,,ii  #aafth ,,congress  #b;d ,session  
,s4 #dcga  ,,in ,,the ,,senate ,,of     
,,the ,,united ,,states  ,july #cj1     
#bjbj,ms4 ,smith 7for herself and ,ms4  
,sinema7 introduced the following bill2 
which was read twice and referred to the
 ,committee on ,finance  ,a ,,bill  ,to 
amend the ,internal ,revenue ,code of   
#aihf to require employers to cash out  
the flexible spending accounts of       
employees who separate from employment1 
and for other purposes4  #a4 ,short     
title ,this ,act may be cited as the    
,fair ,f,s,as ,act of #bjbj4  #b4       
,cash-outs of flexible spending accounts
  7a7 ,in general ,subsection 7h7 of    
section #abe of the ,internal ,revenue  
,code of #aihf is amended to read as    
follows3  7h7 ,special rules for unused 
benefits in health flexible spending    
arrangements  7#a7 ,distributions upon  
termination of employment  7,a7 ,in     
general ,if a benefit is provided under 
a cafeteria plan through employer       
contributions to a health flexible      

spending arrangement-- 7i7 such plan or 
arrangement shall not fail to be treated
 as a cafeteria plan or health flexible 
spending arrangement 7and shall not fail
 to be treated as an accident or health 
plan7 for purposes of this title merely 
because such arrangement provides for an
 election meeting the requirements of   
subparagraph 7,b71 and  7ii7 such       
benefit shall not be treated as a       
qualified benefit for purposes of this  
section unless such arrangement provides
 for such election4  7,b7 ,election ,the
 requirements of this subparagraph are  
met if the health flexible spending     
arrangement provides that1 if the       
employee terminates employment with the 
employer 7whether voluntarily or        
involuntarily7 during the plan year1 the
 employee may elect to receive in cash  
an amount equal to-- 7i7 the excess1 if 
any1 of-- 7,i7 all contributions made to
 the arrangement for such plan year as  
of the date the employee terminates     
employment with the employer1 over      

7,,ii7 the amount of reimbursements     
received by the employee under such     
arrangement during such plan year as of 
the date the employee ceases to be a    
participant in the arrangement          
7including any grace period71 reduced by
  7ii7 the amount of tax withheld under 
subparagraph 7,c74  7,c7 ,deduction of  
tax ,in paying to an employee the cash  
payment elected under subparagraph 7,b71
 the employer shall deduct and withhold 
from the employee an amount equal to--  
7i7 the taxes which the employer would  
have been required to deduct and        
withhold if the employee had received   
the equivalent amount of wages instead  
of having made salary reduction         
contributions to the health flexible    
spending arrangement1 and  7ii7 in the  
case of a cash payment of any employer  
contributions to the health flexible    
spending arrangement1 the taxes which   
the employer would have been required to
 deduct and withhold if the employee had
 received the equivalent amount of wages

 in lieu of such contributions1         
determined as if the employee had       
received such wages on the date the cash
 payment is made4 ,the amount of tax so 
deducted and withheld shall be remitted 
by the employer in the same manner as   
amounts collected under section #cajb4  
7#b7 ,qualified reservist distributions 
7,a7 ,in general ,for purposes of this  
title1 a plan or other arrangement shall
 not fail to be treated as a cafeteria  
plan or health flexible spending        
arrangement 7and shall not fail to be   
treated as an accident or health plan7  
merely because such arrangement provides
 for qualified reservist distributions4 
7,b7 ,qualified reservist distribution  
,for purposes of this paragraph1 the    
term qualified reservist distribution   
means any distribution to an individual 
of all or a portion of the balance in   
the employee's account under such       
arrangement if-- 7i7 such individual was
 7by reason of being a member of a      
reserve component 7as defined in section

