Dependent Care Expense Relief Act of 2020

II 116TH CONGRESS 2D SESSION S. 4372 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. IN THE SENATE OF THE UNITED STATES JULY 30, 2020 Ms. SMITH 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. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Dependent Care Ex- 4 pense Relief Act of 2020’’. 5 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 4372 IS SEC. 2. CARRY OVER OF DEPENDENT CARE FSA BENEFITS 1 FROM 2020. 2 (a) IN GENERAL.—Notwithstanding any applicable 3 rule or regulation under section 125 or 129 of the Internal 4 Revenue Code of 1986— 5 (1) a dependent care flexible spending arrange- 6 ment shall permit participants who make the certifi- 7 cation under subsection (b) to carry over any 8 amount of unused benefit or contribution (without 9 limitation) from any plan year beginning or ending 10 in 2020 to the subsequent plan year under rules 11 similar to the rules applicable to health flexible 12 spending arrangements, and 13 (2) a plan or other arrangement shall not fail 14 to be treated as a cafeteria plan or dependent care 15 flexible spending arrangement merely because such 16 plan or arrangement permits the carryover under 17 paragraph (1). 18 (b) CERTIFICATION BY EMPLOYEE.—In applying for 19 the carryover under subsection (a)(1), the employee shall 20 certify that the amount to be carried over is attributable 21 to a reduction in expected dependent care expenses in the 22 plan year due to a reduction in work hours, lack of avail- 23 able dependent care, or both, or other factors as deter- 24 mined by the Secretary of the Treasury (or the Secretary’s 25 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 4372 IS delegate) due to the outbreak of coronavirus disease 2019 1 (COVID–19) in the United States. 2 (c) PENALTY.— 3 (1) IN GENERAL.—There is hereby imposed a 4 tax on the failure of a covered cafeteria plan to meet 5 the requirements of subsection (a)(1) with respect to 6 any employee. 7 (2) AMOUNT OF TAX.— 8 (A) IN GENERAL.—The amount of the tax 9 imposed by paragraph (1) on any failure with 10 respect to an employee shall be $100 for each 11 day in the noncompliance period with respect to 12 such failure. 13 (B) NONCOMPLIANCE PERIOD.—For pur- 14 poses of this subsection, the term ‘‘noncompli- 15 ance period’’ means, with respect to any failure, 16 the period— 17 (i) beginning on the date such failure 18 first occurs, and 19 (ii) ending on the earlier of— 20 (I) the date such failure is cor- 21 rected, or 22 (II) the date which is 6 months 23 after the date the employee terminates 24 employment with the employer. 25 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 4372 IS (C) LIMITATIONS.—Rules similar to the 1 rules of subsections (b)(3) and (c) of section 2 4980B of the Internal Revenue Code of 1986 3 shall apply with respect to the tax under this 4 section. 5 (3) COVERED CAFETERIA PLAN.—For purposes 6 of this subsection, the term ‘‘covered cafeteria plan’’ 7 means a cafeteria plan under which a benefit is pro- 8 vided through employer contributions to a dependent 9 care flexible spending arrangement. 10 (4) LIABILITY FOR TAX.—Rules similar to the 11 rules of section 4980B(e) of the Internal Revenue 12 Code of 1986 shall apply for purposes of deter- 13 mining liability for the tax imposed under this sec- 14 tion. 15 (5) COLLECTION OF TAX.—The tax imposed by 16 paragraph (1) shall be collected in the same manner 17 as the tax under section 4980B of such Code. 18 (d) DEFINITIONS.—Any term used in this section 19 which is also used in section 125 of the Internal Revenue 20 Code of 1986 or the rules or regulations thereunder shall 21 have the same meaning as when used in such section or 22 regulations. 23 (e) PLAN AMENDMENTS.—A plan or arrangement 24 shall not be treated as violating the requirements of sub- 25 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 4372 IS section (a)(1) (including for purposes of subsection (c)), 1 if— 2 (1) the plan or arrangement is amended to 3 meet such requirements on or before December 31, 4 2020, 5 (2) such amendment applies retroactively to any 6 plan year ending in 2020, and 7 (3) the plan or arrangement operates in accord- 8 ance with such requirements at all times after the 9 date of the enactment of this Act. 10 A plan or arrangement shall not be treated as failing to 11 satisfy any requirement of the Internal Revenue Code of 12 1986 merely because the plan or arrangement operates as 13 provided in subparagraph (C). 14 SEC. 3. SPEND-DOWN OF BENEFITS IN DEPENDENT CARE 15 FLEXIBLE SPENDING ACCOUNTS. 16 (a) IN GENERAL.—Chapter 43 of the Internal Rev- 17 enue Code of 1986 is amended by inserting after section 18 4980 the following new section: 19 ‘‘SEC. 4980A. TREATMENT OF UNUSED BENEFITS IN DE- 20 PENDENT CARE FLEXIBLE SPENDING AR- 21 RANGEMENTS. 22 ‘‘(a) GENERAL RULE.—There is hereby imposed a 23 tax on the failure of a covered cafeteria plan to meet the 24 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 4372 IS requirements of subsection (c) with respect to any em- 1 ployee. 