Bill Text: NJ SR70 | 2020-2021 | Regular Session | Introduced
Bill Title: Urges Internal Revenue Service to grant more flexibility to users of flexible spending accounts.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2020-09-24 - Filed with Secretary of State [SR70 Detail]
Download: New_Jersey-2020-SR70-Introduced.html
Sponsored by:
Senator THOMAS H. KEAN, JR.
District 21 (Morris, Somerset and Union)
SYNOPSIS
Urges Internal Revenue Service to grant more flexibility to users of flexible spending accounts.
CURRENT VERSION OF TEXT
As introduced.
A Senate Resolution urging the Internal Revenue Service to grant more flexibility to users of flexible spending accounts.
Whereas, Millions of people in the United States utilize flexible spending accounts (FSAs) to pay for certain medical expenses that are not covered by health insurance plans and for other dependent care services on a pre-tax basis; and
Whereas, FSAs can help employees pay for out-of-pocket medical, dental, prescription, hearing, and vision expenses for themselves, their spouses, and their eligible dependents while also helping employees pay portions of their healthcare insurance premiums; dependent care FSAs (DCFSAs) 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; and
Whereas, Participants utilizing FSAs are required to estimate anticipated expenses for the upcoming year and make elections for their account needs accordingly as participants are unable to make changes to these elections throughout the year; these strict rules prohibiting changes to participants' accounts, governed by the Internal Revenue Service (IRS), are problematic during times of unexpected crises such as the current COVID-19 pandemic; and
Whereas, COVID-19, a novel coronavirus, is a respiratory illness that has spread across all major continents resulting in a worldwide pandemic; the COVID-19 pandemic has caused large-scale loss of life worldwide, has caused schools and many businesses to close operations, and has severely impacted the global economy; and
Whereas, The unprecedented COVID-19 pandemic has also impacted many individuals' health care and dependent care expenses resulting in many over- or under-estimated elections for FSAs; this is problematic for individuals who will need additional financial assistance and for individuals whose excess funds will likely go unused at the end of the year; and
Whereas, The IRS has taken steps to address these unanticipated expenses as a result of the COVID-19 pandemic such as IRS Notice 2020-29 which will allow for certain mid-year changes to FSA elections and also extend grace periods to apply unused funds remaining in a health FSA or DCFSA to pay for or reimburse medical care or dependent care expenses; in addition, IRS Notice 2020-33 will allow for an increase in the amount of carryover of unused funds within health FSAs into the following year; and
Whereas, Despite the IRS' efforts to adapt to the constantly changing needs of America's employees during the COVID-19 pandemic, greater flexibility within FSAs is still required; for example, the maximum unused amount in an FSA that can be carried over into next year was only raised from $500 to $550; and
Whereas, In addition, the IRS' relief efforts are not mandatory and employers have the discretion to allow all or any of the IRS' optional changes to FSAs; this discretion may result in certain employees lacking essential flexibility within their FSAs during the COVID-19 pandemic; now, therefore,
Be It Resolved by the Senate of the State of New Jersey:
1. This House urges the Internal Revenue Service to grant more flexibility in regard to flexible spending accounts.
2. Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Secretary of the Senate to the Commissioner of the Internal Revenue Service and every member of Congress from the State of New Jersey.
STATEMENT
This resolution urges the Internal Revenue Service (IRS) to grant more flexibility to users of flexible spending accounts (FSAs).
The COVID-19 pandemic has been a human tragedy that has affected the lives of millions worldwide. It has also impacted many individuals' health care and dependent care expenses resulting in many over- or under-estimated elections for FSAs.
FSAs are relied upon by millions of employees within the United States to pay for medical, dental, prescription, hearing, and vision expenses that are not covered by health insurance plans for themselves, their spouses, and their eligible dependents. FSAs can also be used to pay for dependent care services. Dependent care FSAs (DCFSAs) 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 These FSAs allow for funds to be used on a pre-taxed basis, however, the IRS requires participants to estimate anticipated expenses for the upcoming year and 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 or DCFSA 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. In addition, these IRA relief options are not mandatory, so employees can decide to implement all, some, or none at their own discretion. This discretion could result in certain employees not receiving necessary relief during this unprecedented time.
For these reasons, the IRS is encouraged to further increase flexibility within FSAs during the time of the COVID-19 pandemic.
