The American Rescue Plan Act of 2021 (“ARPA”) increases the dependent care flexible spending arrangement (“DCFSA”) annual limit from $5,000 to $10,500. The increase only applies to the 2021 calendar year.Employers are not required to offer the higher limit under their DCFSA plans.
If an employer desires to increase the limit under its DCFSA plan, the employer must do the following -
- Inform employees of the increased limit and pursuant to guidance issued earlier this year by the IRS allow employees a one-time opportunity to change their pre-tax election for the remainder of 2021.
- Amend the employer’s cafeteria plan by December 31, 2021 to allow for the one-time mid-year election change and the increased DCFSA limit.
- If applicable, amend the service agreement with the DCFSA administrator for the mid-year change in services.
Disclaimer
While we are pleased to have you contact us by telephone, surface mail, electronic mail, or by facsimile transmission, contacting Kilpatrick Townsend & Stockton LLP or any of its attorneys does not create an attorney-client relationship. The formation of an attorney-client relationship requires consideration of multiple factors, including possible conflicts of interest. An attorney-client relationship is formed only when both you and the Firm have agreed to proceed with a defined engagement.
DO NOT CONVEY TO US ANY INFORMATION YOU REGARD AS CONFIDENTIAL UNTIL A FORMAL CLIENT-ATTORNEY RELATIONSHIP HAS BEEN ESTABLISHED.
If you do convey information, you recognize that we may review and disclose the information, and you agree that even if you regard the information as highly confidential and even if it is transmitted in a good faith effort to retain us, such a review does not preclude us from representing another client directly adverse to you, even in a matter where that information could be used against you.
