The American Rescue Plan Makes FSAs a Little More Flexible
Posted by on April 01, 2021
The act boosts the amount that companies can allow workers to deposit.
For those with a Dependent Care Flexible Spending Account (FSA), there may be some good news on the horizon. The American Rescue Plan Act, signed into law by President Joe Biden, boosts the amount that companies can allow workers to deposit in their dependent-care FSAs for 2021. Here are some details to remember:
*Dependent Care Contributions: The limit on contributions to Dependent Care FSAs is now higher under the American Rescue Plan Act. For married couples filing jointly, the cap is $10,500, up from $5,000. For single filers, the limit is $5,250, up from $2,500.1
*Health FSA Contributions: Health FSA contributions are unaffected by the latest stimulus bill, meaning contributions to Health FSAs are still capped at $2,750.2
*FSA Rollovers: Employees may carry over all or some of their unused health and/or dependent care FSA funds from a plan year ending in 2020 or 2021.3
Although this may be deeply appreciated news for many, there is one caveat to keep in mind. Employers can choose whether to make any modifications to their plans under these temporary rule changes but are under no obligation to do so.4
Let me know if you’d like to chat about the most recent stimulus, FSAs, or any other topics you’re pondering. I’m always here to help.
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Citations
1. CNBC.com, March 12, 2021
2. CNBC.com, March 12, 2021
3. Congress.gov, March 11, 2021
4. Congress.gov, March 11, 2021
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Dave is a tax partner with over 30 years’ experience in service to closely-held family-run businesses, high net worth individuals, and for-profit flow-through entities. Dave’s expertise lies in the areas of real estate investments, the oil and gas industry, partnerships, S corporations, and closely held C corporations. His day-to-day activities include investment advisory services, the coordination and delivery of tax planning and compliance services for individuals and businesses. Dave holds his FINRA Series 7 and 66 licenses; he also holds Life, Accident, and Health Insurance licenses.