Changes to employees' Flexible Spending Accounts in response to COVID-19

February 09, 2021

In response to the COVID-19 pandemic, the Consolidated Appropriations Act, 2021 was enacted on Dec. 27, 2020. The legislation permits employers to allow employees more flexibility in how they utilize unused 2020 and 2021 Health Care and Dependent Care Flexible Spending Account (FSA) monies previously elected for qualifying medical and dependent care expenses under the employer’s plan. All the FSA provisions of the act are optional; Penn State will be offering those noted below to their employees.

Health Care FSAs  

  • Carryover ALL unused 2020 funds into 2021 for those who made a Health Care FSA election during Benefits Open Enrollment 2021.
  • Previous carryover limit was $550.
  • Prospectively MODIFY the elected amount without a qualifying status change, for those who made a Health Care FSA election during Benefits Open Enrollment 2021. 
  • Modify means increase to the IRS maximum limit ($2,750) or decrease no lower than the amount already spent from the account.
  • New enrollment is permitted only with a qualifying status change.
  • Carryover ALL unused 2021 funds into 2022 (with Health Care FSA election during Benefits Open Enrollment 2022).

Dependent Care (Child Care) FSAs  

  • Carryover ALL unused 2020 funds into 2021 for those who made a Dependent Care FSA election during Benefits Open Enrollment 2021.
  • This is the first time the IRS has permitted carryover for Dependent Care FSAs.
  • Prospectively MODIFY the elected amount without a qualifying status change for those who made a Dependent Care FSA election during Benefits Open Enrollment 2021.
  • Modify means increase to the IRS maximum limit ($5,000) or decrease no lower than the amount already spent from the account.
  • New enrollment is permitted only with a qualifying status change.
  • Be reimbursed for expenses for an eligible dependent who is not yet age 14 (previously age 13). 
  • Carryover ALL unused 2021 funds into 2022 (with Dependent Care FSA election during Benefits Open Enrollment 2022).

Extended Claims Substantiation Periods for Health Care & Dependent Care (Child Care) FSAs:

Health Care FSA:  

  • The 2019 Health Care FSA deadline to submit expenses has been extended to March 31, 2021.   
  • The 2020 Health Care FSA deadline to submit expenses is March 31, 2021.  

Dependent Care (Child Care) FSA:  

  • For employees enrolled in benefits for 2019, the grace period which will allow employees to incur expenses was Dec. 31, 2020, provided there were funds remaining in the 2019 account.
  • The deadline to submit expenses for 2019 and 2020 will be March 31, 2021.

Penn State employees with questions may contact HR Services at 814-865-1473 or through WorkLion.psu.edu.

 

Last Updated February 09, 2021