WASHINGTON, D.C., USA — QUESTION:
Has the Internal Revenue Service relaxed the “Use it or Lose it” rule for FSA accounts?
ANSWER:
Yes, but it's up to employers to open them up.
SOURCE:
PROCESS:
The coronavirus has turned a lots of things upside down.
But the Verify team is here to help you sort through the changes and get you answers from the experts.
With child care facilities and summer camps closed, you might be worried about losing money in a Dependent Care Flexible Spending Account.
So we’re Verifying, has the IRS updated the “Use it or Lose it Rule” for dependent care FSA accounts?
Our source for this one, the Internal Revenue Service.
Your employer manages your FSA, but the IRS sets the rules.
Here’s how it usually works. You put money into the Dependent Care FSA account pre-tax to pay for things like child care.
If you don’t use it by a certain date, you lose it.
Because of the pandemic, the IRS issued Notice 2020.29 back in May.
It gives employers more flexibility in managing those FSA’s.
Things like – allowing an employee to make a midyear change to how much they’re putting in the account.
Or, extending the deadlines for filing claims so an employee doesn’t lose that money.
So we can Verify, yes, the IRS has issued new temporary rules to ease dependent care FSA restrictions but it’s up to employers to make those new options available to employees.