Allow Post-Termination Expenses for FSAs
Typically, participants can only receive reimbursement of FSA expenses that were incurred while actively employed. However, under the 2021 legislation, terminated participants have the opportunity to receive reimbursement from unused benefits or contributions through the end of the plan year when participation ceased (including grace periods). This provision applies to Health FSAs and Dependent Care FSAs.
The above change is not mandatory. Employers who want to allow election changes must make an amendment to their plan no later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective.