Bulletin No. 2021–10
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HIGHLIGHTS
OF THIS ISSUE
Bulletin No. 2021–10
March 8, 2021
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
EMPLOYEE PLANS
Notice 2021-16, page 907.
This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for
February 2021 used under § 417(e)(3)(D), the 24-month average segment rates applicable for February 2021, and the
30-year Treasury rates, as reflected by the application of §
430(h)(2)(C)(iv).
INCOME TAX
Notice 2021-15, page 898.
This notice provides guidance on the application of § 214 of
the Taxpayer Certainty and Disaster Tax Relief Act of 2020
(the Act), which provides temporary special rules for health
flexible spending arrangements (FSAs) and dependent care
assistance programs under § 125 cafeteria plans. Specifically, § 214 of the Act: provides flexibility with respect to
carryovers of unused amounts from the 2020 and 2021 plan
Finding Lists begin on page ii.
years; extends the permissible period for incurring claims for
plan years ending in 2020 and 2021; provides a special rule
regarding post-termination reimbursements from health FSAs
during plan years 2020 and 2021; provides a special claims
period and carryover rule for dependent care assistance programs when a dependent “ages out” during the public health
emergency posed by COVID-19; and allows certain mid-year
election changes for health FSAs and dependent care assistance programs for plan years ending in 2021. In addition,
the notice provides that a § 125 cafeteria plan may permit
employees to make certain mid-year election changes with
respect to employer-sponsored health coverage and provides relief with respect to the effective date of amendments
to § 125 cafeteria plans to implement certain changes under
the CARES Act for health FSAs and health reimbursement
arrangements.
Rev. Rul. 2021-5, page 896.
Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes
of sections 382, 1274, 1288, 7872 and other sections of
the Code, tables set forth the rates for March 2021.
The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
March 8, 2021
Bulletin No. 2021–10
Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)
Rev. Rul. 2021-5
This revenue ruling provides various
prescribed rates for federal income tax
Annual
AFR
110% AFR
120% AFR
130% AFR
0.11%
0.12%
0.13%
0.14%
AFR
110% AFR
120% AFR
130% AFR
150% AFR
175% AFR
0.62%
0.68%
0.74%
0.81%
0.93%
1.09%
AFR
110% AFR
120% AFR
130% AFR
1.62%
1.78%
1.94%
2.10%
Short-term adjusted AFR
Mid-term adjusted AFR
Long-term adjusted AFR
March 8, 2021
purposes for March 2021 (the current
month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted federal long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropri-
ate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service
after July 30, 2008, shall not be less
than 9%. Finally, Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder or
a reversionary interest for purposes of
section 7520.
REV. RUL. 2021-5 TABLE 1
Applicable Federal Rates (AFR) for March 2021
Period for Compounding
Semiannual
Quarterly
Short-term
0.11%
0.11%
0.12%
0.12%
0.13%
0.13%
0.14%
0.14%
Mid-term
0.62%
0.62%
0.68%
0.68%
0.74%
0.74%
0.81%
0.81%
0.93%
0.93%
1.09%
1.09%
Long-term
1.61%
1.61%
1.77%
1.77%
1.93%
1.93%
2.09%
2.08%
Annual
0.08%
0.47%
1.22%
REV. RUL. 2021-5 TABLE 2
Adjusted AFR for March 2021
Period for Compounding
Semiannual
0.08%
0.47%
1.22%
896
Monthly
0.11%
0.12%
0.13%
0.14%
0.62%
0.68%
0.74%
0.81%
0.93%
1.09%
1.60%
1.76%
1.92%
2.08%
Quarterly
0.08%
0.47%
1.22%
Monthly
0.08%
0.47%
1.22%
Bulletin No. 2021–10
REV. RUL. 2021-5 TABLE 3
Rates Under Section 382 for March 2021
Adjusted federal long-term rate for the current month
Long-term tax-exempt rate for ownership changes during the current month (the highest of
the adjusted federal long-term rates for the current month and the prior two months.)
1.22%
1.22%
REV. RUL. 2021-5 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for March 2021
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit
7.26%
Appropriate percentage for the 30% present value low-income housing credit
3.11%
REV. RUL. 2021-5 TABLE 5
Rate Under Section 7520 for March 2021
Applicable federal rate for determining the present value of an annuity, an interest for life or a
term of years, or a remainder or reversionary interest
Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2021. See Rev. Rul. 2021-5, page 896.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2021. See Rev. Rul. 2021-5, page 896.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of March 2021. See Rev.
Rul. 2021-5, page 896.
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2021. See Rev. Rul. 2021-5, page 896.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of March 2021. See Rev. Rul.
2021-5, page 896.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2021. See Rev. Rul. 2021-5, page 896.
.8%
Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2021. See Rev. Rul. 2021-5, page 896.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of
March 2021. See Rev. Rul. 2021-5, page 896.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of March 2021. See Rev. Rul.
2021-5, page 896.
Section 7872.—Treatment
of Loans With BelowMarket Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2021. See Rev. Rul. 2021-5, page 896.
Bulletin No. 2021–10
897
March 8, 2021
Part III
ADDITIONAL RELIEF FOR
CORONAVIRUS DISEASE
(COVID-19) UNDER § 125
CAFETERIA PLANS
Notice 2021-15
I. PURPOSE AND OVERVIEW
This notice clarifies the application of
§ 214 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the Act),
recently enacted as Division EE of the
Consolidated Appropriations Act, 2021,
Pub. L. 116-260, 134 Stat. 1182 (Dec. 27,
2020), which provides temporary special
rules for health flexible spending arrangements (health FSAs) and dependent care
assistance programs1 under § 125 cafeteria plans. As described more fully below,
§ 214 of the Act:
• Provides flexibility with respect to
carryovers of unused amounts from
the 2020 and 2021 plan years;
• Extends the permissible period for incurring claims for plan years ending
in 2020 and 2021;
• Provides a special rule regarding
post-termination
reimbursements
from health FSAs during plan years
2020 and 2021;
• Provides a special claims period and
carryover rule for dependent care assistance programs when a dependent
“ages out” during the COVID-19
public health emergency; and
• Allows certain mid-year election
changes for health FSAs and dependent care assistance programs for
plan years ending in 2021.
This notice also provides additional relief with respect to mid-year elections for
plan years ending in 2021. Specifically,
with respect to employer-sponsored health
coverage, a § 125 cafeteria plan may permit employees who are eligible to make
salary reduction contributions under the
plan to take any of the following actions
for plan years ending in 2021: (1) make
a new election on a prospective basis, if
the employee initially declined to elect
employer-sponsored health coverage;
(2) revoke an existing election and make
a new election to enroll in different health
coverage sponsored by the same employer on a prospective basis; and (3) revoke
an existing election on a prospective basis, provided that the employee attests in
writing that the employee is enrolled, or
immediately will enroll, in other health
coverage not sponsored by the employer.
The notice also provides relief with
respect to the effective date of amendments to § 125 cafeteria plans and health
reimbursement arrangements (HRAs) to
implement the expansion of allowed expenses for health FSAs and HRAs by the
Coronavirus Aid, Relief, and Economic
Security Act (CARES Act), Pub. L. 116136, 134 Stat. 281 (March 27, 2020) to
include over-the-counter drugs without
prescriptions and menstrual care products.
II. BACKGROUND
A. Elections Under a § 125 Cafeteria
Plan
Section 125(d)(1) of the Internal Revenue Code (Code) defines a § 125 cafeteria plan as a written plan maintained
by an employer under which all participants are employees, and all participants
may choose among two or more benefits
consisting of cash and qualified benefits.
Subject to certain exceptions, § 125(f)
defines a qualified benefit as any benefit
which, with the application of § 125(a), is
not includable in the gross income of the
employee by reason of an express provision of the Code. Qualified benefits that
may be provided under a § 125 cafeteria
plan include, but are not limited to, employer-provided accident and health plans
excludable under §§ 105(b) and 106,
health FSAs excludable under §§ 105(b)
and 106, and dependent care assistance
programs excludable under § 129.
Elections regarding qualified benefits
under a § 125 cafeteria plan generally
must be irrevocable and must be made prior to the first day of the plan year, except
as provided under Treas. Reg. § 1.1254. Treas. Reg. § 1.125-4 provides that a
§ 125 cafeteria plan may permit an employee to revoke an election during a period of coverage and to make a new election under certain circumstances, such as
if the employee experiences a change in
status or there are significant changes in
the cost of coverage. Section 125 does not
require a § 125 cafeteria plan to permit the
mid-year election changes allowed under
Treas. Reg. § 1.125-4.
B. Health FSAs and Dependent Care
Assistance Programs – Carryovers and
Grace Periods
A § 125 cafeteria plan may permit the
carryover of unused amounts remaining in a health FSA as of the end of a
plan year to pay or reimburse a participant for medical care expenses incurred
during the following plan year, subject to
the carryover limit (the carryover rule).2
See Notice 2013-71, 2013-47 IRB 532,
and Notice 2020-33, 2020-22 IRB 868.
