II 

116TH CONGRESS 

2D SESSION S. 4372 

To provide for unused benefits in a dependent care FSA to be carried 

over from 2020 to 2021, to provide for benefits to be accessed after 

termination of employment, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 30, 2020 

Ms. SMITH introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To provide for unused benefits in a dependent care FSA 

to be carried over from 2020 to 2021, to provide for 

benefits to be accessed after termination of employment, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Dependent Care Ex5 pense Relief Act of 2020’’. 


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1 SEC. 2. CARRY OVER OF DEPENDENT CARE FSA BENEFITS 

2 FROM 2020. 

3 (a) IN GENERAL.—Notwithstanding any applicable 

4 rule or regulation under section 125 or 129 of the Internal 

5 Revenue Code of 1986— 

6 (1) a dependent care flexible spending arrange7 ment shall permit participants who make the certifi8 cation under subsection (b) to carry over any 

9 amount of unused benefit or contribution (without 

10 limitation) from any plan year beginning or ending 

11 in 2020 to the subsequent plan year under rules 

12 similar to the rules applicable to health flexible 

13 spending arrangements, and 

14 (2) a plan or other arrangement shall not fail 

15 to be treated as a cafeteria plan or dependent care 

16 flexible spending arrangement merely because such 

17 plan or arrangement permits the carryover under 

18 paragraph (1). 

19 (b) CERTIFICATION BY EMPLOYEE.—In applying for 

20 the carryover under subsection (a)(1), the employee shall 

21 certify that the amount to be carried over is attributable 

22 to a reduction in expected dependent care expenses in the 

23 plan year due to a reduction in work hours, lack of avail24 able dependent care, or both, or other factors as deter25 mined by the Secretary of the Treasury (or the Secretary’s 


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1 delegate) due to the outbreak of coronavirus disease 2019 

2 (COVID–19) in the United States. 

3 (c) PENALTY.— 

4 (1) IN GENERAL.—There is hereby imposed a 

5 tax on the failure of a covered cafeteria plan to meet 

6 the requirements of subsection (a)(1) with respect to 

7 any employee. 

8 (2) AMOUNT OF TAX.— 

9 (A) IN GENERAL.—The amount of the tax 

10 imposed by paragraph (1) on any failure with 

11 respect to an employee shall be $100 for each 

12 day in the noncompliance period with respect to 

13 such failure. 

14 (B) NONCOMPLIANCE PERIOD.—For pur15 poses of this subsection, the term ‘‘noncompli16 ance period’’ means, with respect to any failure, 

17 the period— 

18 (i) beginning on the date such failure 

19 first occurs, and 

20 (ii) ending on the earlier of— 

21 (I) the date such failure is cor22 rected, or 

23 (II) the date which is 6 months 

24 after the date the employee terminates 

25 employment with the employer. 


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1 (C) LIMITATIONS.—Rules similar to the 

2 rules of subsections (b)(3) and (c) of section 

3 4980B of the Internal Revenue Code of 1986 

4 shall apply with respect to the tax under this 

5 section. 

6 (3) COVERED CAFETERIA PLAN.—For purposes 

7 of this subsection, the term ‘‘covered cafeteria plan’’ 

8 means a cafeteria plan under which a benefit is pro9 vided through employer contributions to a dependent 

10 care flexible spending arrangement. 

11 (4) LIABILITY FOR TAX.—Rules similar to the 

12 rules of section 4980B(e) of the Internal Revenue 

13 Code of 1986 shall apply for purposes of deter14 mining liability for the tax imposed under this sec15 tion. 

16 (5) COLLECTION OF TAX.—The tax imposed by 

17 paragraph (1) shall be collected in the same manner 

18 as the tax under section 4980B of such Code. 

19 (d) DEFINITIONS.—Any term used in this section 

20 which is also used in section 125 of the Internal Revenue 

21 Code of 1986 or the rules or regulations thereunder shall 

22 have the same meaning as when used in such section or 

23 regulations. 

24 (e) PLAN AMENDMENTS.—A plan or arrangement 

25 shall not be treated as violating the requirements of subVerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372

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1 section (a)(1) (including for purposes of subsection (c)), 

2 if— 

3 (1) the plan or arrangement is amended to 

4 meet such requirements on or before December 31, 

5 2020, 

6 (2) such amendment applies retroactively to any 

7 plan year ending in 2020, and 

8 (3) the plan or arrangement operates in accord9 ance with such requirements at all times after the 

10 date of the enactment of this Act. 

11 A plan or arrangement shall not be treated as failing to 

12 satisfy any requirement of the Internal Revenue Code of 

13 1986 merely because the plan or arrangement operates as 

14 provided in subparagraph (C). 

15 SEC. 3. SPEND-DOWN OF BENEFITS IN DEPENDENT CARE 

16 FLEXIBLE SPENDING ACCOUNTS. 

17 (a) IN GENERAL.—Chapter 43 of the Internal Rev18 enue Code of 1986 is amended by inserting after section 

19 4980 the following new section: 

20 ‘‘SEC. 4980A. TREATMENT OF UNUSED BENEFITS IN DE21 PENDENT CARE FLEXIBLE SPENDING AR22 RANGEMENTS. 

