Title: 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.
Policy area: Taxation

Summary:
This bill requires flexible spending arrangements established for 2020 to provide for the rollover of unused benefits or contributions to 2021. It also permits plan participants to modify their election amount and extends the grace period for the 2020 plan year to 12 months after the end of such plan year.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7149 Introduced in House (IH)]

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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.

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

SECTION 1. SPECIAL DISPOSITION RULES FOR UNUSED BENEFITS IN FLEXIBLE 
              SPENDING ARRANGEMENTS OF INDIVIDUALS IN PLAN YEAR 2020.

    (a) FSAs Must Allow Distribution or Rollover in 2020.--For purposes 
of sections 106, 125, and 129 of the Internal Revenue Code of 1986, a 
flexible spending arrangement must allow a qualified 2020 distribution 
or rollover.
    (b) Taxes Applied to Certain Distributions.--For purposes of 
sections 125(a) and 129(a) of such Code, such sections shall not apply 
to any benefit distributed from a flexible spending arrangement for a 
use other than the qualifying benefit for which such arrangement was 
established.
    (c) Special Rule for Disposition of Unused Benefits.--For purposes 
of such Code, a plan shall not fail to be treated as a cafeteria plan, 
health flexible spending arrangement, or dependent care flexible 
spending arrangement merely because such arrangement provides for a 
qualified 2020 distribution or rollover.
    (d) Qualified 2020 Distribution or Rollover.--For purposes of this 
section, the term ``qualified 2020 distribution or rollover'' means, 
for plan year 2020, any distribution at any time to an individual of 
all or a portion of the balance in the employee's account under such 
arrangement, or the rollover of the balance in the employee's account 
to plan year 2021.
    (e) Application.--This section shall only apply to distributions or 
rollovers in plan year 2020.

SEC. 2. CHANGE IN ELECTION AMOUNT.

    (a) In General.--A plan or other arrangement that otherwise 
satisfies all 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 
allows an employee to make, with respect to the remaining portion of a 
period of coverage within the applicable period--
            (1) an election modifying the amount of such employee's 
        contributions to such a health flexible spending arrangement 
        (without regard to any change in status), or
            (2) an election modifying the amount of such employee's 
        elective paid time off. Any election as modified under 
        paragraph (1) shall not exceed the limitation applicable under 
        section 125(i) for the taxable year.
    (b) One-Time Application.--Paragraphs (1) and (2) of subsection (a) 
shall each apply to only 1 election change described in such paragraph 
with respect to an employee (in addition to any other election changes 
during a period of coverage permitted under the plan or arrangement 
without regard to this section).
    (c) Applicable Period.--For purposes of this section, the term 
``applicable period'' means the period beginning on the date of the 
enactment of this Act and ending on December 31, 2020.

SEC. 3. EXTENSION OF GRACE PERIODS, ETC.

    (a) In General.--A plan or other arrangement that otherwise 
satisfies all applicable requirements of sections 106, 125, or 129 of 
the Internal Revenue Code (including any rules or regulations 
thereunder) shall not fail to be treated as a cafeteria plan, health 
flexible spending arrangement, or dependent care flexible spending 
arrangement (whichever is applicable) merely because such plan or 
arrangement extends the grace period for the plan year ending in 2020 
to 12 months after the end of such plan year, with respect to unused 
benefits or contributions remaining in a health flexible spending 
arrangement or a dependent care flexible spending arrangement.
    (b) Post-Termination Reimbursements From Health FSAs.--A plan or 
other arrangement that otherwise satisfies all 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 allows (under rules similar to the rules 
applicable to dependent care flexible spending arrangements) an 
employee who ceases participation in the plan during calendar year 2020 
to continue to receive reimbursements from unused benefits or 
contributions through the end of the plan year (including any grace 
period, taking into account any modification of a grace period 
permitted under subsection (a)).
    (c) 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.
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