Increase in Dependent Care FSA Limit for 2021

March 12, 2021

Under the recently signed American Rescue Plan Act of 2021 (ARPA), the dependent care flexible spending account (“FSA”) limits have been increased for 2021 only. Prior to the changes under ARPA, the limits were $5,000 for married individuals filing jointly and $2,500 for married individuals filing separately and single filers. The temporary limits for 2021 are $10,500 and $5,250 respectively.

Modifying previously elected amounts must be done so within the framework of the cafeteria plan mid-year election changes as outlined in the recent Consolidated Appropriates Act of 2021. Plan documents must be appropriately amended by the end of 2021 to accommodate these limit increases. Employers are encouraged to contact their plan administrator to discuss the procedures for implementing this very beneficial change.

If you should have any questions, please contact Mark Flanagan of Aronson’s Compensation and Benefits Practice at 301.231.6257.