Additional Time to Use FSA Funds
Notice 2020-29 also allows plans to extend the normal deadline for having eligible expenses (typically, the last day of a plan year) to December 31, 2020.
- Employers and plan sponsors “may permit” employees to continue spending their balances until December 31, 2020.
- Example: A plan year ending on June 30, 2020, also has a two and a half month grace period. So, the last day for incurring eligible expenses for the plan year would normally be September 15, 2020. With the new relief provided, the last day to incur an eligible expense would now be December 31, 2020.
Employers who want to extend their plan's deadline for incurring eligible expenses to December 31, 2020 must have their existing plan year or grace period end in 2020.
Extending the period for incurring eligible expenses is optional and not required. You will need to amend your plan to implement this relief. The extension is available for plans with plan years or claims submission "grace periods" ending on or after January 1, 2020 but before December 31, 2020.
Important note: plan years ending on December 31, 2019 with no grace period are not subject to this optional provision.