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American Rescue Plan Act of 2021 Allows for Temporary Increase to Dependent Care Elections

March 18, 2021

On Thursday, March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which allows employers to amend their Dependent Care FSA plan to allow employees to increase their elections amounts for 2021.

Dependent Care FSA Exclusion Limit:

For Dependent Care Flexible Spending Accounts, the provision raises the exclusion limits for the plan year beginning after Dec. 31, 2020, and before Jan. 1, 2022

The law raises the 2021 contribution limit for Dependent Care Flexible Spending Accounts:

  • $10,500 (from $5,000) for a married individual filing a joint return with a spouse, as well as for a single/head of household filer.
  • $5,250 (from $2,500) for a married individual filing separately from their spouse.

How to Adopt an Amendment to the Plan with The Difference Card 

Plans can be retroactively amended back to 1/1/2021. First check with your payroll and enrollment system to ensure that they can accommodate elections in excess of $5,000.

If they can and you wish to amend your plan to allow members to change elections, please contact your Account Manager. The plan should be amended no later than the last day of the plan year in which the amendment is effective. Please note that you can distribute this amendment to your employees.

We’re here to help!

If you have any questions, please reach out to your dedicated Difference Card Account Manager.

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