23 ‘‘(a) GENERAL RULE.—There is hereby imposed a 

24 tax on the failure of a covered cafeteria plan to meet the 


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1 requirements of subsection (c) with respect to any em2 ployee. 

3 ‘‘(b) AMOUNT OF TAX.— 

4 ‘‘(1) IN GENERAL.—The amount of the tax im5 posed by subsection (a) on any failure with respect 

6 to an employee shall be $100 for each day in the 

7 noncompliance period with respect to such failure. 

8 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 

9 of this section, the term ‘noncompliance period’ 

10 means, with respect to any failure, the period— 

11 ‘‘(A) beginning on the date such failure 

12 first occurs, and 

13 ‘‘(B) ending on the earlier of— 

14 ‘‘(i) the date such failure is corrected, 

15 or 

16 ‘‘(ii) the date which is 6 months after 

17 the date the employee terminates employ18 ment with the employer. 

19 ‘‘(3) LIMITATIONS.—Rules similar to the rules 

20 of subsections (b)(3) and (c) of section 4980B shall 

21 apply with respect to the tax under this section. 

22 ‘‘(c) DISTRIBUTIONS AFTER TERMINATION OF EM23 PLOYMENT.—A covered cafeteria plan meets the require24 ments of this subsection only if the cafeteria plan provides 

25 that, if an employee who is receiving benefits provided 


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1 through employer contributions to a dependent care flexi2 ble spending arrangement ceases (whether voluntarily or 

3 involuntarily) to work for the employer during the plan 

4 year, the employee may elect to be reimbursed from un5 used benefits for dependent care expenses incurred— 

6 ‘‘(1) after the date the employee terminates em7 ployment with the employer, and 

8 ‘‘(2) before the last day of such plan year (in9 cluding any grace period under the arrangement). 

10 ‘‘(d) COVERED CAFETERIA PLAN.—For purposes of 

11 this section, the term ‘covered cafeteria plan’ means a caf12 eteria plan under which a benefit is provided through em13 ployer contributions to a dependent care flexible spending 

14 arrangement. 

15 ‘‘(e) DEFINITIONS.—Any term used in this section 

16 which is also used in section 125 of the Internal Revenue 

17 Code of 1986 or the rules or regulations thereunder shall 

18 have the same meaning as when used in such section or 

19 regulations. 

20 ‘‘(f) LIABILITY FOR TAX.—Rules similar to the rules 

21 of section 4980B(e) shall apply for purposes of deter22 mining liability for the tax imposed under this section.’’. 

23 (b) CLERICAL AMENDMENT.—The table of sections 

24 for chapter 43 of the Internal Revenue Code of 1986 is 


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1 amended by inserting after the item relating to section 

2 4980 the following new item: 

‘‘Sec. 4980A. Treatment of unused benefits in dependent care flexible spending 

arrangements.’’. 

3 (c) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—The amendments made by 

5 this section shall apply to plan years ending after 

6 the date of the enactment of this Act. 

7 (2) PLAN AMENDMENTS.—A plan or arrange8 ment shall not be treated as violating the require9 ments of section 4980A(c) of the Internal Revenue 

10 Code of 1986, as added by this Act (including for 

11 purposes of section 4980A(a) of such Code, as so 

12 added), if— 

13 (A) the plan or arrangement is amended to 

14 meet such requirements on or before the last 

15 day of the first plan year ending after the date 

16 of the enactment of this Act, 

17 (B) such amendment applies retroactively 

18 to such first plan year, and 

19 (C) the plan or arrangement operates in 

20 accordance with such requirements at all times 

21 after the date of the enactment of this Act. 

22 A plan or arrangement shall not be treated as failing 

23 to satisfy any requirement of the Internal Revenue 


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1 Code of 1986 merely because the plan or arrange2 ment operates as provided in subparagraph (C). 

3 SEC. 4. DEPENDENT CARE EXPENSES. 

4 As soon as practicable after the date of the enactment 

5 of this Act, the Secretary of the Treasury (or the Sec6 retary’s delegate) shall issue such interim or temporary 

7 rules or guidance as are necessary to expand the definition 

8 of dependent care expenses eligible to be reimbursed from 

9 a dependent care flexible spending arrangement, to ac10 count for changes in the dependent care needs of tax11 payers due to— 

12 (1) the emergency involving Federal primary re13 sponsibility determined to exist by the President 

14 under section 501(b) of the Robert T. Stafford Dis15 aster Relief and Emergency Assistance Act (42 

16 U.S.C. 5191(b)) with respect to coronavirus disease 

17 2019 (COVID–19), and 

18 (2) the national emergency declared by the 

19 President under the National Emergencies Act (50 

20 U.S.C. 1601 et seq.) with respect to coronavirus dis21 ease 2019 (COVID–19). 

22 Such rules or guidance shall remain in effect until the last 

23 day of either such emergency, whichever is later. 

Æ 


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