 #aja of title #cg1 ,united ,states     
,code77 ordered or called to active duty
 for a period in excess of #agi days or 
for an indefinite period1 and  7ii7 such
 distribution is made during the period 
beginning on the date of such order or  
call and ending on the last date that   
reimbursements could otherwise be made  
under such arrangement for the plan year
 which includes the date of such order  
or call4  4  7b7 ,treatment as accident 
or health plan ,section #ajf of the     
,internal ,revenue ,code of #aihf is    
amended by adding at the end the        
following new subsection3  7h7          
,distributions upon termination of      
employment ,a plan shall not fail to be 
treated as a health flexible spending   
arrangement under this section or       
section #aje merely because such plan   
provides for an election meeting the    
requirements of section                 
#abe7;h77#a77;,b74  4  7c7 ,excise tax  
on failure ,to provide distributions    
upon termination of employment  7#a7 ,in

 general ,chapter #dc of the ,internal  
,revenue ,code of #aihf is amended by   
inserting after section #dihj the       
following new section3  #dihj;,a4       
,failure to provide distributions from  
health flexible spending arrangements   
upon termination of employment  7a7     
,general rule ,there is hereby imposed a
 tax on the failure of a covered        
cafeteria plan to meet the requirements 
of section #abe7;h77#a7 7including a    
failure to withhold and remit any tax as
 required by subparagraph 7,c7 thereof7 
with respect to any employee4  7b7      
,amount of tax  7#a7 ,in general ,the   
amount of the tax imposed by subsection 
7a7 on any failure with respect to an   
employee shall be #ajj for each day in  
the noncompliance period with respect to
 such failure4  7#b7 ,noncompliance     
period ,for purposes of this section1   
the term noncompliance period means1    
with respect to any failure1 the        
period-- 7,a7 beginning on the date such
 failure first occurs1 and  7,b7 ending 

on the earlier of-- 7i7 the date such   
failure is corrected1 or  7ii7 the date 
which is #f months after the date the   
employee terminates employment with the 
employer4  7#c7 ,limitations ,rules     
similar to the rules of subsections     
7b77#c7 and 7c7 of section #dihj;,b     
shall apply with respect to the tax     
under this section4  7c7 ,covered       
cafeteria plan ,for purposes of this    
section1 the term covered cafeteria plan
 means a cafeteria plan 7as defined in  
section #abe7;d77 under which a benefit 
is provided through employer            
contributions to a health flexible      
spending arrangement4  7d7 ,liability   
for tax ,rules similar to the rules of  
section #dihj;,b7e7 shall apply for     
purposes of determining liability for   
the tax imposed under this section4  4  
7#b7 ,clerical amendment ,the table of  
sections for chapter #dc of such ,code  
is amended by inserting after the item  
relating to section #dihj the following 
new item3  ,sec4 #dihj;,a4 ,failure to  

provide distributions from health       
flexible spending arrangements upon     
termination of employment4  4  7d7      
,effective date  7#a7 ,in general ,the  
amendments made by this section shall   
apply to plan years beginning after the 
date of the enactment of this ,act4     
7#b7 ,plan amendments ,a plan or        
arrangement shall not be treated as     
violating the requirements of section   
#abe7;h77#a7 of the ,internal ,revenue  
,code of #aihf1 as added by this section
 7including for purposes of section     
#dihj;,a of such ,code1 as so added71   
if-- 7,a7 the plan or arrangement is    
amended to meet such requirements on or 
before the last day of the first plan   
year beginning after the date of the    
enactment of this ,act1  7,b7 such      
amendment applies retroactively to the  
first day of such first plan year1 and  
7,c7 the plan or arrangement operates in
 accordance with such requirements as of
 the first day of such first plan year4 
,a plan or arrangement shall not be     

treated as failing to satisfy any       
requirement of the ,internal ,revenue   
,code of #aihf merely because the plan  
or arrangement operates as provided in  
subparagraph 7,c74  #c4 ,extension of   
time for filing ,,fsa claims  7a7 ,in   
general ,notwithstanding any applicable 
rule or regulation under section #abe of
 the ,internal ,revenue ,code of #aihf1 
a plan or other arrangement shall not   
fail to be treated as a cafeteria plan  
or health flexible spending arrangement 
merely because such arrangement permits 
participants who make the certification 
under subsection 7b7 to carry over any  
amount of unused benefit or contribution
 7without limitation7 from any plan year
 beginning or ending in #bjbj to the    
subsequent plan year4  7b7              
,certification by employee ,in applying 
for any carryover permitted pursuant to 
subsection 7a71 the employee shall      
certify that the amount to be carried   
over is attributable to a reduction in  
expected elective health care expenses  

in the plan year due to the outbreak of 
coronavirus disease #bjai 7,,covid-#ai7 
in the ,united ,states4  7c7            
,definitions ,any term used in this     
section which is also used in section   
#ajf or #abe of the ,internal ,revenue  
,code of #aihf or the rules or          
regulations thereunder shall have the   
same meaning as when used in such       
section or regulations4