A Second Stimulus - What Does This Mean for Your Benefit Account Plans?

With the passage of the stimulus bill (“Consolidated Appropriations Act of 2021”), Congress has allowed for additional flexibility with regard to Health Care Flexible Spending Accounts, and Dependent Care Accounts.

The following changes will be allowed if employers wish to adopt them:

· If you choose to allow it, participants can carry over unused health care or dependent care money from 2020 and use it in 2021. The same is true for unused 2021 money that you wish to allow to carry over into 2022.

· Permits a 12-month grace period for unused benefits or contributions in health and dependent care FSAs for plan years ending in 2020 or 2021.

· Permit Health FSA participants who terminate during the 2020 or 2021 plan year to spend down their unused balances for expenses incurred through the end of the plan year in which the termination occurred, including any grace period.

· Permit a prospective change in election amounts for health and dependent care FSAs for plan years ending in 2021 without a corresponding change in status event (similar to Notice 2020-29)

· The law also allows employers to raise the last eligible age for children’s dependent care to 13, from 12, for the 2020 plan year.

If you wish for your company plan to allow for these changes, please contact your NCA Account manager so they can provide an amendment for signature. No updates will be made to your benefit plans without confirmation from your company and a signed amendment. If you allow for this change, no action is required for the plan participants. The unused balances will be made available to them in addition to their 2021 elections.

These updates are permissive, not mandatory. If you choose to implement any one or more of them, then you must amend your plan by not later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective (if you adopt for 2021, then you must amend by December 31, 2022).

Our team is continuing to monitor legislative updates. We will be sure to communicate any further updates as we receive them.