Title: Dependent Care Expense Relief Act of 2020
Policy area: Taxation

Summary:
Dependent Care Expense Relief Act of 2020
This bill allows the carryover of unused dependent care flexible spending arrangement benefits from plan year 2020 to plan year 2021. It also allows employees terminated from employment to be reimbursed for unused dependent care benefits during a specified period.
The bill requires the Department of the Treasury to issue rules or guidance to expand the definition of dependent care expenses eligible to be reimbursed from a dependent care flexible spending arrangement to account for changes in the dependent care needs of taxpayers due to a COVID-19 (i.e., corornavirus disease 2019) emergency declaration.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 4372 Introduced in Senate (IS)]

<DOC>






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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Dependent Care Expense Relief Act of 
2020''.

SEC. 2. CARRY OVER OF DEPENDENT CARE FSA BENEFITS FROM 2020.

    (a) In General.--Notwithstanding any applicable rule or regulation 
under section 125 or 129 of the Internal Revenue Code of 1986--
            (1) a dependent care flexible spending arrangement shall 
        permit participants who make the certification under subsection 
        (b) to carry over any amount of unused benefit or contribution 
        (without limitation) from any plan year beginning or ending in 
        2020 to the subsequent plan year under rules similar to the 
        rules applicable to health flexible spending arrangements, and
            (2) a plan or other arrangement shall not fail to be 
        treated as a cafeteria plan or dependent care flexible spending 
        arrangement merely because such plan or arrangement permits the 
        carryover under paragraph (1).
    (b) Certification by Employee.--In applying for the carryover under 
subsection (a)(1), the employee shall certify that the amount to be 
carried over is attributable to a reduction in expected dependent care 
expenses in the plan year due to a reduction in work hours, lack of 
available dependent care, or both, or other factors as determined by 
the Secretary of the Treasury (or the Secretary's delegate) due to the 
outbreak of coronavirus disease 2019 (COVID-19) in the United States.
    (c) Penalty.--
            (1) In general.--There is hereby imposed a tax on the 
        failure of a covered cafeteria plan to meet the requirements of 
        subsection (a)(1) with respect to any employee.
            (2) Amount of tax.--
                    (A) In general.--The amount of the tax imposed by 
                paragraph (1) on any failure with respect to an 
                employee shall be $100 for each day in the 
                noncompliance period with respect to such failure.
                    (B) Noncompliance period.--For purposes of this 
                subsection, the term ``noncompliance period'' means, 
                with respect to any failure, the period--
                            (i) beginning on the date such failure 
                        first occurs, and
                            (ii) ending on the earlier of--
                                    (I) the date such failure is 
                                corrected, or
                                    (II) the date which is 6 months 
                                after the date the employee terminates 
                                employment with the employer.
                    (C) Limitations.--Rules similar to the rules of 
                subsections (b)(3) and (c) of section 4980B of the 
                Internal Revenue Code of 1986 shall apply with respect 
                to the tax under this section.
            (3) Covered cafeteria plan.--For purposes of this 
        subsection, the term ``covered cafeteria plan'' means a 
        cafeteria plan under which a benefit is provided through 
        employer contributions to a dependent care flexible spending 
        arrangement.
            (4) Liability for tax.--Rules similar to the rules of 
        section 4980B(e) of the Internal Revenue Code of 1986 shall 
        apply for purposes of determining liability for the tax imposed 
        under this section.
            (5) Collection of tax.--The tax imposed by paragraph (1) 
        shall be collected in the same manner as the tax under section 
        4980B of such Code.
    (d) Definitions.--Any term used in this section which is also used 
in section 125 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 regulations.
    (e) Plan Amendments.--A plan or arrangement shall not be treated as 
violating the requirements of subsection (a)(1) (including for purposes 
of subsection (c)), if--
            (1) the plan or arrangement is amended to meet such 
        requirements on or before December 31, 2020,
            (2) such amendment applies retroactively to any plan year 
        ending in 2020, and
            (3) the plan or arrangement operates in accordance with 
        such requirements at all times after the date of the enactment 
        of this Act.
A plan or arrangement shall not be treated as failing to satisfy any 
requirement of the Internal Revenue Code of 1986 merely because the 
plan or arrangement operates as provided in subparagraph (C).

