March 18, 2021

IRS Clarifies Relief for Health FSA Benefits under the Consolidated Appropriations Act of 2021

Spotlight on Benefits

As noted in our prior blog posts here and here, Section 214 of the Consolidated Appropriations Act of 2021 (“Act”) permits employers to amend their flexible spending account (FSA) plans to help participants avoid forfeiting unused amounts for the 2020 and 2021 plan years.  The Act offers employers a myriad of temporary relief options for health FSAs—including expanded carryover relief, extended grace period relief, mid-year election change relief and post-termination spend down relief.  The IRS recently issued Notice 2021-15 (“Notice”) giving employers significant flexibility to tailor these relief options to their particular concerns and objectives.  This blog post answers common questions about how the guidance applies to health FSA benefits; the application to dependent care FSA benefits will be discussed in a forthcoming blog post.
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