In the alternative, a § 125 cafeteria plan
may permit a participant to apply unused
amounts (including amounts remaining
in a health FSA or dependent care assistance program) at the end of the plan year
to pay expenses incurred for those same
qualified benefits during a period of up to
two months and 15 days immediately following the end of the plan year (the grace
period rule). See Notice 2005-42, 2005-1
C.B. 1204, and Prop. Treas. Reg. § 1.1251(e). For a health FSA, a § 125 cafeteria
plan may adopt a carryover or a grace period (or neither) but may not adopt both
features. See Notice 2013-71. Under generally applicable rules, without regard to
§ 214 of the Act, a § 125 cafeteria plan
may not adopt a carryover for a dependent
care assistance program.
In Notice 2020-29, 2020-22 IRB 864,
the Department of the Treasury (Treasury
Department) and the Internal Revenue
Service (IRS) explained that, due to the
Although § 214 of the Act refers to “dependent care flexible spending arrangements,” this notice uses the term “dependent care assistance programs.”
The maximum unused amount remaining in a health FSA from a plan year beginning in 2020 allowed to be carried over to the plan year beginning in 2021 is $550 (20 percent of $2,750,
the indexed 2020 limit under § 125(i)).
1
2
March 8, 2021
898
Bulletin No. 2021–10
nature of the COVID-19 public health
emergency and unanticipated changes in
the availability of certain medical care
and dependent care, employees may be
more likely to have unused health FSA
amounts or dependent care assistance program amounts at the end of plan years, or
grace periods, ending in 2020. To provide
related relief, Notice 2020-29 extended, to
the end of calendar year 2020, the period
during which employees could be permitted to apply unused health FSA amounts
and dependent care assistance program
amounts remaining as of the end of a
grace period or plan year ending in 2020
to pay or reimburse medical care expenses
or dependent care expenses.
C. Impact of Health FSA
Reimbursements on Eligibility to
Contribute to an HSA
Section 223 of the Code permits eligible individuals to establish and contribute to health savings accounts (HSAs).
Pursuant to § 223(c)(1)(A), an eligible
individual is, with respect to any month,
any individual if (i) the individual is covered under a high deductible health plan
(HDHP) as of the first day of the month,
and (ii) the individual is not, while covered
under an HDHP, covered under any health
plan which is not an HDHP and which
provides coverage for any benefit which
is covered under the HDHP. An HDHP is
a health plan that satisfies the minimum
annual deductible requirement and maximum out-of-pocket expenses requirement under § 223(c)(2)(A). Coverage by
a general purpose health FSA disqualifies
an otherwise eligible individual from con-
tributing to an HSA, although coverage by
an HSA-compatible health FSA, such as a
limited purpose health FSA or a post-deductible health FSA, would not do so.3
See Rev. Rul. 2004-45, 2004-1 C.B. 971.
III. GUIDANCE RELATED TO
SECTION 214 OF THE ACT
A. Section 214 Carryovers for Health
FSAs and Dependent Care Assistance
Programs
Section 214 of the Act temporarily increases flexibility for a § 125 cafeteria plan
to provide a carryover of unused amounts
remaining in a health FSA or dependent
care assistance program to pay or reimburse medical care expenses or dependent
care expenses in a subsequent plan year.4
Specifically, § 214(a) of the Act provides
that, for plan years ending in 2020, a plan
that includes a health FSA or dependent
care assistance program shall not fail to be
treated as a cafeteria plan merely because
the plan or arrangement permits participants to carry over (under rules similar to
current rules for health FSAs) any unused
benefits or contributions from that plan
year to the plan year ending in 2021. Section 214(b) of the Act provides a similar
rule for plan years ending in 2021, permitting the carryover of any unused benefits
or contributions from that plan year to the
plan year ending in 2022. (Collectively,
the relief provided in § 214(a) and (b) of
the Act related to carryovers is referred
to in this notice as the § 214 carryover.)
Thus, an employer, in its discretion, may
amend one or more of its § 125 cafeteria
plans to provide a carryover of all or part
of the unused amounts remaining in a
health FSA or a dependent care assistance
program as of the end of a plan year ending in 2020 or 20215 to the immediately
subsequent plan year.6
For example, if an employer sponsored a calendar year § 125 cafeteria plan
in 2020 with a health FSA that provides
for a $550 carryover, the employer may
amend the plan to carry over the entire unused amount remaining in an employee’s
health FSA as of December 31, 2020, to
the 2021 plan year (even if that amount
exceeds $550). The employer also may
amend the plan to carry over the entire unused amount remaining in an employee’s
health FSA as of December 31, 2021, to
the 2022 plan year. This relief applies to
all health FSAs, including HSA-compatible health FSAs, and also applies to all dependent care assistance programs. However, health FSA amounts may be used
only for medical care expenses, and dependent care assistance program amounts
may be used only for dependent care expenses. The § 214 carryover is available
to § 125 cafeteria plans that currently have
a grace period or provide for a carryover,
as well as plans that currently do not have
a grace period or provide for a carryover,
notwithstanding Notice 2013-71, which
otherwise continues in effect and provides
that health FSAs can either adopt a grace
period or provide for a carryover amount
but cannot have both.7 In addition, an
employer may limit the carryover to an
amount less than all unused amounts and
may limit the carryover to apply only up
to a specified date during the plan year.8
For purposes of determining whether an eligible individual qualifies to
Notice 2005-86, 2005-49 IRB 1075, clarifies that coverage by a general purpose health FSA during a grace period is health coverage that disqualifies an otherwise eligible individual from
contributing to an HSA during that period. However, Notice 2005-86 provides methods an employer can use to amend the health FSA for the grace period so it does not disqualify employees
from contributing to an HSA during that period. For a more detailed discussion of these options, see section III.F. of this notice.
4
Except as provided in § 214 of the Act, a § 125 cafeteria plan may not adopt a carryover for a dependent care assistance program.
5
All amounts available on the last day of the 2020 or 2021 plan year are available to carry over, regardless of the source of the amounts. Thus, for example, a $500 amount carried over from
a 2019 calendar plan year to the 2020 calendar plan year that remains unused is available to be carried over to the 2021 calendar plan year, and a $500 amount carried over from a 2019
non-calendar plan year to a 2020 non-calendar plan year that remains unused is available to be carried over to the 2021 non-calendar plan year. For employers with plan years or grace periods
ending in 2020 that, pursuant to Notice 2020-29, adopted the extended claims period until December 31, 2020, amounts made available during that extended claims period that remain unused
as of December 31, 2020, are available to be carried over pursuant to § 214 of the Act. However, if a plan did not provide for a carryover for its 2019 plan year, the extension of the runout
period to submit 2019 claims for health FSAs until after the COVID-19 emergency period pursuant to the joint notice of relief, Extension of Certain Timeframes for Employee Benefit Plans,
Participants, and Beneficiaries Affected by the COVID-19 Outbreak, issued by the Treasury Department and the Department of Labor, under § 7508A(b) of the Code (85 FR 26351) does not
otherwise permit the carryover of unused 2019 amounts to the 2020 plan year.
6
An employer adopting the § 214 carryover may, in its discretion, require employees to enroll in the health FSA or dependent care assistance program with a minimum election amount to
have access to the unused amounts from the prior plan year. See Q&A 24 of Notice 2015-87, 2015-52 IRB 889. If an employer adopts both the § 214 carryover from the 2020 calendar year
to the 2021 plan year and the flexibility for mid-year election changes, and an employee later elects to participate in the health FSA or dependent care assistance program mid-year on a prospective basis, the § 214 carryover amount may be made available to reimburse employee expenses retroactive to January 1, 2021, as discussed in more detail in section III.E. of this notice.
7
For example, if a § 125 cafeteria plan provides for a carryover from the 2022 plan year to the 2023 plan year, the plan may not provide a grace period for the 2022 plan year.
8
Amounts carried over or available during an extended period in accordance with § 214(c) of the Act are not taken into account in determining whether a health FSA satisfies the maximum
benefit payable limit condition under the excepted benefits regulations (Treas. Reg. § 54.9831-1(c)(3)(v)). See Q&A 6 in FAQs About Affordable Care Act Implementation (Part XIX) (May
2, 2014), available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xix.pdf.
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899
March 8, 2021
make contributions to an HSA, the carryover of unused amounts to the 2021
plan year or the 2022 plan year is an extension of the coverage by a health plan
that is not an HDHP (except in the case
of an HSA-compatible health FSA, such
as a limited purpose health FSA). Therefore, an individual is not eligible to make
contributions to an HSA during a month
in which the individual participates in a
general purpose health FSA to which unused amounts are carried over pursuant to
§ 214 of the Act.9 See section III.F. of this
notice for information regarding the conversion of a general purpose health FSA to
an HSA-compatible health FSA to permit
individuals with a health FSA carryover to
qualify to make contributions to an HSA.
Employers may also amend their plans to
allow employees, on an employee-by-employee basis, to opt out of the carryover to
preserve their HSA eligibility.10
B. Extended Claims Periods for Health
FSAs and Dependent Care Assistance
Programs, and Post-Termination
Reimbursements from Health FSAs
Section 214 of the Act temporarily provides flexibility for a § 125 cafeteria plan
to provide an extended period to apply unused amounts remaining in a health FSA
or dependent care assistance program to
pay or reimburse medical care expenses
or dependent care expenses, respectively.
Specifically, § 214(c)(1) of the Act provides that a plan that includes a health
FSA or dependent care assistance program
shall not fail to be treated as a cafeteria
plan merely because the plan or arrangement extends the grace period for a plan
year ending in 2020 or 2021 to 12 months
after the end of that plan year, with respect to unused benefits or contributions
remaining in a health FSA or a dependent
care assistance program.
