The IRS today released an advance version of Notice 2021-15 to clarify application of provisions of the “Taxpayer Certainty and Disaster Tax Relief Act of 2020” (enacted as part of the “Consolidated Appropriations Act, 2021” (Pub. L. No. 116-260)) which provides temporary special rules for health flexible spending arrangements (health FSAs) and dependent care assistance programs under section 125 cafeteria plans.
The relief provided by Notice 2021-15 [PDF 245 KB] is in response to the coronavirus (COVID-19) pandemic.
Notice 2021-15 explains that while the legislation refers to “dependent care flexible spending arrangements,” today’s IRS notice uses the term “dependent care assistance programs.”
Today’s notice also provides additional relief with respect to mid-year elections for plan years ending in 2021. Specifically, with respect to employer-sponsored health coverage, a section 125 cafeteria plan may permit employees who are eligible to make salary reduction contributions under the plan to take any of the following actions for plan years ending in 2021:
Notice 2021-15 also provides relief with respect to the effective date of amendments to section 125 cafeteria plans and health reimbursement arrangements (HRAs) to implement the expansion of allowed expenses for health FSAs and HRAs by the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) (Pub. L. No. 116-136) to include over-the-counter drugs without prescriptions and menstrual care products.
The notice includes examples and sample language for use regarding the elections.
Read a related IRS release—IR-2021-40 (February 18, 2021)
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.