January 20, 2022

Volume XII, Number 20

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Required Amendments for Cafeteria Plan and FSA Plan Changes Permitted Under Pandemic Relief

Beginning in 2020 and throughout the COVID-19 pandemic, a wide array of relief was made available to cafeteria plans and flexible spending account (FSA) plans under the CARES Act, ARPA, and other legislative acts, notices, and announcements. This relief, which included carryover increases, grace period extensions, expanded election changes, and additions to reimbursable expenses, was optional to plan sponsors who could elect what relief, if any, would be made available to plan participants operationally under their plans. 

If a plan sponsor implemented any of the relief options, plan amendments reflecting how they were implemented are generally required to be made by the end of the calendar year following the plan year that the change relates to. Therefore, for relief options implemented for calendar year plans for 2020, an amendment must be adopted no later than December 31, 2021. Plan sponsors who implemented any of the relief options described below should be in communication with their plan document providers to ensure that any necessary amendments are adopted before the 2021 plan year-end.

We have briefly summarized the available relief options below. 

Mid-Year Election Changes

  • During 2020 and 2021, cafeteria plans could permit one or more of the following prospective election changes for any reason:

  • New elections for employer-sponsored health coverage by employees who initially declined coverage;

  • Elections to enroll in different health coverage sponsored by the same employer (including a change from self-only to family coverage);

  • or Revocation of existing elections for employer-sponsored health coverage, with a written attestation that the employee is or immediately will be enrolled in other “comprehensive” health coverage not sponsored by the employer.

  • Additionally, during 2021, cafeteria plans could allow one or more of the prospective election changes listed above for employer-sponsored dental or vision coverage for any reason.

  • During 2020 and 2021, cafeteria plans could permit prospective changes to Health or Dependent Care FSA elections (including revocations, increases, decreases, or new elections) for any reason.

Other FSA-Related Relief

  • For plan years ending in 2020 and 2021, unused balances at year end in Health FSAs and Dependent Care FSAs could be carried over (not subject to the normal $550 limit) to the following plan year or could be available for an extended (up to 12 months) grace period.

  • During 2020 or 2021, plan sponsors could permit employees who ceased participation in Heath FSAs to be reimbursed from unused benefits or contributions through the end of the plan year in which participation ceased, including any grace period.

  • Dependent care FSAs could extend the maximum age of a covered child from 12 to 13 when reimbursing dependent care expenses during the last plan year with a regular enrollment period ending on or before January 31, 2020, and could allow employees with unused balances for that plan year to apply this rule to claims for reimbursement of the unused balance in the following plan year, until the child turns 14.

  • For the 2021 taxable year, the maximum federal dependent care FSA limit was increased from $5,000 to $10,500 (for single filers and married filing jointly) and from $2,500 to $5,250 (for married filing single). Note – If a plan sponsor implemented this increased limit for 2021, an amendment is required by December 31, 2021 (not December 31, 2022).

As a reminder, the CARES Act also expanded eligible reimbursable expenses under a Health FSA as listed below, effective January 1, 2020. Plan sponsors who have not previously amended their Health FSA should consider including these changes in any amendment addressing the above relief:

  • The prescription requirement was removed for over-the-counter drug reimbursements under Health FSAs, Health Reimbursement Accounts (HRAs), and Health Savings Accounts (HSAs).

  • Menstrual care products were permitted to qualify as medical care for purposes of reimbursement from Health FSAs, HRAs, or tax-free distributions from HSAs.

© 2007-2022 Hill Ward Henderson, All Rights ReservedNational Law Review, Volume XI, Number 316
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About this Author

Al Ward Executive Compensation Hill Ward Henderson
Shareholder

Al is Co-Chair of the firm's Executive Compensation & Employee Benefits practice. Al is recognized throughout the professional community for his depth of experience and knowledge in the employee benefits area. Prior to entering the practice of law, Al was an actuarial and employee benefits consultant for over eight years.

Al has focused for over four decades on executive compensation, employee benefits, trusts and taxation. He represents many clients including publicly traded and privately held, taxable or tax-...

813.222.8703
Kirsten Vignec Employee Benefits Attorney HIll Ward Henderson
Shareholder

Kirsten is a Shareholder in the firm's Corporate & Tax Group and practice co-chair of the Executive Compensation & Employee Benefits Group. Kirsten’s practice involves employee benefit matters associated with the design and ongoing administration of executive deferred compensation plans, welfare benefit plans, Section 401(k) plans, profit sharing plans, and pension plans. Kirsten represents tax-exempt entities, for-profit, private, and publicly-traded companies.

Kirsten represents clients before the IRS, DOL, and the PBGC with respect to employee benefits matters.

She...

813.222.8731
Bret Hamlin employee benefit lawyer Hill Ward Henderson
Shareholder

Bret is a Shareholder in the firm’s Executive Compensation & Employee Benefits Group. He practices primarily in the areas of employee benefits, deferred compensation and trusts. Prior to entering the private practice of law, he provided plan design and consulting, third-party administration and investment, as well as retirement plan education services for clients. 

Bret represents large, medium and small employers with respect to many employee benefit matters, including both single employer and multiple employer qualified retirement plans, deferred...

813.222.8717
Timothy P Zehnder employee lawyer Hill Ward Henderson
Associate

Tim is an Associate in the firm’s Executive Compensation & Employee Benefits Group. His practice focuses primarily on advising client employers (private and public, tax-exempt and for-profit) on a wide variety of compensation and benefits matters, including plan design, administration and termination, compliance with applicable laws (including the Internal Revenue Code, ERISA, HIPAA, and the Affordable Care Act), and resolution of compliance issues with the Internal Revenue Service, Department of Labor and Pension Benefit Guaranty Corporation.  Tim has experience assisting...

813 222 3113
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