"While the Notice clarifies the permissible opportunities available under the Act, the IRS twists long established rules under Section 125 of the Code ... The Notice offers up a cornucopia of additional opportunities that create administrative burdens and may be too costly for a third-party administrator to implement given the emphasis in the Notice that these permissible opportunities are all temporary in duration."

"A bill recently introduced in the California Assembly ... proposes a child care subsidy as a new form of employee benefit. This is not a leave benefit, or a job-protection benefit, but rather a fund to be used for emergency child care needs. The bill would apply only to the largest employers -- those who employ 1000 or more employees[.]"

"[Disaster Relief Notice 2020-01] acknowledges that the agencies understand and appreciate the complications this latest guidance creates for plan administrators to immediately restart the clock of daily COBRA, HIPAA, and other deadlines and for individuals who now must immediately catch up monthly COBRA premium obligations to maintain health insurance under the employer's plan ... To be considered as acting in 'good faith and with reasonable diligence,' [here is a list of steps employers should take]."

"The centerpiece ... is to combine the grace period and carryover rules. Conceptually there is no distinction between the grace period and carryover for PYs 2020 and 2021 PYs. In order to avoid confusion, the IRS refers to the period as the 'temporary extension period.' An employer has the discretion to adopt all, some or none of the opportunities presented by TCDRA and Notice 2021-15."

"In this most recent notice, the IRS broadened the relief ... so that an employer may allow election changes for all pre-tax health benefits in the 2021 plan year without a qualifying reason. The rules retain the written attestation requirement of other coverage for revoking medical coverage."

"The guidance provides for a lot of flexibility for employers ... however, the IRS holds firm on the idea that a plan may not offer a grace period and a carryover.... Employers will want to provide notice to employees of any modifications made to the plan under this guidance[.]"

"The CAA's accommodations blur the lines between a grace period and carryover, as the law allows unlimited carryovers (more than just $550) and up to 12-month grace periods. So, is an employer better off with a grace period or a carryover provision, and does it really make any difference for leftover balances from the 2020 and 2021 FSA plan years?"

"IRS Notice 2021-15 ... provides welcome clarity regarding several of the lingering questions, as well as some additional relief and guidance.... [This article includes] common questions from employers regarding the CAA relief and a summary of the answers provided by IRS Notice 2021-15."

"[T]he most visible change is significantly broader flexibility for both health care and dependent care FSAs.... [Notice 2021-15] reaffirms that these enhanced carryovers and grace periods will not cause a health FSA lose 'excepted benefit' status. This means a health FSA will not have to comply with all the [ACA] mandates as a result of adopting one of these provisions."

"New Notice 2021-15 clarifies the latest temporary rules regarding health FSAs and DCAPS included in the Act.... [E]mployers that choose to adopt any of the 2021 changes must formally amend their plans to do so. The amendment can be retroactive, but must be adopted not later than December 31 of the first calendar year beginning after the end of the plan year in which the amendment is effective."

"Notice 2021-15 allows retroactive amendments to health FSAs and HRAs to cover OTC medicines and drugs, and menstrual care products as of January 1, 2020.... Notice 2021-15 also clarifies that the spend down feature under a health FSA does not relieve the employer of its requirement to offer COBRA continuation coverage under the health FSA."

"[I]ssues addressed by the IRS in [Notice 2021-15]: ... [1] Carryover amounts do not affect FSA contribution limits ... [2] HSA eligibility ... [3] Limiting health FSA spend down access to YTD contributions ... [4] Prospective election change relief not limited to FSAs ... [5] Limiting election reductions to amounts already reimbursed ... [6] Cafeteria plan retroactive amendment deadline ... [7] The odd dependent care FSA age limit increase to age 14 in 2020 ... [8] Employer-imposed restrictions on relief permitted."

"[1] Student loan repayment by employer under an educational assistance program.... [2] Student loan repayment by employee under a 529 plan.... [3] Carryover of health and dependent care flexible spending account (FSA) amounts ... [4] Setting up a 401(k) plan and obtaining a tax credit for doing so.... [5] Penalty-free withdrawals from 401(k) plan to pay for birth or adoption of a child."

