Flexible Spending Arrangement (FSA) Budget Bill Changes
The Consolidated Appropriations (Budget) Act for 2021 signed by the President includes time limited changes in Flexible Spending Account (FSA) administration and participant utilization. These changes are not mandatory, but instead require employers to make the choice whether to add them to their plan, or not. The changes are designed to provide relief to employers and employees from FSA utilization issues that have arisen as a result of the global pandemic.
- The plan can extend the ‘Carryover’ feature or extend the ‘Grace Period’ of an FSA for up to the full calendar year of 2021 (this change can affect Health Savings Account (HSA) qualifications – please contact KBM if you are using both FSA and HSA for guidance).
- Mid-year enrollment and contribution changes will be allowed. Employers now allowed to add a ‘Mini Open Enrollment’ period mid-year to consolidate FSA changes.
- Terminated employees will have access to unused funds (more guidance is necessary for this portion of the regulation).
- Any employer allowing any of these changes will need to amend their FSA plan document to fully comply with the regulations.
If you are considering adding any of these changes to your FSA plan please consult both your broker and the FSA administrator to discuss the proper approach to implementation.