After several months of the Republicans and Democrats not being able to agree on additional COVID-related tax relief and other matters, as 2020 was coming to an end, horses were traded, and deals were made so that Congress could put together the much-needed legislation. The result is a nearly 5,600-page omnibus bill, the Consolidated Appropriations Act, 2021, Included in that legislation are the “COVID-Related Tax Relief Act of 2020” (COVIDTRA) and the “Taxpayer Certainty and Disaster Tax Relief Act of 2020”. The bill was signed by the President on December 27.
Under current law cafeteria plans may only permit a carryover of unused amounts remaining in a health FSA as of the end of a plan year in an amount of no more than $550.
The new Act extends the carryover period to 12 months after the end of such plan year for unused benefits and contributions to health flexible spending and dependent care flexible spending arrangements for 2020 and 2021.
An employer may also allow an employee who ceases to participate in the plan during calendar year 2020 or 2021 to continue to receive reimbursements from unused benefits or contributions through the end of the plan year in which the employee’s participation ceased, including any extended grace period.
Please contact us if you'd like to discuss how this applies to your situation.
Comments