The 3 most important things to know about 2021 FSA changes

You may have heard about some major FSA changes that passed through Congress in late 2020 as part of the Consolidated Appropriations Act 2021 (CAA 2021). No more deadlines right? Not exactly. The fact is, some of these changes will apply to some FSA users, while others will not. Knowing what those changes are and what actions you should take will help better prepare you for your 2021 FSA plan.

Here's the most important thing to keep in mind: every one of these potential FSA changes needs to be enacted by your employer first in order for you to take advantage of them.

The best thing you can do now is to keep track of your plan deadlines and any changes which may impact you. Let's explore what could be changing for you as 2021 gets underway:

1. Expanded FSA Rollovers

The new FSA legislation gives employers the option of waiving your FSA deadline for 2021. They will have the option of allowing you to roll over ALL of your unspent FSA dollars into the next plan year. So you can still contribute the full amount for 2022 ($2,750) and have your remaining 2021 FSA funds left to spend.

2. Expanded FSA Grace Period

If you have the FSA Grace Period extension built into your plan, and your plan year ends on December 31, you probably have a deadline coming up on March 15. But thanks to CAA 2021, employers can expand this grace period up to 12 months from your deadline. So your employer could give you a few extra months to spend your 2020 FSA dollars, or even more time for added flexibility.

3. Expanded Mid-Year Changes

As a response to the COVID-19 public health crisis in 2020, the IRS made the unprecedented decision to open up mid-year FSA changes to employers who allowed them. That applies again for 2021, as employers can allow mid-year changes to FSAs to give participants the chance to enroll/disenroll and add/withdraw funds to their FSAs.

What should I do now?

As the 2021 FSA plan year kicks off, be proactive and speak with your HR department. They will have the most updated information on which/if any of these changes your employer is implementing for 2021 and beyond so you know exactly what's coming and can plan accordingly.

FSAs have seen a series of welcome changes over the past year, from the expansion of eligibility of menstrual care products and over-the-counter medicines to increased employer flexibility to allow employees to take full advantage of these accounts. Thankfully after a rough 2020, we can say with confidence that FSA users are better positioned than ever to save money on healthcare expenses and make the right choices for their long-term health and wellness.

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