Notice 2021-15 provides guidance on the application of recently enacted § 214 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the Act), which provides temporary special rules for health flexible spending arrangements (FSAs) and dependent care assistance programs under § 125 cafeteria plans.  Specifically, § 214 of the Act: provides flexibility with respect to carryovers of unused amounts from the 2020 and 2021 plan years; extends the permissible grace period for plan years ending in 2020 and 2021; provides a special rule regarding post-termination reimbursements from health FSAs; provides a special carryover rule for dependent care assistance programs when a dependent “ages out” during the public health emergency posed by COVID-19; and allows certain mid-year election changes for health FSAs and dependent care assistance programs for plan years ending in 2021.  In addition, the notice provides that a § 125 cafeteria plan may permit employees who are eligible to make salary reduction contributions under the plan to, with respect to employer-sponsored health coverage: make a new election on a prospective basis, if the employee initially declined to elect employer-sponsored health coverage; revoke an existing election and make a new election to enroll in different health coverage sponsored by the same employer on a prospective basis; and revoke an existing election on a prospective basis, provided that the employee attests in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer.  The notice also provides relief with respect to the effective date of amendments to § 125 cafeteria plans to implement the expansion under the CARES Act of allowed expenses for health FSAs and health reimbursement arrangements to include over-the-counter drugs without prescriptions and menstrual care products.

Notice 2021-15 will be in IRB 2021-10, dated 3/8/2021