Relief Provisions for FSAs and DCAPs Must Be Adopted by March 31

A reminder to cooperatives sponsoring a 125 Plan: If you offer your employees access to a flexible spending account (FSA), limited-use FSA, and/or the dependent care assistance program (DCAP), there are several optional, temporary provisions your co-op can adopt to provide financial relief to employees with these accounts, retroactively for the 2020 plan year.

The relief provisions were created under the Consolidated Appropriations Act (CCA) of 2021, which was signed into law in December 2020. Information on the CAA’s provisions was emailed in early February to all co-ops sponsoring the 125 Plan.

The deadline for adopting these provisions is rapidly approaching: Interested co-ops should inform their field representative of their final decision by March 31, 2021.

Co-ops that have already requested to adopt one or more of the provisions can expect to receive their plan documents from NRECA in mid-April.

What are the provisions?
Under the CAA, your co-op can:

1. Allow participants to carry over all unused FSA funds from 2020 to the 2021 plan year. Your co-op can adopt this provision regardless of whether you offer the existing $500 carryover feature.
2. Extend FSA and DCAP grace periods from 2½ months to 12 months. This means participants can use their 2020 contributions to reimburse eligible expenses that were incurred at any point during 2020 or 2021. Your co-op can adopt this provision regardless of whether you offer the existing grace period feature.
   NOTE: Co-ops can adopt either one of the above provisions, but not both.
3. Allow employees who stop participating in an FSA to continue spending their FSA dollars through the end of the year. For employees whose jobs and/or FSA participation ended in 2020, this provision enables them to retroactively submit FSA claims for 2020 expenses, assuming they had an unused FSA balance.
4. Raise the maximum age of DCAP beneficiaries from 12 to 13. This provision will apply to dependents who turned 13 in 2020.

An additional provision does not need to be adopted by co-ops: Employees can make prospective election changes for their FSA and/or DCAP accounts during 2021 without a qualifying event.

Reach out to your field representative with any questions.