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The Breakdown: How the New Stimulus Law Impacts Unused FSA Balances, Health Plans and Plan Sponsors

As 2020 came to a close, President Trump signed a far-reaching $900 billion stimulus bill aimed at providing economic relief for those affected most by the pandemic. In addition to the more publicized direct payments, unemployment extensions and supplements, the law contains several provisions providing flexibility on using available FSA spending account funds, as well as provisions that impact health care claims, enrollment and eligibility.

During the recent fall open enrollment season, Conduent saw a focus on participant savings and risk aversion across all health accounts. With daycares and camps closed and continued delays in non-urgent health care, employees with FSAs were faced with two problems — losing their flexible spending account balances in 2020 due to the “use or it lose” requirements and underfunding their accounts for 2021 expenses. Optional provisions in the newly signed law offer employers a way to assist employees who face these challenges. Conduent’s BenefitWallet division can accommodate all of the FSA options if employers choose to implement them.

Optional Health Care and Dependent Care Spending Account provisions include:

  • Carryover of unused funds from plan years 2020 and 2021 to the following plan year; or
  • Grace period for plan years ending in 2020 or 2021 may be extended to 12 months after the end of the plan year
  • Employees who terminate Health Care FSA participation during 2020 or 2021 can spend down unused balances for expenses incurred after the termination to the end of the plan year in which they terminate
  • Increase the maximum age from 12 to 13 years of age for Dependent Care FSA beneficiaries for the 2020 plan year
  • Prospective modification of election amount for Health Care and Dependent Care FSAs (plan years ending in 2021)

Please keep in mind that adopting the FSA carry-over provisions could impact Health Savings Account (HSA) contribution eligibility for employees moving to HSA-qualified plans.

Other provisions that may impact claims, enrollment and eligibility for employers:

  • Process improvements with respect to medical billing by out-of-network providers who are unexpectedly involved in a patient’s care
  • HSA-qualified plans will not lose their HSA status because of compliance with new provisions regarding surprise medical bills
  • Continuity of care if a provider changes network status
  • Phased in transparency and competition requirements for group health care providers to provide public website access to in-network negotiated fees for procedures and personalized cost-sharing information
  • Expansion of telehealth for mental health services to allow a healthcare professional to ‘see’ a patient via telemedicine without having a prior patient relationship
  • Employers may offer below-the-deductible telehealth services without disqualifying contributions to otherwise qualified HSA plans for plan years beginning before January 1, 2022
  • Strengthening parity in mental health and substance use disorder benefits
  • Reporting requirements for pharmacy benefits and drug costs

Actions for employers

Employers will need to determine which provisions impact them and how to adopt changes by working with their legal counsel on the changes that may require plan amendments.

Since the law is quite sizeable, we will continue to evaluate all the provisions that impact employer-related benefits as well as additional guidance from the IRS. Continue to check the Conduent Insights page for updates.

Conduent cannot provide legal or tax advice regarding this law or its requirements. For those questions, you should consult your own legal counsel.