Thus, an employer, in its discretion,
may amend one or more of its § 125 cafeteria plans to permit employees to apply
any unused amounts remaining in a health
FSA or a dependent care assistance pro-
gram as of the end of a plan year ending
in 2020 or 2021 to reimburse expenses
incurred for the same qualified benefit
(medical care or dependent care) up to
12 months after the end of the plan year.
For example, if an employer sponsored a
calendar year § 125 cafeteria plan in 2020
with a health FSA, the employer may
amend the plan to permit employees to
apply the entire unused amount remaining
in their health FSAs as of December 31,
2020, to reimburse employees for medical
care expenses incurred through December 31, 2021.
In addition, § 214(c)(2) of the Act provides that a plan that includes a health
FSA shall not fail to be treated as a cafeteria plan merely because the plan or
arrangement allows (under rules similar
to the rules applicable to dependent care
assistance programs)11 an employee who
ceases participation in the plan during
calendar year 2020 or 2021 to continue
to receive reimbursements from unused
benefits or contributions through the end
of the plan year in which participation
ceased (including any grace period, taking
into account any modification of a grace
period permitted under § 214(c)(1) of the
Act).
The relief provided under § 214(c) of
the Act applies to all health FSAs, including HSA-compatible health FSAs. An employer may choose to adopt an extended
period for incurring claims that is less than
12 months, and an employer may choose
to adopt a period that ends before the end
of the plan year, during which employees
who have ceased participation in a plan
may continue to receive reimbursements.
The extension of time for incurring claims
pursuant to § 214(c)(1) of the Act is available to § 125 cafeteria plans that currently
have a grace period or provide for a carryover, as well as plans that currently do not
have a grace period or provide for a carryover, notwithstanding Notice 2013-71,
which otherwise continues in effect and
provides that health FSAs can either adopt
a grace period or provide for a carryover
amount but cannot have both. Finally,
health FSA amounts may be used only
for medical care expenses, and dependent
care assistance program amounts may be
used only for dependent care expenses.
The extension of the period for incurring claims that may be reimbursed by a
health FSA is an extension of the coverage
by a health plan that is not an HDHP in determining whether an individual is eligible
to make contributions to an HSA (except
in the case of an HSA-compatible health
FSA). Therefore, an individual is not eligible to make contributions to an HSA
if the individual participates in a general
purpose health FSA, including during any
extended period in which the participant
can incur claims pursuant to § 214(c) of
the Act. This restriction on making contributions to an HSA if amounts remain
available in a general purpose health FSA
applies not only to current participants in
the health FSA but also to individuals who
remain eligible to incur claims but have
ceased participation in the health FSA
as the result of termination of employment, change in employment status, or a
new election during calendar year 2020
or 2021. See section III.F. of this notice
for information regarding the conversion
of a general purpose health FSA to an
HSA-compatible health FSA. Employers
also are permitted to amend their plans to
allow employees, on an employee-by-employee basis, to opt out of any extended
period for incurring claims in plan years
ending in 2021 and 2022, to preserve their
HSA eligibility.
With respect to the extension of the period for incurring claims for an employee
who ceases to be a participant, the employer, in its discretion, is permitted to limit the
unused amounts in the health FSA to the
amount of salary reduction contributions
the employee had made from the beginning of the plan year in which the employee ceased to be a participant up to the date
the employee ceased to be a participant.
This option is available for an employee
who ceases to be a participant as the result
of termination of employment, change
in employment status, or a new election
An individual continues to participate in the general purpose health FSA for the entire coverage period of the health FSA, even if the health FSA’s funds are exhausted before the end of the
coverage period, subject to the special rule for health FSA grace periods under § 223(c)(1)(B)(iii)(I).
10
See Chief Counsel Advice memorandum 201413005 (Feb. 12, 2014), available at https://www.irs.gov/pub/irs-wd/1413005.pdf.
11
See Prop. Treas. Reg. § 1.125-6(a)(4)(v), which provides that, at the employer’s option, the written cafeteria plan may provide that dependent care expenses incurred after the date an employee ceases participation in the cafeteria plan (for example, after termination of employment) and through the last day of that plan year (or grace period immediately after that plan year)
may be reimbursed from unused benefits, if all of the requirements of § 129 are satisfied.
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during calendar year 2020 or 2021. Finally, the extension period is limited to the
end of the plan year in which participation
ceased (including any grace period, taking
into account any modification of a grace
period permitted under § 214(c)(1) of the
Act).
C. Interaction of § 214 Carryovers and
Extended Periods for Incurring Claims
As a practical matter, in most cases the
flexibility provided by the § 214 carryover
and the extension of grace periods under
§ 214(c)(1) of the Act provide the same
relief, as both provisions allow all unused
benefits remaining for plan years ending
in 2020 and 2021 to be made available for
the same benefit (medical care expenses or
dependent care expenses) incurred in the
immediately subsequent plan year ending
in 2021 and 2022, respectively.12 However, the relief available to employees may
vary depending on whether an employer
adopts either the extended grace period
under § 214(c)(1) or the § 214 carryover,
because the two types of relief interact
differently with an extended period for
incurring claims available under § 214(c)
(2). An employer that adopts a grace period under § 214(c)(1) may also allow
employees who have ceased participation
in a plan in an earlier plan year to further
extend a period for incurring claims until
the end of the subsequent plan year under
§ 214(c)(2), but this additional extended
period for incurring claims is not available
for employees who ceased participation in
the earlier plan year and whose employers
have adopted the § 214 carryover instead.
Therefore, consistent with current guidance,13 an employer may not amend its
plan to adopt both the § 214 carryover and
the extended grace period under § 214(c)
(1) for a particular plan year for a particular health FSA or dependent care assistance program, and an amendment must
specify which option is adopted for the
applicable plan years.14 See section III.H.
of this notice for information regarding
plan amendments. Subject to the nondiscrimination rules under §§ 125 and 129,
an employer is permitted to adopt this relief for some, but not all, health FSA or
dependent care assistance program participants.15 Amounts carried over or available during an extended claims period will
not be taken into account for purposes of
the nondiscrimination rules applicable to
§ 125 cafeteria plans and to dependent
care assistance programs under § 129.
The otherwise applicable rules regarding carryovers and grace periods will apply for plan years ending in or after 2022.
For a plan that provides for a grace period
for the plan year ending in 2022, the grace
period would allow a participant to use all
unused amounts remaining at the end of
the plan year ending in 2022 for expenses
incurred during the first two and one-half
months of the plan year ending in 2023.
For a plan that provides for a carryover for
the plan year ending in 2022, the carryover would allow the participant to use up
to $550 (or, if greater, 20 percent of the
indexed contribution limit under § 125(i))
of unused amounts remaining at the end of
the 2022 plan year for expenses incurred
during any month of the plan year ending
in 2023. In accordance with the otherwise
applicable rules, for plan years ending in
or after 2022, the carryover is available
only for a health FSA and is not available
for a dependent care assistance program.
The following examples illustrate the application of these rules and assume that
the applicable carryover limit continues to
be $550 for all relevant periods:
Example 1. Employer provides a health FSA under a calendar year § 125 cafeteria plan that allows a
$550 carryover from one plan year to the next. Pursuant to § 214 of the Act, Employer amends the plan
to adopt a 12-month temporary extended period for
incurring claims with respect to the 2020 plan year,
allowing for claims incurred on or after January 1,
2021, but prior to January 1, 2022, to be paid with
amounts remaining from the 2020 plan year.
As of December 31, 2020, Employee A has a remaining balance of $2,000 in a health FSA for the
2020 plan year. For the 2021 plan year, Employee A
elects to contribute $2,000 to a health FSA. Between
January 1, 2021 and December 31, 2021, Employee A incurs $3,300 in medical care expenses. The
health FSA may reimburse Employee A $3,300,
leaving $700 in the health FSA as of December 31,
2021.
Pursuant to § 214 of the Act, Employer amends
the plan to adopt the temporary extended period for
incurring claims with respect to the 2021 plan year,
allowing for claims incurred on or after January 1,
2022, but prior to January 1, 2023, to be paid with
amounts remaining at the end of the 2021 plan year.
For the 2022 plan year, Employee A elects to contribute $1,500 to a health FSA. Between January 1,
2022, and December 31, 2022, Employee A incurs
$1,200 in medical care expenses. The health FSA
may reimburse Employee A $1,200, leaving $1,000
in the health FSA as of December 31, 2022. Under
the plan terms that provide for a $550 carryover from
the 2022 plan year to the 2023 plan year, Employee A is allowed to use $550 of the remaining $1,000
in the health FSA during the 2023 plan year to reimburse expenses incurred on or after January 1, 2023,
and before January 1, 2024. The $450 remaining
as of December 31, 2022, is forfeited. A 2½ month
grace period is not available for the plan year ending
December 31, 2023, because the plan provides for a
carryover.
Example 2. Employer provides a health FSA
under a non-calendar year (July 1 to June 30) § 125
cafeteria plan that allows a $550 carryover from one
plan year to the next. Pursuant to § 214 of the Act,
Employer amends the plan to adopt a 12-month temporary extended period for incurring claims with respect to the 2020 plan year, allowing claims incurred
on or after July 1, 2021, but prior to July 1, 2022,
to be paid with amounts from the 2020 plan year
(which ends on June 30, 2021).
