I 

116TH CONGRESS 

2D SESSION H. R. 7149 

To amend the Internal Revenue Code of 1986 to provide special disposition 

rules for unused benefits in flexible spending arrangements of individuals 

for calendar year 2020. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 11, 2020 

Mr. PALMER (for himself, Mr. COOK, Mr. HAGEDORN, Mrs. WAGNER, Mr. 

ADERHOLT, Mr. STIVERS, Mr. BALDERSON, Mr. PERRY, Mr. GIBBS, and 

Mr. STEWART) introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

special disposition rules for unused benefits in flexible 

spending arrangements of individuals for calendar year 

2020. 

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

3 SECTION 1. SPECIAL DISPOSITION RULES FOR UNUSED 

4 BENEFITS IN FLEXIBLE SPENDING ARRANGE5 MENTS OF INDIVIDUALS IN PLAN YEAR 2020. 

6 (a) FSAS MUST ALLOW DISTRIBUTION OR ROLL7 OVER IN 2020.—For purposes of sections 106, 125, and 


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1 129 of the Internal Revenue Code of 1986, a flexible 

2 spending arrangement must allow a qualified 2020 dis3 tribution or rollover. 

4 (b) TAXES APPLIED TO CERTAIN DISTRIBUTIONS.— 

5 For purposes of sections 125(a) and 129(a) of such Code, 

6 such sections shall not apply to any benefit distributed 

7 from a flexible spending arrangement for a use other than 

8 the qualifying benefit for which such arrangement was es9 tablished. 

10 (c) SPECIAL RULE FOR DISPOSITION OF UNUSED

11 BENEFITS.—For purposes of such Code, a plan shall not 

12 fail to be treated as a cafeteria plan, health flexible spend13 ing arrangement, or dependent care flexible spending ar14 rangement merely because such arrangement provides for 

15 a qualified 2020 distribution or rollover. 

16 (d) QUALIFIED 2020 DISTRIBUTION OR ROLL17 OVER.—For purposes of this section, the term ‘‘qualified 

18 2020 distribution or rollover’’ means, for plan year 2020, 

19 any distribution at any time to an individual of all or a 

20 portion of the balance in the employee’s account under 

21 such arrangement, or the rollover of the balance in the 

22 employee’s account to plan year 2021. 

23 (e) APPLICATION.—This section shall only apply to 

24 distributions or rollovers in plan year 2020. 


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1 SEC. 2. CHANGE IN ELECTION AMOUNT. 

2 (a) IN GENERAL.—A plan or other arrangement that 

3 otherwise satisfies all applicable requirements of sections 

4 106 and 125 of the Internal Revenue Code of 1986 (in5 cluding any rules or regulations thereunder) shall not fail 

6 to be treated as a cafeteria plan or health flexible spending 

7 arrangement merely because such plan or arrangement al8 lows an employee to make, with respect to the remaining 

9 portion of a period of coverage within the applicable pe10 riod— 

11 (1) an election modifying the amount of such 

12 employee’s contributions to such a health flexible 

13 spending arrangement (without regard to any 

14 change in status), or 

15 (2) an election modifying the amount of such 

16 employee’s elective paid time off. Any election as 

17 modified under paragraph (1) shall not exceed the 

18 limitation applicable under section 125(i) for the 

19 taxable year. 

20 (b) ONE-TIME APPLICATION.—Paragraphs (1) and 

21 (2) of subsection (a) shall each apply to only 1 election 

22 change described in such paragraph with respect to an em23 ployee (in addition to any other election changes during 

24 a period of coverage permitted under the plan or arrange25 ment without regard to this section). 


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1 (c) APPLICABLE PERIOD.—For purposes of this sec2 tion, the term ‘‘applicable period’’ means the period begin3 ning on the date of the enactment of this Act and ending 

4 on December 31, 2020. 

5 SEC. 3. EXTENSION OF GRACE PERIODS, ETC. 

6 (a) IN GENERAL.—A plan or other arrangement that 

7 otherwise satisfies all applicable requirements of sections 

8 106, 125, or 129 of the Internal Revenue Code (including 

9 any rules or regulations thereunder) shall not fail to be 

10 treated as a cafeteria plan, health flexible spending ar11 rangement, or dependent care flexible spending arrange12 ment (whichever is applicable) merely because such plan 

13 or arrangement extends the grace period for the plan year 

14 ending in 2020 to 12 months after the end of such plan 

15 year, with respect to unused benefits or contributions re16 maining in a health flexible spending arrangement or a 

17 dependent care flexible spending arrangement. 

18 (b) POST-TERMINATION REIMBURSEMENTS FROM

19 HEALTH FSAS.—A plan or other arrangement that other20 wise satisfies all applicable requirements of sections 106 

21 and 125 of the Internal Revenue Code of 1986 (including 

22 any rules or regulations thereunder) shall not fail to be 

23 treated as a cafeteria plan or health flexible spending ar24 rangement merely because such plan or arrangement al25 lows (under rules similar to the rules applicable to dependVerDate Sep 11 2014 04:10 Jun 28, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H7149.IH H7149

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1 ent care flexible spending arrangements) an employee who 

2 ceases participation in the plan during calendar year 2020 

3 to continue to receive reimbursements from unused bene4 fits or contributions through the end of the plan year (in5 cluding any grace period, taking into account any modi6 fication of a grace period permitted under subsection (a)). 

7 (c) DEFINITIONS.—Any term used in this section 

8 which is also used in section 106, 125, or 129 of the Inter9 nal Revenue Code of 1986 or the rules or regulations 

10 thereunder shall have the same meaning as when used in 

11 such section or rules or regulations. 

Æ 


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