New law provides additional flexibility

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The IRS recently announced greater flexibility, due to the pandemic, to employee benefit plans offering health flexible spending arrangements (FSAs) or dependent care assistance programs.

Employers now have flexibility in the following areas related to health FSAs and dependent care assistance programs:

  • Carryover of unused amounts from the 2020 and 2021 plan years
  • Permissible period for incurring claims for plan years ending in 2020 and 2021
  • Special rule regarding post-termination reimbursements from health FSAs
  • Special claims period and carryover rule for dependent care assistance programs when a dependent "ages out" during the COVID-19 public health emergency
  • Certain mid-year election changes for health FSAs and dependent care assistance programs for plan years ending in 2021

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