For the 2020 plan year, Employee B elects to
contribute $1,800 to a health FSA. As of June 30,
2021, Employee B has a remaining balance in the
health FSA for the 2020 plan year of $1,800. For
the 2021 plan year, Employee B elects to contribute
$1,000 to a health FSA. Between July 1, 2021, and
June 30, 2022, Employee B incurs $2,000 in medical
care expenses. The health FSA may reimburse Employee B $2,000, leaving $800 in the health FSA as
of June 30, 2022. Under the plan terms that provide
for a carryover, Employee B is allowed to use $550
of the remaining $800 in the health FSA during the
2022 plan year to reimburse expenses incurred on
Notice 2005-42 provides that unused amounts available during a grace period are forfeited at the end of the grace period; however, that is a function of the grace period being limited to
2½ months. Thus, under the rules providing for a 2½ month grace period, unused amounts from year 1 available during a grace period in year 2 are no longer available at the end of year 2
and cannot be made available for any subsequent grace period in year 3. In contrast, because § 214(c) of the Act provides for a 12-month grace period, it is possible that some or all of the
unused amounts available in a grace period at the beginning of a plan year will remain available at the end of that plan year, in which case they may be made available in the next grace period.
Specifically, amounts available on the last day of a plan year due to a 12-month grace period adopted pursuant to § 214(c) are not required to be forfeited, and the plan terms may allow the
unused amounts to be made available for expenses incurred during a grace period in the following plan year.
13
See Notice 2013-71.
14
Note that, if an employer adopts a plan amendment pursuant to § 214 of the Act and this notice that provides that the amendment supersedes normal operations for the duration of the period
for which the plan adopts the relief, an employer is not required to also delete an existing plan provision that provides for a $550 carryover or a 2½ month grace period.
15
An employer also may choose to adopt one type of relief, or no relief, under § 214 of the Act for a health FSA and a different type of relief, or no relief, for a dependent care assistance program. An employer that offers multiple health FSAs or dependent care assistance programs may also adopt differing relief for each particular health FSA or dependent care assistance program.
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or after July 1, 2022, but prior to July 1, 2023. The
$250 remaining as of June 30, 2022, is forfeited. A
2½ month grace period is not available for the plan
year ending June 30, 2022, because the plan provides
for a carryover.
Example 3. Employer provides a dependent care
assistance program under a calendar year § 125 cafeteria plan. Pursuant to § 214 of the Act, Employer
amends the plan to adopt a 12-month temporary extended period for incurring claims with respect to the
2020 plan year, allowing for claims incurred on or
after January 1, 2021, but prior to January 1, 2022,
to be paid with amounts remaining from the 2020
plan year.
As of December 31, 2020, Employee C has a remaining balance of $4,000 in a dependent care assistance program for the 2020 plan year. For the 2021
plan year, Employee C elects to contribute $3,000
to a dependent care assistance program. Between
January 1, 2021, and December 31, 2021, Employee C incurs $6,000 in dependent care expenses. The
dependent care assistance program may reimburse
Employee C $6,000, leaving $1,000 in the dependent
care assistance program as of December 31, 2021.
Pursuant to § 214 of the Act, Employer amends
the plan to adopt a 12-month temporary extended
period for incurring claims with respect to the 2021
plan year, allowing for claims incurred on or after
January 1, 2022, but prior to January 1, 2023, to be
paid with amounts remaining at the end of the 2021
plan year. For the 2022 plan year, Employee C elects
to contribute $2,000 to a dependent care assistance
program. Between January 1, 2022, and December 31, 2022, Employee C incurs $2,800 in dependent care expenses. The dependent care assistance
program may reimburse Employee C $2,800, leaving
$200 in the dependent care assistance program as of
December 31, 2022. A carryover is not available for
a dependent care assistance program from the 2022
plan year to the 2023 plan year. Employer adopts a
2½ month grace period for the 2022 plan year, during
which the $200 remaining as of December 31, 2022,
may be applied to reimburse dependent care expenses incurred during the grace period.
D. Special Age Limit Relief Applicable
to Carryover Relief for Dependent
Care Assistance Programs
Section 214(d)(1) of the Act provides
that in the case of certain employees,
§ 21(b)(1)(A) of the Code shall be applied
by substituting ‘‘age 14’’ for ‘‘age 13’’
for purposes of determining the dependent care assistance which may be paid
or reimbursed during (A) the last plan
year with respect to which the end of the
regular enrollment period for such plan
year was on or before January 31, 2020,
and (B) in the case of an employee who
has an unused balance in a dependent care
assistance program for such plan year (determined as of the close of the last day on
which, under the terms of the plan, claims
for reimbursement may be made with respect to such plan year), the subsequent
plan year.16 Regarding the subsequent plan
year, § 214(d)(2) of the Act provides that
§ 214(d)(1) shall only apply to so much
of the amounts paid for dependent care
assistance with respect to the dependents
referred to in § 214(d)(3)(B)(ii) as does
not exceed the unused balance described
in § 214(d)(3)(B)(ii).
Only certain employees are eligible for
this relief. Section 214(d)(3) of the Act
provides that, for purposes of this relief,
the term ‘‘eligible employee’’ means any
employee who (A) is enrolled in a dependent care assistance program for the last
plan year with respect to which the end of
the regular enrollment period for the plan
year was on or before January 31, 2020,
and (B) has one or more dependents (as
defined in § 152(a)(1) of the Code) who
attain the age of 13 either (i) during that
plan year, or (ii) in the case of an employee who (after the application of § 214
of the Act) has unused dependent care
amounts for that plan year (determined
as of the close of the last day on which,
under the terms of the plan, claims for reimbursement may be made with respect to
that plan year), during the subsequent plan
year. Thus, an employer, in its discretion,
may amend one or more of its § 125 cafeteria plans17 in accordance with § 214(d)
of the Act.18
This special age limit relief for certain
dependents is separate from the general
carryover and extended claims periods relief available under § 214(a), (b) and (c) of
the Act. An employer that adopts the special age limit relief provided in § 214(d)(3)
(B)(ii) of the Act is not required to adopt
the carryover provided in § 214(a) of the
Act or an extended period for incurring
claims (for example, the relief provided in
§ 214(c)(1) of the Act) in order to adopt
the special age limit relief. Thus, an employer, in its discretion, may amend one or
more of its § 125 cafeteria plans to adopt
any or all of the relief provided in § 214 of
the Act, and an employer that adopts any
or all of the relief provided in § 214(a), (b)
and (c) of the Act is not required to adopt
the special age limit relief provided in
§ 214(d) of the Act, and vice-versa.
If an employer sponsors a § 125 cafeteria plan with a dependent care assistance
program and amends the plan to substitute “under age 14” for “under age 13”
for purposes of determining the dependent care assistance expenses that may be
paid or reimbursed, then all amounts from
the most recent plan year with respect to
which the end of the regular enrollment
period was on or before January 31, 2020,
may be applied to dependent care expenses for a dependent who attained age 13
during that plan year. In addition, employers may allow employees to carry over all
unused amounts from that plan year (the
first plan year) to reimburse dependent
care expenses during the subsequent plan
year for a dependent that attained age 13
during the first plan year (until that dependent attains age 14) and for a dependent
who attains age 13 during the subsequent
plan year. This special age limit relief for
dependent care assistance programs does
not apply to any unused amounts carried
over from the subsequent plan year. This
special age limit relief rule also does not
permit an employer to reimburse expenses
for a child who is age 14 years or older.
Example 1. Employer provides a dependent care
assistance program under a § 125 cafeteria plan with
a non-calendar plan year. The regular enrollment period for the 2020 plan year (March 1, 2020, through
February 28, 2021) ended on January 31, 2020.
Employee elected to enroll in the dependent care
assistance program for the 2020 plan year, electing
to contribute the maximum $5,000 allowed. Employee’s Dependent turns age 13 on February 1, 2021.
As of January 31, 2021, Employee has incurred no
qualifying expenses for the 2020 plan year. However, Employee anticipates incurring dependent care
Section 129(a) generally excludes from an employee’s gross income amounts paid or incurred by the employer for “dependent care assistance” provided to the employee if the assistance
is furnished pursuant to a dependent care assistance program. Section 129(e) provides that “dependent care assistance” means the payment of, or provision of, those services, which if paid
for by the employee would be considered employment-related services under § 21(b)(2). Generally, and assuming the requirements of §§ 21 and 129 otherwise are satisfied, “dependent care
assistance” includes expenses incurred for the care of a dependent child who is under age 13 that enable an employee to be gainfully employed.
17
References in this notice to amendments to § 125 cafeteria plans include any necessary amendments to plans under § 129, as applicable.
18
Without regard to § 214 of the Act, employers are permitted to limit reimbursable expenses to expenses incurred for the care of a dependent child who is under age 13 or who is under a
specified age that is less than age 13.
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expenses during February 2021, which is during the
2020 plan year.
