American Rescue Plan Act
The law allows workers who have been involuntarily terminated or experienced a reduction in hours to continue their employer health insurance coverage under COBRA with a 100 percent subsidy. The subsidy is effective April 1, 2021 and continues through September 30, 2021. The federal government will reimburse the employer or insurer (for fully insured plans) for the cost of the subsidy, including COBRA administrative fees.
View our ARPA COBRA FAQ
Dependent care FSAs
For the 2021 plan year, the act includes a temporary, maximum contribution increase from $5,000 to $10,500. Employers are not required to provide this limit increase to their participants. If WEX clients choose to do so, they should let us know. Please note: Changing the limit for your participants could affect your plan’s compliance, and you may need to amend your plan document to allow for the increase.
Our interpretation is that the $10,500 limit is only applicable for tax years beginning in 2021 and would only apply to a portion of your plan year. If your plan year starts between July 1, 2021 and December 31, 2021, then the increased limits would be prorated for the months that fall in 2021.
FSAs and HRAs
Flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) were granted a temporary extension of run-out periods. These extensions are retroactive to deadlines occurring from March 1, 2020 until 60 days after the COVID-19 National Emergency is declared over or until 12 months have passed, whichever occurred first.
The run-out extension gives participants additional time to submit claims for any active plan year they are enrolled in that has a run-out period ending during the relevant timeframe (March 1, 2020 until 60 days after the end of the COVID-19 national emergency or until one year has passed, whichever occurred first).
Under this temporary extension, employers, qualified beneficiaries and COBRA participants have extra time to send certain notifications about COBRA coverage, to elect COBRA coverage, and to make premium payments. These changes are retroactive to any deadline occurring from March 1, 2020 until 60 days after the COVID-19 National Emergency is declared over or until 12 months have passed, whichever occurred first.
On October 6, 2021, the IRS released additional guidance explaining how the extensions apply to initial and subsequent premium payments. Click here for more details.
Consolidated Appropriations Act, 2021
Signed into law on December 21, 2020, this act includes several provisions to provide relief for health and dependent care FSAs. Employers are allowed, but not required to, permit the following:
- Carryover of unused funds from plan year ending in 2020 to plan year ending in 2021.
- Carryover of unused funds from plan year ending in 2021 to plan year ending in 2022.
- Grace period for plan year ending in 2020 or 2021 may be extended to 12 months after the end of the plan year.
Each of the above would be applicable to both health and dependent care FSAs. The act includes other provisions, which you can learn more about in this blog post.
The CARES Act was signed into law on March 27, 2020. It permanently reinstates coverage of over-the-counter (OTC) drugs and medicines as eligible for reimbursement from HSA, FSAs and HRAs without need for a prescription. For any OTC purchases made since January 1, 2020, participants can submit a claim in your online account or mobile app.