Flexible spending accounts: IRS offers new extensions
IRS Notice 2021-15 spells out new extensions for flexible spending accounts (FSA) and dependent care assistance programs. So your company can continue to be a bit more flexible with its cafeteria plan.
And it comes courtesy of the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
Last March, IRS first offered employers the ability to be more flexible with their plans, due to the coronavirus pandemic. But that was set to expire at the end of 2020.
Flexible spending accounts in 2021
Specifically, your company will now be able to:
- let employees carry over unused FSA amounts into the following plan year
- extend the permissible period for employees to incur claims for plan years ending in 2021, and
- allow for mid-year election changes for 2021.
When it comes to dependent care, the biggest change is this extension. If an employees’ dependent “aged out” during the pandemic, the eligible age extends to 14. Along with that, employees can also carryover unused dependent care amounts into next year.
Note: Notice 2021-15 offers plenty of examples to help you navigate the different scenarios you might face.
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