The recently signed relief bill — the Consolidated Appropriations Act, 2021 — is letting those who have flexible spending accounts roll money over, which is a win for parents and those with live-in elderly loved ones.
Late December is when many Americans rush to spend any money left in their flexible spending accounts — those workplace plans funded during the year to pay medical expenses — because typically the funds cannot be rolled over and disappear with the new year. However, the stimulus package gives these workers a temporary reprieve.
A provision in the new stimulus package allows those who have FSAs to roll over the remainder of their accounts from 2020 to 2021 and from 2021 to 2022. The same rules apply to dependent care FSAs — similar plans to benefit an employee's young child or elderly parent.
Workers could set aside up to $2,750 in pretax funds for individuals in health care FSAs and up to $5,000 per family, also before taxes, for dependent care FSAs in 2020. The normal "use or lose" provisions have been temporarily suspended.
Another benefit is the liberalization of contribution rate rules for 2021: Typically, employees cannot change their contribution rate during the year unless there's a major life event, such as the birth of a child. But no such major event is required for a change this year.
These are just summaries — there are still complex rules regarding the management of FSAs. Individuals should contact their employers' HR departments, and companies should get advice from qualified financial professionals.
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