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Impact of Recent Federal Legislation on Medical FSA and DCAP Accounts

Applies to: All Fully Insured and Self-funded Plans

The Consolidated Appropriations Act, 2021, which provides relief during the COVID-19 public health emergency, was signed into law on December 27, 2020. The legislation contains several items that affect medical Flexible Spending Accounts (FSAs) and dependent care assistance plan (DCAP) accounts that members may have, including:

  • DCAP/FSA Carryover: Plans may permit members with an FSA or DCAP to carry over all unused amounts from 2020 to 2021 and from 2021 to 2022;
  • DCAP/FSA Grace Period: Plans may permit members to use a 12-month grace period for unused benefits for plan years ending in 2020 or 2021;
  • FSA Spend Down: The option for plans to allow members with medical FSA participants who terminate coverage 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;
  • DCAP Age Increase: The maximum age of eligible dependents is increased by one year; and
  • DCAP/FSA Election Changes: The option for plans to allow a prospective change in election amounts for plan years ending in 2021 without a corresponding change in qualified status event.

If your clients offer FSAs and DCAP accounts, your clients must decide if they will amend their plan document with the recent COVID Relief legislation by December 31, 2022, for 2021 plan year changes.

What this means for members

This legislation is not mandatory; these are group-level choices. Groups are able to amend their plan document with the recent COVID Relief legislation until December 31, 2022, for 2021 plan year changes.

Amendment options include:

  • Adding a DCAP/FSA grace period extension
  • Allowing a DCAP age increase
  • Allowing an FSA spend down
  • Allowing DCAP/FSA election changes
  • Adding a DCAP/FSA carryover

What your group clients need to do

If a group chooses to implement any of the amendment options mentioned above, please have them fill out and return the attached form prior to their renewal date. If changes are made, groups must inform their covered employees of the plan amendments. If the group submits the attached form after your renewal is complete, we will reprocess only those claims that are requested by a member and will not automatically reprocess all impacted claims.

Due to the anticipated influx of plan amendments, groups can expect to receive their amendment by May 31, 2021. There will be no charge for this service.

Published on: January 15, 2021, 16:10 p.m. ET
Last updated on: June 8, 2021, 22:14 p.m. ET