12/16/2023 0 Comments Fsa flexible expenses more than amount15, clarifies that employers may extend the dependent care FSA claims period for a dependent who "ages out" by turning 13 years old during the COVID-19 public health emergency. For instance:Ĭonsolidated Appropriations Act, 2021 (CAA), signed into law at the end of 2020, allows employers that sponsor health or dependent care FSAs to permit participants to roll over all unused amounts in these accounts from 2020 to 2021 and from 2021 to 2022. However, the combined employer and employee contributions to a dependent care FSA cannot exceed the IRS limits.Ĭongress and the IRS have provided other DC-FSA relief this year to help meet caregivers' needs during the pandemic, and employers should consider these changes as well as the new contribution limits when adjusting plans they sponsor. Funds may be used for expenses relating to children who are under the age of 13 or incapable of self-care and who live with the FSA holder more than half the year.Įlder care may be eligible for reimbursement with a dependent care FSA if the adult lives with the FSA holder at least eight hours of the day and is claimed as a dependent on the FSA holder's federal tax return.Įmployers can also choose to contribute to employees' dependent care FSAs. Reviewing the Basics: Dependent Care FSAs and Tax CreditsĪ dependent care FSA-also referred to as an Internal Revenue Code Section 129 dependent care assistance program(DCAP)-is a pretax benefit account used to pay for services such as day care, preschool, summer camps and before- or after-school programs. "Providing this flexibility is warranted for employees since many child care services were suspended over the past year, leaving dependent care funds unused," she pointed out. In response to the pandemic, the Society for Human Resource Management (SHRM) "worked with Congress to ensure maximum flexibility for dependent care FSAs," said Chatrane Birbal, vice president of public policy at SHRM. 1, 2022.Ĭontribution limit for health care FSAs remained unchanged at $2,750. The higher limits apply to the plan year beginning after Dec. The new DC-FSA annual limits for pretax contributions increases to $10,500 (up from $5,000) for single taxpayers and married couples filing jointly, and to $5,250 (up from $2,500) for married individuals filing separately. It also increases the value of the dependent care tax credit for 2021. American Rescue Plan Act (ARPA), signed into law on March 11, raises pretax contribution limits for dependent care flexible spending accounts (DC-FSAs) for calendar year 2021.
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