"Employers have flexibility to implement and tailor one or more of the available options.... Some administrators have adopted the rules unless employers opt out of them. Pay attention to communications from your administrators to ensure you do not lose flexibility ... [1] Carryover eligibility.... [2] Amount.... [3] HSA eligibility.... [4] Ordering rules.... [5] Aged-out dependents.... [6] COBRA considerations.... [7] Fiscal year plans.... [8] Employee communications.... [9] Plan amendments."

"[This article] is an overview of the law's key provisions affecting pension, welfare and fringe benefit programs."

"[T]his legislation makes the most significant changes to health plans since the [ACA], offers employers and employees additional flexibility for cafeteria plan benefits, and provides additional retirement plan relief.... Action steps for employers include: [1] Coordinate with insurers and/or third-party administrators of health plans to ensure compliance with the surprise billing rules; [2] Request ERISA Section 408(b)(2) disclosures from health plan brokers and consultants, and review those disclosures for reasonableness ... [3] Decide whether to offer some or all of the cafeteria plan and FSA relief ... [4] Evaluate whether layoffs implemented during the pandemic caused a partial plan termination; and [5] Decide whether to offer a qualified disaster distribution or loan option."

"Plan sponsors should take note that FSA plans cannot include both a carryover and a grace period extension feature. Plan sponsors should also keep in mind that employees are prevented during any health FSA carryover or grace period from contributing to a health savings account (HSA). In order to maintain flexibility for employees who may wish to move to an HDHP/HSA arrangement at year-end, plan sponsors offering a carryover or grace period may find it beneficial to convert the health FSA of such an employee to a limited-purpose health FSA or in the case of carryovers, permit a waiver by the employee."

"Flexible Spending Account carryovers and grace period extensions permitted for plan years ending in 2020 and 2021.... Health care FSA reimbursements for terminated participants.... Carry-forward opportunity for aged-out dependents.... Surprise medical billing.... Safe harbor to avoid a partial plan termination.... Coronavirus related distributions permitted from money purchase pension plans.... Non-COVID related disaster distributions."

"Have you communicated with your administrator for the healthcare FSA and dependent care FSA to confirm their capabilities for implementing these rules? ... Would you permit the entire amount or some lower amount to be carried over? ... What impact would the carryover or grace period have on health savings account (HSA) eligibility? ... Are your administrators able to administer the ordering rules that enable employees to use FSA dollars from two different plan years for the entire next plan year? ... [H]ave you considered the potential impact this may have on your COBRA notices? ... How would you communicate the changes to employees?"

"The new law provides plan sponsors with two options for increasing participant flexibility with respect to using amounts deferred under a health or dependent care FSA, as well as permitting some leeway with respect to dependent care benefits and expanding options for election deadlines."

"Plan sponsors that elect to adopt the expanded carryover or extended grace period rules should notify participants of the changes as soon as possible.... If a health FSA is amended to temporarily permit terminated employees to continue participation for the remainder of the plan year, plan administrators should coordinate the new process with the plan sponsor's COBRA procedures.... To mitigate against experience losses, a participant should not be permitted to elect a new annual contribution amount that, as of the election change date, is less than the greater of the amount contributed in 2021 and the amount of reimbursements received in 2021."

"Because many FSA Plan plan years begin on January 1, 2021, employers who wish to allow employees to make changes in their FSA Plan contribution elections to take into account the availability of roll over funds from the 2020 plan year that were not anticipated when they made their elections during the fall 2020 open enrollment period may do so under the change in election amount relief[.]"

"The act permits plan sponsors to implement the following voluntary changes for health and/or dependent care FSAs: Unlimited carryover.... Extended grace period.... Election changes.... Post-termination reimbursements from health FSAs.... Carry forward for aged-out dependents in dependent care FSA.... [C]alendar year plans adopting these voluntary changes will generally need to be amended by December 31, 2021."

"While many plans have already had annual enrollment for 2021 so that participants cannot change elections to address these new permissive carryovers, the Act also permits unused amounts from 2021 to be carried over to 2022. In addition the Act permits employers to allow elections to be changed by participants during plan years ending in 2021 to alter the employee's contribution toward their 2021 health flexible spending account and dependent care flexible spending account."

"The CAA's COVID relief provisions also amend the [Internal Revenue Code] to temporarily raise the maximum age of a child for whom qualifying childcare expenses may be reimbursed under a DCAP to age 14 during the plan year for which the end of the regular enrollment period was on or before January 31, 2020. This change will apply where a participant has at least one tax dependent who turns 13 during that plan year."