Employer amends its § 125 cafeteria plan by substituting “under age 14” for “under age 13” for the
2020 and 2021 plan years, making that change applicable to all amounts permitted under § 214(d) of the
Act, and does not adopt any other relief provided by
§ 214 of the Act. Employee incurs $5,000 in dependent care expenses in February 2021 for Dependent,
who at that time is age 13. The $5,000 in dependent
care expenses may be reimbursed by the dependent
care assistance program for the 2020 plan year.
Example 2. Employer provides a dependent care
assistance program under a § 125 cafeteria plan with
a non-calendar plan year. The regular enrollment period for the 2020 plan year (March 1, 2020, through
February 28, 2021) ended on January 31, 2020.
Employee elected to enroll in the dependent care assistance program for the 2020 plan year, electing to
contribute $4,000. Employee’s Dependent turns age
13 on February 1, 2021. As of January 31, 2021, Employee has incurred no qualifying expenses for the
2020 plan year. However, Employee anticipates incurring dependent care expenses during the summer
of 2021, which is during the 2021 plan year.
Employer amends its § 125 cafeteria plan to
adopt the relief provided by § 214(d) of the Act by
substituting “under age 14” for “under age 13” for the
2020 and 2021 plan years, making that change applicable to all amounts permitted under § 214(d) of the
Act. Employer allows employees until the end of the
next plan year to incur claims and does not adopt any
other relief provided by § 214 of the Act. Employee elects to contribute $500 for the 2021 plan year.
Employee incurs $4,200 in dependent care expenses
from June through August 2021 for Dependent, who
during that time is age 13. For the 2021 plan year
(March 1, 2021, through February 28, 2022), $4,000
of the $4,200 in dependent care expenses may be reimbursed by the dependent care assistance program
for Dependent. ($4,000 is the unused amount from
the 2020 plan year that may be applied to reimburse
dependent care expenses during the subsequent plan
year for a dependent that attained age 13 during the
preceding plan year, until that dependent attains age
14, so the remaining $200 in dependent care expenses for Dependent may not be reimbursed.) Employee
does not incur any other dependent care expenses
during the 2021 plan year. The $500 remaining in
the dependent care assistance program as of February 28, 2022, is forfeited.
E. Elections Under a § 125 Cafeteria
Plan
Section 214 of the Act provides that
§ 125 cafeteria plans may permit employees to make prospective mid-year election
changes for health FSAs and dependent
care assistance programs for plan years
ending in 2021. Specifically, § 214(e) of
the Act provides that for plan years ending in 2021, a plan that includes a health
FSA or dependent care assistance program
shall not fail to be treated as a cafeteria
plan merely because the plan or arrangement allows an employee to make an election to modify prospectively the amount
(but not in excess of any applicable dollar
limitation) of the employee’s contributions to the arrangement (without regard
to any change in status). Thus, an employer, in its discretion, may amend one or
more of its § 125 cafeteria plans to allow
each employee who is eligible to make
salary reduction contributions under the
plan to make prospective election changes
for plan years ending in 2021 regarding a
health FSA or dependent care assistance
program, regardless of whether the basis
for the election change satisfies the criteria set forth in Treas. Reg. § 1.125-4. In
particular, subject to the limitations discussed later in this section, an employer
may amend one or more of its § 125 cafeteria plans to allow employees, on a prospective basis, to (1) revoke an election,
make one or more elections, or increase
or decrease an existing election, for plan
years ending in 2021 regarding a health
FSA, or (2) revoke an election, make one
or more elections, or increase or decrease
an existing election, for plan years ending in 2021 regarding a dependent care
assistance program. Prospective election
changes may include an initial election to
enroll in a health FSA or dependent care
assistance program for the year, for example, to gain use of the § 214 carryover or
extended period for incurring claims pursuant to § 214 of the Act if the employee
initially declined to enroll in the health
FSA or dependent care assistance program
for the year. An employer adopting this
relief may limit the period during which
election changes may be made.
In addition, similar to relief provided by Notice 2020-29, an employer may
amend one or more of its § 125 cafeteria
plans to allow employees to: (1) make
a new election for employer-sponsored
health coverage19 on a prospective basis,
if the employee initially declined to elect
employer-sponsored health coverage; (2)
revoke an existing election for employer-sponsored health coverage and make a
new election to enroll in different health
coverage sponsored by the same employer
on a prospective basis (including changing enrollment from self-only coverage to
family coverage);20 (3) revoke an existing
election for employer-sponsored health
coverage on a prospective basis, provided
that the employee attests in writing that
the employee is enrolled, or immediately
will enroll, in other health coverage not
sponsored by the employer.
To accept an employee’s revocation of
an existing election for employer-sponsored health coverage when the employee
does not make a new election to enroll in
different health coverage sponsored by the
employer, the employer must receive from
the employee an attestation in writing that
the employee is enrolled, or immediately
will enroll, in other comprehensive health
coverage not sponsored by the employer.21 The employer may rely on the written attestation provided by the employee,
unless the employer has actual knowledge
that the employee is not, or will not be, enrolled in other comprehensive health coverage not sponsored by the employer. The
following is an example of an acceptable
written attestation:
Name: _______________________
(and other identifying information requested by the employer for administrative purposes).
I attest that I am enrolled in, or immediately will enroll in, one of the following
types of coverage: (1) employer-sponsored health coverage through the
employer of my spouse or parent; (2)
individual health insurance coverage
enrolled in through the Health Insurance Marketplace (also known as the
The term “health coverage” in this notice refers to health, dental, or vision coverage.
The ability to amend a plan to allow an employee to revoke an existing election for employer-sponsored health coverage and make a new election to enroll in different health coverage
sponsored by the same employer may include allowing employees to change from one type of health plan (such as a health maintenance organization (HMO)) to another (such as a preferred
provider organization (PPO)). An employer also may choose to limit the ability of employees to change from one type of health plan to another. For example, an employer may choose to
restrict the election to allow employees to change only from a narrow network plan to a broader network plan or to allow only employees who previously elected a particular plan to elect to
move to a different plan.
21
An employee revoking an existing election for comprehensive health coverage may not revoke the election by attesting to enrollment in coverage solely for dental or vision benefits.
19
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Health Insurance Exchange); (3) Medicaid; (4) Medicare; (5) TRICARE; (6)
Civilian Health and Medical Program
of the Department of Veterans Affairs
(CHAMPVA); or (7) other coverage
that provides comprehensive health
benefits (for example, health insurance
purchased directly from an insurance
company or health insurance provided
through a student health plan).
Signature: ______________________
An employer using the relief provided
under § 214(e) of the Act and this notice is
not required to provide unlimited election
changes but may, in its discretion, determine the extent to which election changes
are permitted, provided that any permitted election changes are applied on a prospective basis only (with the exception of
elections related to previously contributed
amounts as part of the relief provided under § 214(a), (b) and (c)(1) of the Act, as
discussed elsewhere in this section III.E.).
In addition, except for changes in election
requirements that, pursuant to § 214(a), (b),
(c) and (d) of the Act, allow employees to
carry over amounts, have amounts available
during an extended claims period, or have
amounts available to reimburse dependent
care expenses for certain dependents who
attain age 13, as described in sections III.A.
through D. of this notice, any change to the
plan’s election requirements may not result
in the failure of the plan to comply with the
nondiscrimination rules applicable to § 125
cafeteria plans. In determining the extent
to which election changes are permitted
and applied, an employer may wish to consider the potential for adverse selection of
health coverage by employees. To prevent
this result, an employer may wish to limit elections to circumstances in which an
employee’s coverage will be increased or
improved as a result of the election (for example, by electing to switch from self-only
coverage to family coverage, or from a low
option plan covering in-network expenses
only to a high option plan covering expenses in or out of network).
With respect to mid-year election
changes for employer-sponsored coverage, this relief applies both to employers
sponsoring self-insured plans and to em22
ployers sponsoring insured plans. With
respect to health FSAs, this relief applies
to all health FSAs, including HSA-compatible health FSAs. In addition, with respect to health FSAs and dependent care
assistance programs, employers are permitted to limit mid-year election changes
to amounts no less than amounts already
reimbursed and to certain types of midyear election changes, such as decreases
in elections only. Employers also are permitted to allow mid-year election changes
without a status change22 up to a certain
date during the plan year but require a
status change after that date (for example,
no status change is required if an election
is changed before March 31, 2021, but a
status change is required if an election is
changed after that date), and to limit the
number of election changes during the
plan year that are not associated with a
status change (for example, allow only
one election change in the 2021 plan year
without a status change). Although salary
reductions may be applied only prospectively under any revised election, employers may allow amounts available under
the health FSA or dependent care assistance program after the revised election
to be used for any medical care expense
or dependent care expense, respectively, incurred on or after January 1, 2021,
through the end of a plan year ending in
2021. Amounts available after the revised
election may include contributions, carryover amounts, and amounts available
under an extended period for incurring
claims.This relief extends to expenses
incurred by employees who were not enrolled in the health FSA or dependent care
assistance program on January 1, 2021.
This relief does not allow unused amounts
to be paid to an employee in cash or paid
to an employee in the form of any taxable or nontaxable benefit without regard
to whether the employee incurs medical
care expenses or dependent care expenses
during the period of coverage.
