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COVID-19 FSA grace period and runout extension

If you offer a FSA or DCFSA, you have new options to offer your employees under IRS Notice 2020-29 (released on May 12, 2020):

  • If you already offer a runout or grace period for those accounts, you can lengthen them.
  • If you don't already have a runout or grace period, you choose to include one.

Employers are not required to offer the Special COVID-19 Enrollment Opportunity to their benefits-eligible employees—this is a flexible offering.

If an employer opts in:

  • Employees have until 12/31/2020 to use their expired or expiring policy’s FSA or DCFSA funds. Keep in mind that this applies only to plans that end in 2020, or where the grace period ends in 2020. Until 12/31/2020, employees will be able to: 
    • Submit claims for services rendered during the plan year. 
    • Use the funds for expenses incurred between the last day of the plan year and 12/31/2020.
  • Employees cannot contribute more to past plan year FSAs or DCFSAs.
  • Employees' HSA eligibility will be impacted — and employees should discuss the impact this may have on their HSA eligibility with a personal tax advisor. 

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