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February 18, 2021
2021-0375

IRS issues guidance on flexibility for health FSAs and dependent care assistance programs during COVID-19 pandemic

The IRS has announced guidance (Notice 2021-15) with new rules for health flexible spending arrangements (FSAs) and dependent care assistance programs. In keeping with changes enacted under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, Notice 2021-15 provides flexibility with regard to: carrying over unused amounts from the 2020 to 2021 plan years; extending the permissible period for incurring claims for plan years ending in 2020 and 2021; adopting a special rule for post-termination reimbursements from health FSAs; providing a special claims period and carryover rule for dependents who age out of dependent care assistance programs during the pandemic; and allowing certain mid-year election changes for plan years ending in 2021. A Tax Alert is forthcoming.

 

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