If an employer adopts the § 214 carryover or the extended period for incurring
claims permitted by § 214(c)(1) of the
Act, the annual limits under §§ 125(i) and
129(a) apply to amounts contributed to a
health FSA or dependent care assistance
program for a particular year, and not to
amounts reimbursed or otherwise available for reimbursement from a health FSA
or dependent care assistance program in
a particular plan or calendar year. Thus,
unused amounts carried over from prior
years or available during an extended period for incurring claims are not taken into
account in determining the annual limit
applicable for the following year.
If a health FSA or dependent care assistance program election is revoked, the
treatment of amounts previously contributed to a § 125 cafeteria plan on a pre-tax
basis to fund a health FSA or dependent
care assistance program are subject to
the terms of the plan, which must apply
uniformly to all participants in the plan.
The plan may provide that amounts contributed before the election is revoked
remain available to reimburse medical
care expenses or dependent care expenses incurred for the rest of the plan year.
Alternatively, the plan may provide that if
the election is revoked, amounts contributed before the revocation will be available only to reimburse eligible expenses
incurred before the revocation takes effect
(and not later incurred expenses), or that
amounts contributed before the revocation will be forfeited. An employer, in its
discretion, may allow employees to elect
to revoke elections under a health FSA or
dependent care assistance program as of a
future specified date.
Regarding health FSAs, if the plan provides that revocation of the election terminates participation in the health FSA, and
that no subsequent reimbursements will
be available under the health FSA regardless of when the expense is incurred, following the revocation, the health FSA will
no longer be treated as health coverage
that disqualifies an otherwise eligible individual from contributing to an HSA. In
that case, an otherwise eligible individual
may begin contributing to an HSA as soon
as the termination of participation (including the lack of continued availability
of reimbursements in the health FSA) is
effective. Similarly, if under the terms of
the plan, the health FSA reimburses only
expenses incurred before the date of the
revocation, following the revocation, the
health FSA will not be treated as health
coverage that disqualifies an otherwise el-
See Treas. Reg. § 1.125-4.
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igible individual from contributing to an
HSA for months after the date of the revocation and an otherwise eligible individual
may begin contributing to an HSA.
Example 1. During the regular enrollment period for the 2021 calendar plan year, employee elects
to contribute $1,200 to a health FSA for the year. The
plan allows the employee to revoke or change the
election by March 1, 2021. The employee makes a
prospective election to revoke the election effective
March 1, at which time the employee has contributed
$200 to the health FSA. Under the terms of the plan,
amounts contributed before the revocation of the
election remain available to reimburse medical care
expenses incurred for the rest of the plan year and,
therefore, the employee may use the $200 previously
contributed to the health FSA to reimburse medical
care expenses incurred throughout 2021. Consequently, the employee has coverage by the health
FSA for 2021 and will not be eligible to contribute
to an HSA for calendar year 2021 even if otherwise
eligible (that is, covered by an HDHP), unless the
plan allows the employee to opt out of this extended
period for incurring claims, and the employee opts
out of this period.
Example 2. During the regular enrollment period for the 2021 calendar plan year, Employee elects
to contribute $1,200 to a health FSA for the year. The
plan allows the employee to revoke or change the
election by March 1, 2021. The employee makes a
prospective election to revoke the election effective
March 1, at which time the employee has contributed
$200 to the health FSA. Under the terms of the plan,
revocation of the election means that the employee
may use the $200 that was contributed to the health
FSA prior to March 1 to reimburse only medical care
expenses incurred prior to March 1. The coverage
during January and February will not make the employee ineligible to contribute to an HSA during the
rest of the plan year if otherwise eligible.
F. Changes Between HSA-compatible
and General Purpose Health FSAs and
HSA Contributions
Under the relief provided by this notice and § 214 of the Act, § 125 cafeteria
plans may be amended to allow an employee to make a mid-year election to be
covered by a general purpose health FSA
for part of the year and an HSA-compatible health FSA for part of the year.23 Eligibility to contribute to an HSA is determined on a month-by-month basis under
§ 223 of the Code. If an employee begins
the year with an HSA-compatible health
FSA and is otherwise an eligible indi-
vidual under § 223(c)(1) and then elects
coverage under a general purpose health
FSA, the employee’s permissible HSA
contribution is based on the number of
months that the employee was covered
under the HSA-compatible health FSA
and an HDHP and was otherwise an eligible individual. Only those expenses both
allowed by the HSA-compatible health
FSA and incurred during the months in
which the employee was covered by the
HSA-compatible health FSA may be reimbursed by that health FSA. Although
unused amounts in the HSA-compatible
health FSA may be added to the general
purpose health FSA, the general purpose
health FSA may reimburse only allowable
medical care expenses incurred after the
change in coverage.
If an employee begins the year with a
general purpose health FSA and then elects
coverage by an HDHP and an HSA-compatible health FSA, the employee’s permissible HSA contribution is based on
the number of months that the employee
is an eligible individual.24 Any allowable
medical care expense incurred during the
months before the change in coverage
may be reimbursed by the general purpose
health FSA. Although unused amounts
in the general purpose health FSA may
be added to the HSA-compatible health
FSA, only expenses both allowed by the
HSA-compatible health FSA and incurred
during months after the change in coverage may be reimbursed by the HSA-compatible health FSA.
Finally, if an employee is covered under
an HDHP at the beginning of the plan year
without a health FSA and then elects coverage by a plan that is not an HDHP and
coverage by a health FSA that can be used
to reimburse medical expenses incurred
while the employee was covered by the
HDHP, the health FSA must be operated
as an HSA-compatible health FSA for the
months that the employee was otherwise
an eligible individual under § 223(c)(1) in
order for the employee to contribute to an
HSA with respect to those months. Therefore, only the expenses both allowed by an
HSA-compatible health FSA and incurred
during those months before the change
may be reimbursed. For months after the
change in coverage, the health FSA may
be operated as a general purpose health
FSA and may reimburse any allowable
medical care expense incurred during that
later period.
In each of these cases, the maximum
reimbursements for the combined health
FSAs for the year are limited to the
amount of salary reduction elected for
the year (subject to the $2,750 limit under § 125(i) of the Code (as indexed)) plus
any available unused amounts from prior
years (including unused amounts carried
over or available due to plan amendments
under § 214 of the Act) and any nonelective employer contributions.
G. Interaction with COBRA
In certain circumstances, § 4980B
permits qualified beneficiaries who lose
coverage under a group health plan, including under a health FSA, to elect
continuation health coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA continuation
coverage). See Treas. Reg. § 54.4980B2, Q&A 8. For COBRA purposes, a qualified beneficiary generally includes the
covered employee, the spouse of the covered employee, or the dependent child of
the covered employee, if the employee
had coverage under the plan on the day
before the employee experiences a qualifying event and would have a loss of
coverage but for the COBRA continuation coverage. See § 4980B(g) and Treas.
Reg. § 54.4980B-3, Q&A 1. For COBRA
purposes, a qualifying event includes
certain events, such as the termination of
the employee or a reduction of hours, that
would result in a loss of coverage but for
the COBRA continuation coverage, and
a loss of coverage means ceasing to be
covered under the same terms and conditions as in effect immediately before a
qualifying event. See § 4980B(f)(3) and
Treas. Reg. § 54.4980B-4, Q&A 1. If an
In addition, employers are permitted to amend their plans to offer employees a choice between an HSA-compatible health FSA or general purpose health FSA during the period to which
the § 214 carryover or the extended period for incurring claims applies, on an employee-by-employee basis. Also, employers are permitted to implement a plan design in which employees
who elect an HDHP are automatically enrolled in an HSA-compatible health FSA. To the extent changes result in an employee being ineligible for an HSA mid-year on a prospective basis,
the employee would not be rendered HSA-ineligible for the earlier part of the plan year.
24
Alternatively, pursuant to § 223(b)(8), an employee that is an eligible individual during the last month of the year will be treated for purposes of the HSA contribution limitation as having
been an eligible individual for the entire year, even if the individual was not otherwise an eligible individual for the entire year, provided, generally, that the eligible individual remains an
eligible individual (including through enrollment in an HDHP) for the entire next year.
23
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905
March 8, 2021
individual is otherwise a qualified beneficiary with respect to coverage by a health
FSA, a limited extension of coverage to
the individual pursuant to § 214(c)(2) of
the Act will not prevent the individual
from having a loss of coverage resulting
in a qualifying event (for example, by
termination of employment or reduction
in hours of a covered employee), and
the relevant employer will be required
to provide a notice of the right to elect
COBRA continuation coverage to the individual.25
For example, if an employer allows an
employee who ceases to be a participant
as the result of termination of employment
or change in employment status to be reimbursed for expenses incurred after the
termination or reduction in hours through
access to the amount of salary reduction
contributions that have been made as
of the date the employee ceased being a
participant, this event would constitute a
COBRA qualifying event subject to notice
requirements. As a further example, if an
employee elected to contribute $2,400 to
a health FSA, terminated employment on
January 31 after making $200 in salary
reduction contributions, and as a result of
the termination was no longer permitted to
contribute to the health FSA other than by
electing COBRA continuation coverage,
the employer may allow the employee to
request reimbursement for up to $200, or
the employee may elect COBRA continuation coverage to have access to $2,400 by
paying the applicable COBRA premium
of $200 per month on an after-tax basis.
Nonetheless, regardless of whether an
individual is offered or elects COBRA
continuation coverage, if an employer
allows the individual the limited extension of coverage pursuant to § 214(c)(2)
of the Act, the health FSA may reimburse
expenses incurred after the termination of
participation and through the end of the
plan year. The health FSA also may reimburse expenses incurred during any period
to which unused amounts are carried over
or during any grace period provided under
the plan.
