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FSA Related Provisions In The Federal Government’s New COVID Relief Package

This month Congress passed and President Trump signed the latest COVID related relief bill, the Consolidated Appropriations Act of 2021.  The new law includes several provisions that provide potential relief for Health and Dependent Care Flexible Spending Arrangement Participants.  Employer Plan Sponsors are allowed, but not required, to amend their plans to permit the following:

  • Carryover of unused funds from a Plan Year ending during 2020 or  2021 to the following Plan Year;
  • Extend Grace Periods applicable for Plan Years ending during 2020 or 2021 to 12 months after the end of the Plan Year;
  • Allow Plan Participants who cease participation in a Health FSA during calendar 2020 or 2021 the opportunity to receive reimbursements from unused benefits or contributions through the end of the plan year in which such participation ceased (including grace period if applicable);
  • Increase the maximum age (by one year) for Dependent Care beneficiaries who aged out during the pandemic; and
  • Prospective modifications of election amounts for Health and Dependent care FSAs for Plan Years ending in 2021.

We wanted you to be aware of the provisions outlined above in the new law as soon as possible to give you an opportunity to consider them and possibly communicate them to Plan Participants.  

Any of the permissive changes listed above will require Plan Amendments (which may be completed retroactively any time during 2021) if elected.  Admin America, Inc. will be following up again with customers in the coming days to provide a process for electing any of the available options.

We also would like to point out that the administration of the additional rollover amounts and grace periods will require programming changes to Admin America, Inc.’s administrative platform.  Therefore, we cannot advise at this time as to when rollover amounts in excess of the previously announced limits will be available to Plan Participants via their electronic payment cards.  We will provide an update on the timing of any system updates as soon as we have more information.

Thank you and Happy New Year!

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Time is running out for employers to provide employees with substantial tax free benefits.

December 31, 2020 marks the last day for employers can provide employees with up to $5,250 of tax-exempt student loan repayment benefits.

When Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act earlier this year in response to the COVID-19 pandemic, it included a temporary provision that many employers do not know about. Under this provision Employers may make tax-free contributions of up to $5,250 per employee during 2020 toward employee student debt without raising the employee’s gross taxable income. In prior years, these contributions have been subject to federal, state and local income taxes for the employee and FICA payroll taxes for both the employer and the employee. In 2021, the current preferential tax treatment is slated to disappear.

Of course it is possible that Congress will vote to extend the preferential tax treatment for student loan repayment benefits into future years but even if they do not, employers across America are finding that these types of plans give them a competitive advantage in the attraction and retention of quality employees. While many people think about student loan repayment benefits being applicable primary to the youngest members of the workforce, student loan debt increasingly impacts employees across all age demographics. Millions of parents are repaying student debt they incurred for the benefit of their children and in 2017 the Consumer Financial Protection Bureau reports that senior citizens make up the fastest growing segment of the U.S. student loan market. By helping them get out of debt faster, student loan repayment plans can benefit all of these individuals and their families.

Admin America has partnered with BenefitEd, a leading provider of customized employer-assisted student loan repayment programs and college savings programs to help our clients take advantage of this unique opportunity. We also believe agents and brokers benefit by communicating these types of opportunities to their clients and prospects. If you would like more information about implementing a student loan repayment benefit program, you can request more information here.


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IRS Finally Releases Updated 2019 PCORI Tax Rates

This week the IRS finally announced the applicable per participant PCORI tax rates for group health plan with Plan Year ending during the last three months of 2019.  The applicable rate will be $2.54 per participant.

When the PCORI tax was introduced as part of the Affordable Care Act, it went into effect for Plan Years ending on or after October 1, 2012.  The ACA provided for the tax to increase each year based on inflation with the increased rates going into effect each subsequent October 1.  The increases have historically been announced by the end of each calendar year.  Because the PCORI tax payments are due by July 31 of the following calendar year insurers and Plan Sponsors of self-insured group health plans had plenty of time to calculate their tax and prepare their filings.

Under the terms of the ACA, the PCORI tax would not apply to any Plan Years ending on or after September 30, 2019.  Therefore, there was no need for the IRS to issue an annual increase for Plan Years ending in the fourth quarter of 2019.  However, on December 20, 2019, President Trump signed the “Further Consolidated Appropriations Act” into law. The Act extended the PCORI tax for another 10 years.

At that point, plans with Plan Year ending during the first 9 months of 2019 knew that their tax rate for payments due this July would be $2.45 but we did not know the $2.54 rate for Plan Years ending during the last three months of 2019 until this week.

The new rates were announced in IRS Notice 2020-44.  Additionally, this week the IRS published an updated version of  Form 720 to reflect the extension of the PCORI tax and the new rate for Plan Years ending in late 2019.  Insurers and Plan Sponsors of self-insured group health plans may complete their filings and make their tax payments at this time.” 

More information about the PCORI tax, including which plans are required to file a return and pay the tax, as well as instruction for completing the process are available in a guide we wrote for clients this month.  It is available online here.


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