospective election change to modify their FSA or DCAP contributions without a change in status.
- DCAPs may 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 may 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.
Plan amendments must be made by the end of the first calendar year beginning after the end of the plan year in which the amendment is effective, provided the plan operated consistently with the terms of the amendment beginning on its effective date. For example:
- If the plan year you wish to amend runs from Jan. 1, 2020 through Dec. 31, 2020, plan amendments must be adopted by Dec. 31, 2021.
- If the plan year you wish to amend runs from July 1, 2020 through June 30, 2021, plan amendments must be adopted by Dec. 31, 2022.
It should be noted that basic cafeteria plan rules remain; cashouts of unused contributions and retroactive election changes generally are not permitted.
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.
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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.