Last month, Congress passed and the President signed the Consolidated Appropriations Act, a significant government funding bill which provides appropriations for the federal government, as well as economic stimulus provisions due to the ongoing COVID-19 pandemic.
Given the Act’s length and complexity, this post addresses key employee benefit and charitable giving provisions but is not comprehensive in scope. BASIC’s Compliance Department continues to assess Public Law 116-260 and its impact on BASIC CDA employee benefit accounts.
Flexible Spending Accounts. Due to the unforeseeable circumstances brought about by the Coronavirus, many have expressed concerns that employees may face forfeiting substantial amounts of benefit funds, difficulty anticipating future expenses, etc. Thankfully, the year-end spending/relief package includes a number of special rules for health and dependent care FSAs including:
- Carryover of unused funds (unlimited) from the 2020 to the 2021 plan year.
- Carryover of unused funds (unlimited) from the 2021 to the 2022 plan year.
- A 12-month grace period at the end of the 2020 and/or 2021 plan years during which all unused amounts from the prior year will be available.
- Modification of election amounts for the 2021 plan year.
- An opportunity for employees who cease participation in a health FSA during calendar year 2020 or 2021 to receive reimbursements from unused benefits or contributions through the end of that plan year.
- Dependent care FSA participants whose qualifying child turned age 13 during the national health emergency may continue to receive reimbursements for expenses for the remainder of the plan year and the following plan year until the child turns age 14 (to the extent a balance remains).
Note: There is no rush to make plan decisions or amendments; the bill text allows for plenty of time to apply the changes listed above. Please watch for a follow-up communication from BASIC soon that will offer more detailed information and requirements specific to your FSA benefits.
Student Loan Repayment. The Act extends the ability of employers to provide a tax advantaged student loan repayment benefit to their employees, up to an annual cap of $5,250, by five years (making it available until January 1, 2026).
Partial Universal Charitable Deduction. The Act extends and modifies the non-itemizer charitable deduction for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing a joint return.
With over 30 years of experience in the industry, BASIC knows how new legislation impacts employee benefits and the complexities involved in making timely changes in response. We invested in moving to the Consumer Driven Accounts system for situations just like this. As a highly configurable platform, CDA can be easily and quickly reconfigured to support clients and their employees with changes to their benefits to meet governmental requirements and their preferences.
BASIC is committed to doing the heavy lifting for our clients by making the necessary plan changes so they can take full advantage of the new law. More to come soon.