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S. 4372 (116th): Dependent Care Expense Relief Act of 2020


The text of the bill below is as of Jul 30, 2020 (Introduced). The bill was not enacted into law.


II

116th CONGRESS

2d Session

S. 4372

IN THE SENATE OF THE UNITED STATES

July 30, 2020

introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To provide for unused benefits in a dependent care FSA to be carried over from 2020 to 2021, to provide for benefits to be accessed after termination of employment, and for other purposes.

1.

Short title

This Act may be cited as the Dependent Care Expense Relief Act of 2020.

2.

Carry over of dependent care FSA benefits from 2020

(a)

In general

Notwithstanding any applicable rule or regulation under section 125 or 129 of the Internal Revenue Code of 1986—

(1)

a dependent care flexible spending arrangement shall permit participants who make the certification under subsection (b) to carry over any amount of unused benefit or contribution (without limitation) from any plan year beginning or ending in 2020 to the subsequent plan year under rules similar to the rules applicable to health flexible spending arrangements, and

(2)

a plan or other arrangement shall not fail to be treated as a cafeteria plan or dependent care flexible spending arrangement merely because such plan or arrangement permits the carryover under paragraph (1).

(b)

Certification by employee

In applying for the carryover under subsection (a)(1), the employee shall certify that the amount to be carried over is attributable to a reduction in expected dependent care expenses in the plan year due to a reduction in work hours, lack of available dependent care, or both, or other factors as determined by the Secretary of the Treasury (or the Secretary's delegate) due to the outbreak of coronavirus disease 2019 (COVID–19) in the United States.

(c)

Penalty

(1)

In general

There is hereby imposed a tax on the failure of a covered cafeteria plan to meet the requirements of subsection (a)(1) with respect to any employee.

(2)

Amount of tax

(A)

In general

The amount of the tax imposed by paragraph (1) on any failure with respect to an employee shall be $100 for each day in the noncompliance period with respect to such failure.

(B)

Noncompliance period

For purposes of this subsection, the term noncompliance period means, with respect to any failure, the period—

(i)

beginning on the date such failure first occurs, and

(ii)

ending on the earlier of—

(I)

the date such failure is corrected, or

(II)

the date which is 6 months after the date the employee terminates employment with the employer.

(C)

Limitations

Rules similar to the rules of subsections (b)(3) and (c) of section 4980B of the Internal Revenue Code of 1986 shall apply with respect to the tax under this section.

(3)

Covered cafeteria plan

For purposes of this subsection, the term covered cafeteria plan means a cafeteria plan under which a benefit is provided through employer contributions to a dependent care flexible spending arrangement.

(4)

Liability for tax

Rules similar to the rules of section 4980B(e) of the Internal Revenue Code of 1986 shall apply for purposes of determining liability for the tax imposed under this section.

(5)

Collection of tax

The tax imposed by paragraph (1) shall be collected in the same manner as the tax under section 4980B of such Code.

(d)

Definitions

Any term used in this section which is also used in section 125 of the Internal Revenue Code of 1986 or the rules or regulations thereunder shall have the same meaning as when used in such section or regulations.

(e)

Plan amendments

A plan or arrangement shall not be treated as violating the requirements of subsection (a)(1) (including for purposes of subsection (c)), if—

(1)

the plan or arrangement is amended to meet such requirements on or before December 31, 2020,

(2)

such amendment applies retroactively to any plan year ending in 2020, and

(3)

the plan or arrangement operates in accordance with such requirements at all times after the date of the enactment of this Act.

A plan or arrangement shall not be treated as failing to satisfy any requirement of the Internal Revenue Code of 1986 merely because the plan or arrangement operates as provided in subparagraph (C).
3.

Spend-down of benefits in dependent care flexible spending accounts

(a)

In general

Chapter 43 of the Internal Revenue Code of 1986 is amended by inserting after section 4980 the following new section:

4980A.

Treatment of unused benefits in dependent care flexible spending arrangements

(a)

General rule

There is hereby imposed a tax on the failure of a covered cafeteria plan to meet the requirements of subsection (c) with respect to any employee.

(b)

Amount of tax

(1)

In general

The amount of the tax imposed by subsection (a) on any failure with respect to an employee shall be $100 for each day in the noncompliance period with respect to such failure.

(2)

Noncompliance period

For purposes of this section, the term noncompliance period means, with respect to any failure, the period—

(A)

beginning on the date such failure first occurs, and

(B)

ending on the earlier of—

(i)

the date such failure is corrected, or

(ii)

the date which is 6 months after the date the employee terminates employment with the employer.

(3)

Limitations

Rules similar to the rules of subsections (b)(3) and (c) of section 4980B shall apply with respect to the tax under this section.

(c)

Distributions after termination of employment

A covered cafeteria plan meets the requirements of this subsection only if the cafeteria plan provides that, if an employee who is receiving benefits provided through employer contributions to a dependent care flexible spending arrangement ceases (whether voluntarily or involuntarily) to work for the employer during the plan year, the employee may elect to be reimbursed from unused benefits for dependent care expenses incurred—

(1)

after the date the employee terminates employment with the employer, and

(2)

before the last day of such plan year (including any grace period under the arrangement).

(d)

Covered cafeteria plan

For purposes of this section, the term covered cafeteria plan means a cafeteria plan under which a benefit is provided through employer contributions to a dependent care flexible spending arrangement.

(e)

Definitions

Any term used in this section which is also used in section 125 of the Internal Revenue Code of 1986 or the rules or regulations thereunder shall have the same meaning as when used in such section or regulations.

(f)

Liability for tax

Rules similar to the rules of section 4980B(e) shall apply for purposes of determining liability for the tax imposed under this section.

.

(b)

Clerical amendment

The table of sections for chapter 43 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 4980 the following new item:

Sec. 4980A. Treatment of unused benefits in dependent care flexible spending arrangements.

.

(c)

Effective date

(1)

In general

The amendments made by this section shall apply to plan years ending after the date of the enactment of this Act.

(2)

Plan amendments

A plan or arrangement shall not be treated as violating the requirements of section 4980A(c) of the Internal Revenue Code of 1986, as added by this Act (including for purposes of section 4980A(a) of such Code, as so added), if—

(A)

the plan or arrangement is amended to meet such requirements on or before the last day of the first plan year ending after the date of the enactment of this Act,

(B)

such amendment applies retroactively to such first plan year, and

(C)

the plan or arrangement operates in accordance with such requirements at all times after the date of the enactment of this Act.

A plan or arrangement shall not be treated as failing to satisfy any requirement of the Internal Revenue Code of 1986 merely because the plan or arrangement operates as provided in subparagraph (C).
4.

Dependent care expenses

As soon as practicable after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary's delegate) shall issue such interim or temporary rules or guidance as are necessary to expand the definition of dependent care expenses eligible to be reimbursed from a dependent care flexible spending arrangement, to account for changes in the dependent care needs of taxpayers due to—

(1)

the emergency involving Federal primary responsibility determined to exist by the President under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5191(b)) with respect to coronavirus disease 2019 (COVID–19), and

(2)

the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to coronavirus disease 2019 (COVID–19).

Such rules or guidance shall remain in effect until the last day of either such emergency, whichever is later.