On Feb. 18, 2021, the IRS released Notice 2021-15 to clarify special rules for Section 125 plans, health flexible spending arrangements (FSAs) and dependent care assistance programs (DCAPs).

The Consolidated Appropriations Act provides:

• flexibility with respect to carryovers of unused FSA amounts, extends the time period for incurring claims, permits post-termination reimbursements from health FSAs and provides special rules for dependents who “age out” of DCAP coverage during the COVID-19 public health emergency;
• that Section 125 plans may permit employees to make or revoke election changes in certain circumstances; and
• relief with respect to plan amendments expanding reimbursable expenses for health FSAs and HRAs to include over-the-counter drugs and menstrual care products.

Amendments to these plans must normally be made on a prospective basis, but these amendments may allow these reimbursements beginning on or after Jan. 1, 2020.

IRS Issues Guidance on COVID-19 Relief for Health FSAs and DCAPs

Clarifying Guidance on COVID-19 Relief for Health FSAs and DCAPs