Senate Republican Leader Tom Kean’s resolution encouraging the Internal Revenue Service (IRS) to relax the rules of flexible spending accounts (FSAs) used to pay for medical and childcare expenses during the COVID pandemic has advanced in the Senate Budget and Appropriations Committee.
Sen. Tom Kean’s resolution encouraging the IRS to relax the rules of FSAs used to pay for medical and childcare expenses during the COVID pandemic has advanced. (SenateNJ.com)
“New Jersey parents need more support as they balance raising their children and running a household while working from home during these unprecedented times,” added Kean. “On the same note, many with postponed elective surgeries want to ensure they can use their funds for said procedures or be refunded at the end of the year rather than be held to the ‘use it or lose it’ rule. Making healthcare and childcare FSAs more flexible during this difficult time will lighten the load and better help New Jersey families survive this pandemic.”
Kean’s legislative resolution, SR-70, urges the IRS to grant more flexibility to users of FSAs during the COVID pandemic.
A dependent care FSA can help participants pay for various dependent care services such as pre-school, summer day camp, before and after school programs, and child and adult day care, while a health care FSA can help pay for qualified medical expenses.
Both types of FSAs allow for funds to be set aside to pay for expenses on a pre-tax basis. The IRS requires participants to estimate anticipated expenses for the upcoming year and to make FSA elections accordingly.
The IRS prohibits changes to participants’ FSA accounts, and these strict rules prohibiting changes is especially problematic during unexpected crises such as the COVID-19 pandemic.
Although the IRS has attempted to make FSAs more flexible by allowing certain changes to mid-term elections within FSAs, extending grace periods to use unused FSA funds, and increasing the amount of health FSA funds that can be carried over into the next year, America’s employees still require additional flexibility within FSAs.
“While the IRS has taken some steps to address unanticipated expenses as a result of the COVID-19 outbreak, greater flexibility within FSAs is still needed,” added Kean. “No one could have predicted nor properly prepared for this unprecedented pandemic. New Jerseyans who set aside too much or too little in their FSAs should not be punished one way or another.”
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