Additionally, if an employer adopts a
§ 214 carryover or extended period for
incurring claims pursuant to § 214(c)(1)
of the Act, the maximum amount that a
health FSA may require to be paid as the
applicable COBRA premium does not
include unused amounts carried over or
available during the extended period for
incurring claims. Thus, if a qualified beneficiary is allowed a § 214 carryover to a
later plan year or an extended period for
incurring claims, the applicable COBRA
premium payable to provide access to the
carryover amounts or the amounts attributable to the extended period for incurring
claims for that later year or for the extended period for incurring claims is zero. See
Q&A 23 of Notice 2015-87. In addition,
amounts carried over or available during
the extended period for incurring claims
are included in the amount of the benefit
that a qualified beneficiary is entitled to
receive during the remainder of a plan
year in which a qualifying event occurs.
See Q&A 21 of Notice 2015-87.
Finally, notwithstanding the special
rule of § 214(c)(2) of the Act, an employer
is not required to allow individuals who
cease participation in the plan to continue
to receive reimbursements from unused
benefits in a health FSA if the individual does not qualify for and elect COBRA
continuation coverage. An employer is not
obligated to amend its plan to make the relief permitted under § 214(c)(2) of the Act
available to all employees. Instead, employees for whom the extension of coverage under § 214(c)(2) of the Act is unavailable remain eligible to elect COBRA,
as do employees for whom the extended
coverage is available.
H. Plan Amendments
An employer that decides to implement
the relief provided under § 214 of the Act
for one or more of its § 125 cafeteria plans
(including plans that do not currently have
a grace period or permit a carryover) must
adopt a plan amendment to do so. Section 214(g) of the Act provides that a plan
that includes a health FSA or dependent
care assistance program shall not fail to
be treated as a cafeteria plan merely because the plan or arrangement is amend-
ed pursuant to a provision under § 214 of
the Act and the amendment is retroactive,
if (1) the amendment is adopted not later
than the last day of the first calendar year
beginning after the end of the plan year in
which the amendment is effective, and (2)
the plan or arrangement is operated consistent with the terms of the amendment
during the period beginning on the effective date of the amendment and ending on
the date the amendment is adopted. For
example, if an employer sponsors a calendar year § 125 cafeteria plan with a health
FSA that provides for a $550 carryover
(from 2020 to 2021) and amends the plan
to carry over the entire unused amount
remaining in employees’ health FSAs as
of December 31, 2020, to the 2021 plan
year, the amendment must be adopted
by December 31, 2021. An amendment
for the 2020 plan year of a non-calendar
year plan, however, must be adopted by
December 31, 2022, because the last day
of the first calendar year beginning after
the end of the 2020 plan year that ends in
2021 is the last day of 2022.
An amendment pursuant to § 214
and this notice may be effective retroactively to the beginning of the applicable
plan year, provided that the § 125 cafeteria plan operates in accordance with the
terms of the amendment during the period beginning on the effective date of the
amendment and ending on the date the
amendment is adopted, and the employer informs all employees eligible to participate in the § 125 cafeteria plan of the
changes to the plan. Changes to the plan
may also implicate requirements under
other applicable laws, such as notice requirements under Title I of the Employee
Retirement Income Security Act of 1974.
Except for amendments that, pursuant to
§ 214(a), (b), (c), and (d) of the Act, allow
employees to carry over amounts, have
amounts available during an extended
claims period, or have amounts available
to reimburse dependent care expenses for
certain dependents who attain age 13, as
described in sections III.A. through D. of
this notice, all permissible amendments
are subject to the nondiscrimination rules
under §§ 125 and 129 of the Code.
An individual who ceases to be covered by a health FSA due to an election to revoke participation in a health FSA, while qualifying for the limited extension of coverage pursuant to § 214(c)
(2) of the Act, would not have a qualifying event satisfying the requirement to be a qualified beneficiary. See Treas. Reg. § 54.4980B-4, Q&A 1.
25
March 8, 2021
906
Bulletin No. 2021–10
I. Reporting Requirements for
Dependent Care Assistance Programs
With respect to Form W-2, “Wage and
Tax Statement,” amounts contributed
to a dependent care assistance program
are required to be reported in Box 10 of
Form W-2. Under current guidance (Notice 2005-61, 2005-39 IRB 607), employers may report in Box 10 for a year
the salary reduction amount elected by
the employee for the year for dependent
care assistance (plus any employer matching contributions) and are not required
to adjust the amount reported in Box 10
to take into account amounts that remain
available in a grace period. This rule continues to apply with respect to employers
who amend their § 125 cafeteria plans to
provide for the temporary flexibility provided by § 214 of the Act. For this purpose, any amount carried forward from
2019 and used in 2020, whether a § 214
carryover or an extended period for incurring claims, is treated as an amount that
remains available in a grace period. With
respect to Form 2441, “Child and Dependent Care Expenses,” any amounts carried
forward from 2019 are similarly treated
as amounts carried over and used during
the grace period when completing Part III
of the form. The Treasury Department
and the IRS anticipate that for the 2021
and 2022 Forms W-2 and 2441, instructions will provide for similar rules that
dependent care amounts carried forward
from prior years pursuant to § 214 of the
Act will be treated as amounts remaining
available during a grace period for reporting purposes and no change to the reporting requirements will be necessary.
IV. GUIDANCE RELATED TO
SECTION 3702 OF THE CARES ACT
Section 3702 of the CARES Act
amended the Code to allow expenses incurred for menstrual care products to be
treated as incurred for medical care with
respect to health FSAs and HRAs, as well
as HSAs and Archer medical savings accounts (MSAs). In addition, the provision
allows health FSAs and HRAs, as well
as HSAs and Archer MSAs, to reimburse
expenses incurred for over-the-counter
drugs without regard to whether the drug
has been prescribed. As enacted, the expansion applies to expenses incurred after
December 31, 2019.26
Generally, the exclusion under § 105(b)
for reimbursements of medical expenses by
an employer applies only if the plan covered the expense on the date the expense
was incurred. See Treas. Reg. § 1.105-5.
Furthermore, Proposed Treasury Regulation § 1.125-1(c)(5), implementing § 125
of the Code, provides that amendments
adding new benefits to a cafeteria plan
may allow payment or reimbursement of
expenses for those benefits only to the extent those expenses are incurred after the
later of the amendment’s adoption date or
effective date. Notwithstanding the general
rule under § 105(b), and notwithstanding
any inconsistency with the proposed regulations under § 125, upon which taxpayers
may rely prior to the issuance of final regulations, health FSAs and HRAs may be
amended pursuant to this notice to provide
for reimbursements of expenses for menstrual care products and over-the-counter
drugs without prescriptions incurred for
any period beginning on or after January 1,
2020, and such an amendment will not result in a failure of the reimbursement to be
excludable from income under § 105(b)
or for the cafeteria plan to fail to meet the
requirements of § 125. This relief includes
amendments made prior to the issuance of
this notice.
V. DRAFTING INFORMATION
The principal author of this notice is
Jennifer Solomon of the Office of Associate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes), though other Treasury Department and IRS officials participated in its
development. For further information on
the provisions of this notice, contact Jennifer Solomon at (202) 317-5500 (not a
toll-free number).
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2021-16
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30year Treasury weighted average rate under
§ 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to single-employer plans (except for CSEC
plans under § 414(y)) pursuant to § 412.
Section 430(h)(2) specifies the interest rates that must be used to determine
a plan’s target normal cost and funding
target. Under this provision, present value is generally determined using three
24-month average interest rates (“segment rates”), each of which applies to
cash flows during specified periods. To
the extent provided under § 430(h)(2)(C)
(iv), these segment rates are adjusted by
the applicable percentage of the 25-year
average segment rates for the period ending September 30 of the year preceding
the calendar year in which the plan year
begins.1 However, an election may be
made under § 430(h)(2)(D)(ii) to use the
monthly yield curve in place of the segment rates.
Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the target
Section 3702 of the CARES Act amends §§ 220, 223 and 106 of the Code. In addition to removing statutory language at §§ 220(d), 223(d) and 106(f) of the Code which limited the excludable expenses under those provisions to prescribed drugs and insulin, § 3702(a) and (b) of the CARES Act amended §§ 220 and 223 of the Code to provide that for purposes of Archer MSAs
and HSAs, amounts paid for menstrual care products shall be treated as paid for medical care. Similarly, § 3702(c) of the CARES Act adds a new subsection (f) to § 106 of the Code providing
that, for purposes of §§ 106 and 105 of the Code, expenses incurred for menstrual care products are treated as incurred for medical care.
1
Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).
26
Bulletin No. 2021–10
907
March 8, 2021
normal cost and the funding target. Consistent with the methodology specified in
Notice 2007-81, the monthly corporate
bond yield curve derived from January
2021 data is in Table 2021-1 at the end
of this notice. The spot first, second, and
third segment rates for the month of January 2021 are, respectively, 0.50, 2.38, and
3.17.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
Applicable Month
February 2021
§ 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average
segment rates. For plan years beginning
before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. For plan years
beginning in 2021, the applicable minimum percentage is 85% and the applicable maximum percentage is 115%. The
25-year average segment rates for plan
years beginning in 2020, and 2021 were
published Notice 2019-51, 2019-41 I.R.B.
