Since the start of the pandemic, there has been a swell of guidance that permits employers to revise their Section 125 plans (a/k/a Cafeteria Plans) to provide various relief to plan participants. We previously blogged in detail about these changes that were permitted under the Coronavirus Aid Relief, and Economic Security Act (CARES Act), Consolidated Appropriations Act of 2021, American Rescue Plan Act, and several Notices issued by the IRS. All of this Section 125 relief was optional, with some of it being temporary for 2020 and 2021 (e.g., ability to make a mid-year change to your FSA for any reason), and some being permanent (e.g., increasing the health FSA carryover amount). If you chose to take advantage of any of these relief provisions, your Cafeteria Plan needs to be amended.
Below is a high-level summary of the items that you may need to amend your Cafeteria Plan for by December 31st if you implemented them:
- Allowing reimbursement of over-the-counter medicines or menstrual supplies in your health FSA or HRA;
- Extended grace period or unlimited carryover amount for health and dependent care FSAs for 2020 and 2021;
- Allowing participants to be reimbursed from their health FSA for expenses that occurred post-termination;
- Increasing the health FSA rollover amount to index for inflation;
- Allowing participants to make mid-year changes for any reason in their health plan, health FSA or dependent care FSA plans;
- Increasing the dependent care FSA maximum temporarily to $10,500; and
- Increasing the qualifying age for dependent care reimbursement from 12 to 13.
The changes permitted as a result of the Consolidated Appropriations Act and the IRS Notices required plans to be amended by the last day of the calendar year in which the amendment was effective. In other words, if you took advantage of any of the relief in 2020, including allowing a carryover into 2021, your plan must be amended no later than December 31, 2021. In addition, the changes for adding OTC drugs and menstrual supplies also have a December 31, 2021 amendment deadline.
When the first of this guidance came out and stated there was a December 31, 2021 amendment deadline, that date felt very far away. It feels like I blinked and it was already right around the corner. If you have not yet discussed or received an amendment from your Section 125 document provider, you should reach out to them to ensure that your plan is timely amended for these provisions. As always, if we can be of assistance, please contact any member of Graydon’s employee benefits team.
