Questions?
For questions regarding flex account changes, contact the university human resources benefits team at 294-4800 or benefits@iastate.edu. For questions about flex plan rules, future legislative changes and tax impact, contact the payroll, benefits and tax office at fbac@iastate.edu.
The normal use-it-or-lose-it rules of flexible spending accounts (FSA) for health and dependent care are suspended for 2020 contributions, due to a temporary change in federal law. All funds left in a health care FSA or a dependent care assistance program (DCAP) account at the end of 2020 are available to cover 2021 expenses.
A provision in the COVID-19 relief package Congress passed in late December provides for the additional temporary flexibility. Throughout 2021, the following changes are in effect for the accounts, which are used to save taxes on payroll deductions set aside to cover eligible health and dependent care costs.
Relaxed FSA carryover
Previously, the carryover amount for the health care FSA was limited to $550. The new rules temporarily eliminate the cap and allow all unused funds from the 2020 plan year to carry over into 2021. This will allow additional time to incur expenses and spend funds that would otherwise be forfeited.
Extended DCAP grace period
Dependent care accounts typically have a grace period, allowing expenses incurred before March 15 to be paid with leftover funds from the prior year. In 2021, the grace period is 12 months, allowing any eligible expense through Dec. 31 to be reimbursed with unspent contributions made in 2020.
Changes allowed
Broadening and continuing a temporary change offered in 2020, employees will be allowed to change their flex account elections at any point during 2021. Contribution levels to the accounts, which are set for the following year during November open enrollment, usually can be changed only when an employee has a qualifying change in family status. The option to make adjustments will help employees better manage fluctuations in child care and medical expenses.
Dependent care eligibility age
The maximum age of eligible dependents to qualify for reimbursement from a DCAP account is being temporarily increased from 12 to 13.
