Stanford employees will not forfeit any unused money from their 2020 health care FSA or dependent day care FSA, and may change their current 2021 elections with this new information.
The latest legislation aimed at providing economic relief during the pandemic has allowed employers such as Stanford to amend certain flexible spending account (FSA) rules for the 2021 plan year.
With the flexibility afforded in the Consolidated Appropriations Act, 2021 enacted in December, the university can allow employees access to their full, unused balance from their 2020 FSAs, including:
the full, unused balance from their 2020 health care FSA
the full, unused balance from their 2020 dependent day care FSA
the full, unused balance of their 2020 Child Care Subsidy Grant
Employees with 2021 FSA elections were sent an email from Stanford Benefits on Jan. 15 to explain how to adjust their 2021 contributions for the remaining paychecks of this plan year based on this new carryover amount, if they do so before Feb. 12, 2021.
This is an important, temporary departure from ordinary FSA administration, which is built around the notion of “use it or lose it,” said Neal Evans, Director of Health & Life Benefits. “The intent of an FSA is that you save only what you plan to spend during the year and get a tax break on that amount,” he explained. In recent years, the IRS has allowed health care FSA participants a $500 carryover from one year to the next, but dependent day care FSA rules did not permit any carryover at all.
In March 2020, under the CARES Act, the IRS increased the health care FSA carryover to $550 and expanded the list of eligible expenses, but didn’t change anything for dependent day care FSAs.
The unprecedented disruption to child care and health care during the pandemic had many employees concerned about committing funds to the FSA without confidence in what they would be able to use. So Stanford Benefits accepted mid-year changes to both types of FSA elections over the summer, as legislation and interim IRS guidance allowed. About 10% of account holders changed their election amount, he said, with the majority of employees choosing to stop or reduce their future contributions for the rest of 2020.
"We hope that giving employees access to all of their remaining funds will alleviate some of the stress of having another unpredictable year,” he added.