DCFSA Rollover from 2020 - Does it Require Offset to 2021 DCFSA Limit

Some publications indicate that the DCFSA limit of $5,000 for 2021 needs to be adjusted for any rollover amounts from 2020 (i.e., if P rolls over $2,000 from 2020 DCFSA, their 2021 DCFSA election cannot exceed $3,000). Does anyone agree with this? Thanks in advance.

I have been taking the position that a dependent care FSA carryover from year one does not affect the year two election limit because that is how the rules have always applied to the health FSA carryover.

I'd also be interested to hear if anyone is taking the position that carryovers affect the year two election limit. 

I have been taking the position that CAA did not change the $5,000 limit* on non-taxable reimbursements in a calendar year so its likely the carryover amount would by default limit the amount the employee could elect in Year 2 on a non-taxable basis to ($5,000 - the carryover amount). If the carryover amount plus the employee's Year 2 election exceeds $5,000, then reimbursements in excess of $5,000 for claims incurred during the calendar year would have to be treated as taxable income.

*$5,000 is the maximum non-taxable amount but there are situations where an employee's maximum will be less than $5,000. 

I agree with Mr. Gilmore - the IRS rules speak to non-taxable contributions not non-taxable reimbursements. 

It doesn't matter that you could rollover money from 2020 into 2021 and be reimbursed more than $5,000 so long as you don't make more than $5,000 in non-taxed contributions this year.