Family Savings Flexibility Act

To amend the Internal Revenue Code of 1986 to provide flexibility for families with health flexible spending arrangements and dependent care flexible spending arrangements, and for other purposes. 1. Short title This Act may be cited as the Family Savings Flexibility Act 2. Increase in carryover for health flexible spending arrangements (a) In general A plan or other arrangement that otherwise satisfies all of the applicable requirements of sections 106 and 125 of the Internal Revenue Code of 1986 (including any rules or regulations thereunder) shall not fail to be treated as a cafeteria plan or health flexible spending arrangement merely because such plan or arrangement permits participants to carry over an amount not in excess of $2,750 of unused benefits or contributions remaining in a health flexible spending arrangement from the plan year ending in 2020 to the plan year ending in 2021. (b) Definitions Any term used in this section which is also used in section 106 or 125 of the Internal Revenue Code of 1986 or the rules or regulations there under shall have the same meaning as when used in such section or rules or regulations. 3. Carryover for dependent care flexible spending arrangements (a) In general A plan or other arrangement that otherwise satisfies all applicable requirements of sections 106, 125, and 129 of the Internal Revenue Code of 1986 (including any rules or regulations thereunder) shall not fail to be treated as a cafeteria plan or dependent care flexible spending arrangement merely because such plan or arrangement permits participants to carry over (under rules similar to the rules applicable to health flexible spending arrangements) an amount, not in excess of the amount in effect under section 129(a)(2)(A) of such Code, of unused benefits or contributions remaining in a dependent care flexible spending arrangement from the plan year ending in 2020 to the plan year ending in 2021. (b) Definitions Any term used in this section which is also used in section 106, 125, or 129 of the Internal Revenue Code of 1986 or the rules or regulations thereunder shall have the same meaning as when used in such section or rules or regulations. 4. Maximum contribution limit to health savings account increased to amount of deductible and out-of-pocket limitation (a) Self-Only coverage Section 223(b)(2)(A) $2,250 the amount in effect under subsection (c)(2)(A)(ii)(I) (b) Family coverage Section 223(b)(2)(B) of such Code is amended by striking $4,500 the amount in effect under subsection (c)(2)(A)(ii)(II) (c) Conforming amendment Section 223(g)(1) of such Code is amended by striking subsections (b)(2) and subsection (d) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2019. 5. Increase in exclusion for employer-provided dependent care assistance (a) In general Section 129(a)(2) $5,000 ($2,500 $10,000 ($5,000 (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2019. (c) Retroactive plan amendments A plan or other arrangement that otherwise satisfies all applicable requirements of sections 106, 125, and 129 of the Internal Revenue Code of 1986 (including any rules or regulations thereunder) shall not fail to be treated as a cafeteria plan or dependent care flexible spending arrangement merely because such plan or arrangement is amended pursuant to a provision under this section and such amendment is retroactive, if— (1) such amendment is adopted no later than the last day of the plan year in which the amendment is effective, and (2) the plan or arrangement is operated consistent with the terms of such amendment during the period beginning on the effective date of the amendment and ending on the date the amendment is adopted.

Summary: Family Savings Flexibility Act This bill (1) increases to $2,750 the maximum amount of unused benefits or contributions remaining in a health flexible or dependent care spending arrangement that may be carried over from the 2020 to the 2021 plan year, (2) increases the maximum contribution amount for health savings accounts, and (3) increases the exclusion from employee gross income of employer-paid dependent care assistance.