866, and Notice 2020-72, 2020-40 I.R.B.
789, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for February 2021 without adjustment for the 25year average segment rate limits are as
follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
First Segment
Second Segment
1.64
2.96
Based on § 430(h)(2)(C)(iv), the
24-month averages applicable for Febru-
ary 2021, adjusted to be within the applicable minimum and maximum percentag-
es of the corresponding 25-year average
segment rates, are as follows:
Adjusted 24-Month Average Segment Rates
Applicable
First
Second
Month
Segment
Segment
For Plan Years
Beginning In
Third Segment
3.59
Third
Segment
2020
February 2021
3.64
5.21
5.94
2021
February 2021
3.32
4.79
5.47
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to multiemployer plans pursuant to § 412. Section
431(c)(6)(B) specifies a minimum amount
for the full-funding limitation described in
§ 431(c)(6)(A), based on the plan’s current
liability. Section 431(c)(6)(E)(ii)(I) pro-
vides that the interest rate used to calculate
current liability for this purpose must be
no more than 5 percent above and no more
than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period
ending on the last day before the beginning
of the plan year. Notice 88-73, 1988-2 C.B.
383, provides guidelines for determining
the weighted average interest rate. The rate
of interest on 30-year Treasury securities
for January 2021 is 1.82 percent. The Service determined this rate as the average of
the daily determinations of yield on the 30year Treasury bond maturing in November
2050. For plan years beginning in February 2021, the weighted average of the rates
of interest on 30-year Treasury securities
and the permissible range of rates used to
calculate current liability are as follows:
For Plan Years
Beginning In
Treasury Weighted Average Rates
30-Year Treasury
Weighted Average
Permissible Range
90% to 105%
February 2021
2.28
2.05 to 2.39
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007-81 provides guidelines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value segment rates determined for January 2021
are as follows:
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
Month
January 2021
Minimum Present Value Segment Rates
First Segment
Second Segment
0.50
2.38
March 8, 2021
908
Third Segment
3.17
Bulletin No. 2021–10
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Asso-
Bulletin No. 2021–10
ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
909
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Paul Stern at 202-3178702 (not toll-free numbers).
March 8, 2021
Table 2021-1
Monthly Yield Curve for January 2021
Derived from January 2021 Data
Maturity
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
20.0
Yield
0.18
0.24
0.31
0.37
0.44
0.50
0.58
0.67
0.77
0.89
1.02
1.15
1.29
1.43
1.57
1.71
1.84
1.96
2.07
2.18
2.28
2.37
2.45
2.53
2.59
2.65
2.70
2.74
2.78
2.82
2.85
2.87
2.89
2.91
2.93
2.95
2.96
2.97
2.98
2.99
March 8, 2021
Maturity
20.5
21.0
21.5
22.0
22.5
23.0
23.5
24.0
24.5
25.0
25.5
26.0
26.5
27.0
27.5
28.0
28.5
29.0
29.5
30.0
30.5
31.0
31.5
32.0
32.5
33.0
33.5
34.0
34.5
35.0
35.5
36.0
36.5
37.0
37.5
38.0
38.5
39.0
39.5
40.0
Yield
3.00
3.01
3.01
3.02
3.03
3.03
3.04
3.05
3.05
3.06
3.06
3.07
3.07
3.08
3.09
3.09
3.10
3.10
3.11
3.11
3.12
3.12
3.13
3.13
3.13
3.14
3.14
3.15
3.15
3.15
3.16
3.16
3.16
3.17
3.17
3.17
3.18
3.18
3.18
3.18
Maturity
40.5
41.0
41.5
42.0
42.5
43.0
43.5
44.0
44.5
45.0
45.5
46.0
46.5
47.0
47.5
48.0
48.5
49.0
49.5
50.0
50.5
51.0
51.5
52.0
52.5
53.0
53.5
54.0
54.5
55.0
55.5
56.0
56.5
57.0
57.5
58.0
58.5
59.0
59.5
60.0
Yield
3.19
3.19
3.19
3.20
3.20
3.20
3.20
3.20
3.21
3.21
3.21
3.21
3.22
3.22
3.22
3.22
3.22
3.23
3.23
3.23
3.23
3.23
3.23
3.24
3.24
3.24
3.24
3.24
3.24
3.24
3.25
3.25
3.25
3.25
3.25
3.25
3.25
3.26
3.26
3.26
910
Maturity
60.5
61.0
61.5
62.0
62.5
63.0
63.5
64.0
64.5
65.0
65.5
66.0
66.5
67.0
67.5
68.0
68.5
69.0
69.5
70.0
70.5
71.0
71.5
72.0
72.5
73.0
73.5
74.0
74.5
75.0
75.5
76.0
76.5
77.0
77.5
78.0
78.5
79.0
79.5
80.0
Yield
3.26
3.26
3.26
3.26
3.26
3.27
3.27
3.27
3.27
3.27
3.27
3.27
3.27
3.27
3.27
3.28
3.28
3.28
3.28
3.28
3.28
3.28
3.28
3.28
3.28
3.28
3.29
3.29
3.29
3.29
3.29
3.29
3.29
3.29
3.29
3.29
3.29
3.29
3.29
3.30
Maturity
80.5
81.0
81.5
82.0
82.5
83.0
83.5
84.0
84.5
85.0
85.5
86.0
86.5
87.0
87.5
88.0
88.5
89.0
89.5
90.0
90.5
91.0
91.5
92.0
92.5
93.0
93.5
94.0
94.5
95.0
95.5
96.0
96.5
97.0
97.5
98.0
98.5
99.0
99.5
100.0
Yield
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.30
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.32
3.32
3.32
3.32
3.32
Bulletin No. 2021–10
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior published position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is being made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously published ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the substance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases in litigation, or the outcome of a Service study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
Bulletin No. 2021–10
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
i
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
March 8, 2021
Numerical Finding List1
Bulletin 2021–10
Announcements:
2021-01, 2021-04 I.R.B. 506
2021-02, 2021-08 I.R.B. 892
2021-03, 2021-08 I.R.B. 892
2021-04, 2021-09 I.R.B. 895
Notices:
2021-01, 2021-02 I.R.B. 315
2021-03, 2021-02 I.R.B. 316
2021-04, 2021-02 I.R.B. 319
2021-02, 2021-03 I.R.B. 478
2021-05, 2021-03 I.R.B. 479
2021-07, 2021-03 I.R.B. 482
2021-09, 2021-05 I.R.B. 678
2021-06, 2021-06 I.R.B. 822
2021-08, 2021-06 I.R.B. 823
2021-11, 2021-06 I.R.B. 827
2021-12, 2021-06 I.R.B. 828
2021-13, 2021-06 I.R.B. 832
2021-10, 2021-07 I.R.B. 888
2021-15, 2021-10 I.R.B. 898
2021-16, 2021-10 I.R.B. 907
Treasury Decisions:
9925, 2021-02 I.R.B. 296
9940, 2021-02 I.R.B. 311
9932, 2021-03 I.R.B. 345
9939, 2021-03 I.R.B. 376
9941, 2021-03 I.R.B. 396
9942, 2021-03 I.R.B. 450
9937, 2021-04 I.R.B. 495
9936, 2021-05 I.R.B. 508
9943, 2021-05 I.R.B. 577
9945, 2021-05 I.R.B. 627
9946, 2021-06 I.R.B. 726
9947, 2021-06 I.R.B. 748
9948, 2021-06 I.R.B. 801
9938, 2021-07 I.R.B. 838
Proposed Regulations:
REG-130081-19, 2021-02 I.R.B. 321
REG-114615-16, 2021-03 I.R.B. 489
REG-111950-20, 2021-05 I.R.B. 683
REG-115057-20, 2021-05 I.R.B. 714
Revenue Procedures:
2021-01, 2020-01 I.R.B. 1
2021-02, 2020-01 I.R.B. 116
2021-03, 2020-01 I.R.B. 140
2021-04, 2020-01 I.R.B. 157
2021-05, 2020-01 I.R.B. 250
2021-07, 2020-01 I.R.B. 290
2021-09, 2020-03 I.R.B. 485
2021-08, 2020-04 I.R.B. 502
2021-10, 2020-04 I.R.B. 503
2021-12, 2020-05 I.R.B. 681
2021-11, 2020-06 I.R.B. 833
2021-15, 2020-08 I.R.B. 891
Revenue Rulings:
2021-01, 2021-02 I.R.B. 294
2021-02, 2021-04 I.R.B. 495
2021-03, 2021-05 I.R.B. 674
2021-04, 2021-06 I.R.B. 724
2021-05, 2021-06 I.R.B. 896
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2020–27 through 2020–52 is in Internal Revenue Bulletin
2020–52, dated December 27, 2020.
1
March 8, 2021
ii
Bulletin No. 2021–10
Finding List of Current Actions on
Previously Published Items1
Bulletin 2021–10
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2020–27 through 2020–52 is in Internal Revenue Bulletin
2020–52, dated December 27, 2020.
1
Bulletin No. 2021–10
iii
March 8, 2021
Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300
INTERNAL REVENUE BULLETIN
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Bulletins are available at www.irs.gov/irb/.
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