Update March 22, 2021: The American Rescue Plan Act of 2021 increased the dependent care FSA contribution limits to $10,500 for single filers and $5,250 for married people filing separately.

On February 18, 2021, the Internal Revenue Service (IRS) released IRS Notice 2021-15 to answer questions regarding Section 214 of the Consolidated Appropriations Act (CAA), 2021, which permits greater flexibility to employee benefits plans offering health flexible spending arrangements (FSAs) or dependent care assistance programs.


The IRS notice provides the following guidance for Section 214 of the CAA:

  • Certain mid-year health FSA election changes and dependent care assistance programs are allowed for the plan year ending in 2021.
  • Unlimited carryover of unused amounts in health and/or dependent care FSA funds from the 2020 and 2021 plan years.
  • Up to 12 months of extended grace period relief for a health and/or dependent care FSA for the plan year ending in 2020 or 2021.
  • Health FSA spend-down relief for employees who cease to participate in a health FSA during the calendar year 2020 or 2021.
  • Increase in maximum age for qualified FSA dependent care from 12 to 13 to determine the dependent care assistance (which may be paid or reimbursed) during:
    • Last plan year in which the regular enrollment period ended on or before January 31, 2020;
    • Employees with an unused balance in their dependent care FSA for such plan year.

None of the changes available via the CAA are required. Employers may implement some or all of these changes or not change their plans at all. Employers who wish to implement the relief provided in the CAA must do so by the last day of the calendar year, after the end of the year in which the amendment is effective.


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