SEC. 3. SPEND-DOWN OF BENEFITS IN DEPENDENT CARE FLEXIBLE SPENDING 
              ACCOUNTS.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 is 
amended by inserting after section 4980 the following new section:

``SEC. 4980A. TREATMENT OF UNUSED BENEFITS IN DEPENDENT CARE FLEXIBLE 
              SPENDING ARRANGEMENTS.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of a covered cafeteria plan to meet the requirements of subsection (c) 
with respect to any employee.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to an employee shall 
        be $100 for each day in the noncompliance period with respect 
        to such failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period--
                    ``(A) beginning on the date such failure first 
                occurs, and
                    ``(B) ending on the earlier of--
                            ``(i) the date such failure is corrected, 
                        or
                            ``(ii) the date which is 6 months after the 
                        date the employee terminates employment with 
                        the employer.
            ``(3) Limitations.--Rules similar to the rules of 
        subsections (b)(3) and (c) of section 4980B shall apply with 
        respect to the tax under this section.
    ``(c) Distributions After Termination of Employment.--A covered 
cafeteria plan meets the requirements of this subsection only if the 
cafeteria plan provides that, if an employee who is receiving benefits 
provided through employer contributions to a dependent care flexible 
spending arrangement ceases (whether voluntarily or involuntarily) to 
work for the employer during the plan year, the employee may elect to 
be reimbursed from unused benefits for dependent care expenses 
incurred--
            ``(1) after the date the employee terminates employment 
        with the employer, and
            ``(2) before the last day of such plan year (including any 
        grace period under the arrangement).
    ``(d) Covered Cafeteria Plan.--For purposes of this section, the 
term `covered cafeteria plan' means a cafeteria plan under which a 
benefit is provided through employer contributions to a dependent care 
flexible spending arrangement.
    ``(e) Definitions.--Any term used in this section which is also 
used in section 125 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 regulations.
    ``(f) Liability for Tax.--Rules similar to the rules of section 
4980B(e) shall apply for purposes of determining liability for the tax 
imposed under this section.''.
    (b) Clerical Amendment.--The table of sections for chapter 43 of 
the Internal Revenue Code of 1986 is amended by inserting after the 
item relating to section 4980 the following new item:

``Sec. 4980A. Treatment of unused benefits in dependent care flexible 
                            spending arrangements.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years ending after the date of the enactment of 
        this Act.
            (2) Plan amendments.--A plan or arrangement shall not be 
        treated as violating the requirements of section 4980A(c) of 
        the Internal Revenue Code of 1986, as added by this Act 
        (including for purposes of section 4980A(a) of such Code, as so 
        added), if--
                    (A) the plan or arrangement is amended to meet such 
                requirements on or before the last day of the first 
                plan year ending after the date of the enactment of 
                this Act,
                    (B) such amendment applies retroactively to such 
                first plan year, and
                    (C) the plan or arrangement operates in accordance 
                with such requirements at all times after the date of 
                the enactment of this Act.
        A plan or arrangement shall not be treated as failing to 
        satisfy any requirement of the Internal Revenue Code of 1986 
        merely because the plan or arrangement operates as provided in 
        subparagraph (C).

SEC. 4. DEPENDENT CARE EXPENSES.

    As soon as practicable after the date of the enactment of this Act, 
the Secretary of the Treasury (or the Secretary's delegate) shall issue 
such interim or temporary rules or guidance as are necessary to expand 
the definition of dependent care expenses eligible to be reimbursed 
from a dependent care flexible spending arrangement, to account for 
changes in the dependent care needs of taxpayers due to--
            (1) the emergency involving Federal primary responsibility 
        determined to exist by the President under section 501(b) of 
        the Robert T. Stafford Disaster Relief and Emergency Assistance 
        Act (42 U.S.C. 5191(b)) with respect to coronavirus disease 
        2019 (COVID-19), and
            (2) the national emergency declared by the President under 
        the National Emergencies Act (50 U.S.C. 1601 et seq.) with 
        respect to coronavirus disease 2019 (COVID-19).
Such rules or guidance shall remain in effect until the last day of 
either such emergency, whichever is later.
                                 <all>