Changes Related to the Dependent Care Flexible Spending Plan for 2021
As part of the latest COVID relief bill, the American Rescue Plan Act (ARPA), Dependent Care FSA plans may now allow participants to contribute a maximum of $10,500.00 in 2021. Brown University has adopted this change and will allow an increase to your annual election amount for Dependent Care FSA.
The American Rescue Plan Act (ARPA) allows a temporary increase to the tax exclusion limit for Dependent Care FSA plans from $5,000 to $10,500 for any taxable year beginning after December 31, 2020 and before January 1, 2022. This allows a plan to increase the contribution limit up to $10,500 for the taxable years during this period. IRS Notice 2021-26 clarifies that dependent care benefits made available through a carryover or grace period extension as a result of the CAA will remain excludable from income if the benefits would have been excluded from income if used during the preceding taxable year, even if the amount reimbursed exceeds $10,500 during the 2021 taxable year or $5,000 during the 2022 taxable year.
To request an increase to your Dependent Care FSA election, please log into Workday and follow these instructions to complete a 2021 CAA Flexible Spending Change. The change will be effective the first of the month following the event date. Please note that this increase is only available for 2021. The maximum annual contribution amount is set to return to $5,000.00 in 2022.