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Clarifying Guidance for Health FSA and DCAP COVID-19 Relief

Under the Consolidated Appropriations Act (CAA), special rules were established regarding Flexible Spending and Dependent Care Accounts. These rules have caused much confusion and mixed messaging from various sources regarding the interpretation of the rules. As such, the Internal Revenue Service (IRS) issued a notice, Notice 2021-15, to provide additional clarification concerning the rules.

Given the clarifications that have been issued and because employers have the flexibility in implementing the provisions, consideration needs to be given to which provisions, if any, an employer plan wishes to incorporate. Prior to deciding, employers should evaluate their own administrative capabilities and limitations if they self-administer their plans or verify with their Third-Party Administrator as to the processes of incorporating the new provisions, should they wish to do so. If an employer chooses to incorporate any of the provisions, it must adopt appropriate plan amendments no later than the last day of the calendar year beginning after the end of the plan year to which the change relates. For example, for a change made to a 2021 calendar year plan, an amendment must be adopted no later than December 31, 2022. For ERISA plans, these amendments will trigger the requirement to distribute a Summary of Material Modification or an updated Summary Plan Description to participants.

Read the Compliance Bulletin.

Contact your Cowden representative for more information on this or other compliance issues.