"Now that income must be added to his income and taxed."

Oh, if it only were this obvious.

"Employers can now offer employees participating in health flexible spending accounts (FSAs) and dependent care FSAs greater flexibility for rolling over unused funds through 2022, under new IRS guidance.

IRS Notice 2021-15, issued Feb. 18, addresses how to apply the FSA relief provisions in the Taxpayer Certainty and Disaster Relief Act, which was incorporated into the Consolidated Appropriations Act (CAA) signed into law near the end of 2020.

"As a result of COVID-19, participating employees are more likely to have unused health FSA or dependent care [FSA] amounts at the end of 2020 and 2021," the IRS announcement said.

"The IRS was very responsive to the benefits community in providing this guidance in a timely fashion," said William Sweetnam, legislative and technical director at the Employers Council on Flexible Compensation, which represents sponsors of account-based benefits plans. "The COVID-19-related relief that Congress provided in the Consolidated Appropriations Act, 2020, addressed many of the problems that individuals who contributed to health FSAs or dependent care assistance FSAs were facing, since the pandemic limited opportunities to spend the funds they contributed for their own health care or to pay expenses to care for dependents."

Employers that want to provide this relief "must make a number of decisions to determine what changes to their FSA plans are needed," Sweetnam said. "Notice 2021-15 provides details on how these relief provisions will operate.""

Right now, there is more than the short carry-over grace period.