INCREASED FLEXIBILITY FOR SECTION 125 CAFETERIA PLANS
The Internal Revenue Service (IRS) released guidance on May 12, 2020, to allow temporary changes to Section 125 cafeteria plans. The guidance addresses unanticipated changes in expenses because of the COVID-19 pandemic.
IRS Notice 2020-29 provides greater flexibility for taxpayers by:
- extending claims periods for taxpayers to apply unused amounts remaining in a health FSA or dependent care assistance program for expenses incurred for those same qualified benefits through December 31, 2020
- expanding the ability of taxpayers to make mid-year elections for health coverage, health FSAs, and dependent care assistance programs, allowing them to respond to changes in needs as a result of the COVID-19 pandemic
- applying earlier relief for high deductible health plans to cover expenses related to COVID-19, and a temporary exemption for telehealth services retroactively to January 1, 2020.
IRS Notice 2020-33 increases the limit for unused health FSA carryover amounts from $500, to a maximum of $550, as adjusted annually for inflation. The carryover amount can be used toward qualified expenses incurred during the following plan year.
Please contact us if you have questions about the released guidance or would like to know more information.