How is the reporting requirement for dependent care FSA benefits affected if an employer adopts the grace period?
It is unclear how the grace period will affect dependent care FSA benefit reporting obligations. It is assumed that rules similar to how dependent care FSA benefits are handled during the run-out period would apply. Before an employer adopts the grace period option, what factors should it consider? The grace period does add another layer of complexity to the administration of the cafeteria plan. Before amending its cafeteria plan, an employer must: • Review all of the requirements and unanswered questions with its attorney and benefits consultant to design the amendment to the cafeteria plan; • Decide which benefits options will be subject to the grace period and what amounts can be carried over; • Provide the proposed amendment to its cafeteria plan administrator to determine how the administrator can accommodate the amendment design and what additional cost will be incurred for adding the grace period; and • Communicate the amendment to its participants at least 30 days before the en
