ARPA – Dependent Care

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA).

For Mindful Insurance Solutions Clients

For our clients that have a Section 125, Dependent Care Flexible Spending Account (DCFSA), notices were sent by our Third Party Administrators to amend your DCFSA.  If you did not receive the employer election form, please contact us.

Amendment Time Frames For DCFSA

December 31, 2020, and Before January 1, 2022

DCFSA Information

The annual limit on pre-tax contributions to a DCFSA that can be excluded from income. For single taxpayers and married couples filing jointly, the limit increases to $10,500 (from $5,000) and for married individuals filing separately, the limit increases to $5,250 (from $2,500).  This change is effective for plan years beginning after December 31, 2020, and before January 1, 2022.

Carry Over Amounts

Any carryover amount will not be treated as taxable income to the participant. Prior to the Act, it was not clear whether DCFSA reimbursements for services incurred during a year in excess of the maximum exclusion would be subject to inclusion in taxable income.

Who Must Amend DCFSA

Employers who want to take advantage of the relief provided by the Act must amend their DCFSAs by the last day of the plan year in which the amendment is effective, which would be December 31, 2022, for calendar year DCFSAs.