2 ‘‘(b) AMOUNT OF TAX.— 3 ‘‘(1) IN GENERAL.—The amount of the tax im- 4 posed by subsection (a) on any failure with respect 5 to an employee shall be $100 for each day in the 6 noncompliance period with respect to such failure. 7 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes 8 of this section, the term ‘noncompliance period’ 9 means, with respect to any failure, the period— 10 ‘‘(A) beginning on the date such failure 11 first occurs, and 12 ‘‘(B) ending on the earlier of— 13 ‘‘(i) the date such failure is corrected, 14 or 15 ‘‘(ii) the date which is 6 months after 16 the date the employee terminates employ- 17 ment with the employer. 18 ‘‘(3) LIMITATIONS.—Rules similar to the rules 19 of subsections (b)(3) and (c) of section 4980B shall 20 apply with respect to the tax under this section. 21 ‘‘(c) DISTRIBUTIONS AFTER TERMINATION OF EM- 22 PLOYMENT.—A covered cafeteria plan meets the require- 23 ments of this subsection only if the cafeteria plan provides 24 that, if an employee who is receiving benefits provided 25 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 4372 IS through employer contributions to a dependent care flexi- 1 ble spending arrangement ceases (whether voluntarily or 2 involuntarily) to work for the employer during the plan 3 year, the employee may elect to be reimbursed from un- 4 used benefits for dependent care expenses incurred— 5 ‘‘(1) after the date the employee terminates em- 6 ployment with the employer, and 7 ‘‘(2) before the last day of such plan year (in- 8 cluding any grace period under the arrangement). 9 ‘‘(d) COVERED CAFETERIA PLAN.—For purposes of 10 this section, the term ‘covered cafeteria plan’ means a caf- 11 eteria plan under which a benefit is provided through em- 12 ployer contributions to a dependent care flexible spending 13 arrangement. 14 ‘‘(e) DEFINITIONS.—Any term used in this section 15 which is also used in section 125 of the Internal Revenue 16 Code of 1986 or the rules or regulations thereunder shall 17 have the same meaning as when used in such section or 18 regulations. 19 ‘‘(f) LIABILITY FOR TAX.—Rules similar to the rules 20 of section 4980B(e) shall apply for purposes of deter- 21 mining liability for the tax imposed under this section.’’. 22 (b) CLERICAL AMENDMENT.—The table of sections 23 for chapter 43 of the Internal Revenue Code of 1986 is 24 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 4372 IS amended by inserting after the item relating to section 1 4980 the following new item: 2 ‘‘Sec. 4980A. Treatment of unused benefits in dependent care flexible spending arrangements.’’. (c) EFFECTIVE DATE.— 3 (1) IN GENERAL.—The amendments made by 4 this section shall apply to plan years ending after 5 the date of the enactment of this Act. 6 (2) PLAN AMENDMENTS.—A plan or arrange- 7 ment shall not be treated as violating the require- 8 ments of section 4980A(c) of the Internal Revenue 9 Code of 1986, as added by this Act (including for 10 purposes of section 4980A(a) of such Code, as so 11 added), if— 12 (A) the plan or arrangement is amended to 13 meet such requirements on or before the last 14 day of the first plan year ending after the date 15 of the enactment of this Act, 16 (B) such amendment applies retroactively 17 to such first plan year, and 18 (C) the plan or arrangement operates in 19 accordance with such requirements at all times 20 after the date of the enactment of this Act. 21 A plan or arrangement shall not be treated as failing 22 to satisfy any requirement of the Internal Revenue 23 VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 4372 IS Code of 1986 merely because the plan or arrange- 1 ment operates as provided in subparagraph (C). 2 SEC. 4. DEPENDENT CARE EXPENSES. 3 As soon as practicable after the date of the enactment 4 of this Act, the Secretary of the Treasury (or the Sec- 5 retary’s delegate) shall issue such interim or temporary 6 rules or guidance as are necessary to expand the definition 7 of dependent care expenses eligible to be reimbursed from 8 a dependent care flexible spending arrangement, to ac- 9 count for changes in the dependent care needs of tax- 10 payers due to— 11 (1) the emergency involving Federal primary re- 12 sponsibility determined to exist by the President 13 under section 501(b) of the Robert T. Stafford Dis- 14 aster Relief and Emergency Assistance Act (42 15 U.S.C. 5191(b)) with respect to coronavirus disease 16 2019 (COVID–19), and 17 (2) the national emergency declared by the 18 President under the National Emergencies Act (50 19 U.S.C. 1601 et seq.) with respect to coronavirus dis- 20 ease 2019 (COVID–19). 21 Such rules or guidance shall remain in effect until the last 22 day of either such emergency, whichever is later. 23 Æ VerDate Sep 11 2014 20:11 Aug 13, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S4372.IS S4372 pamtmann on DSKBC07HB2PROD with BILLS