IRS Guidance Provides Section 125 Cafeteria Plan Flexibility in Response to Coronavirus
May 13, 2020
The Internal Revenue Service has released two notices to allow temporary changes to section 125 cafeteria plans and provide additional flexibility to participants. If adoptedd by the employer, these changes may extend the claims period for health flexible spending accounts (FSAs) and dependent care assistance programs, and allow taxpayers to make mid-year changes.
- Extends claims periods to permit unused amounts in health FSAs and dependent care FSAs that remain at the end of a grace period for a plan year that ends in 2020 to be used for expenses incurred through December 31, 2020.
- Permits mid-year changes for elections made during calendar year 2020 for health coverage, health FSAs, and dependent care assistance programs, in response to changes in needs as a result of COVID-19.
- Provides additional detail and confirmation that individuals enrolled in high deductible health plans (HDHPs) providing COVID-19 testing and telehealth services prior to the satisfaction of a deductible will continue to remain HSA-eligible.
Notice 2020-33 increases the maximum limit for unused health FSA carryover amounts from $500 to $550, as adjusted annually for inflation, for plan years beginning in 2020.
We are reviewing these notices and will provide further information when possible.