The Internal Revenue Service issued guidance Tuesday to make temporary changes to section 125 cafeteria plans, with the goal of providing tax relief and flexibility in the midst of the novel coronavirus pandemic. The IRS is extending the claims period for health care flexible spending arrangements and dependent care assistance programs and enabling taxpayers to make mid-year changes to their accounts.
The guidance released Tuesday by the IRS deals with the unanticipated changes in expenses faced by many taxpayers as a result of the COVID-19 pandemic. The IRS is now allowing its previously provided temporary relief for high deductible health plans to be applied retroactively to Jan. 1, 2020, and also increases for inflation the $500 permitted carryover amount for health FSAs to $550.
Brett Erickson is managing principal of Obsidian Risk Advisors. He also serves on the advisory board of Loyola University Chicago's Center for Compliance Studies.
Jeff Moore is a seasoned professional with an impressive career spanning over three decades at ATI Restoration. Throughout his tenure, Jeff's strategic vision and industry knowledge have been instrumental in driving growth and expansion for the company. His leadership has transformed ATI from a regional restoration firm with revenue of $20M into America's largest family-operated restoration company, boasting over 70+ offices nationwide and revenue exceeding $900M.
As president and chief acquisitions officer, Jeff leads the executive team, spearheads acquisitions, and is the driving force behind ATI's ongoing growth. Over the past four years, Jeff and his dedicated mergers and acquisitions team have successfully negotiated, finalized, and integrated 18 strategic acquisitions, tripling EBITDA, doubling revenue, and multiplying the number of locations threefold. In addition to his work at ATI, Jeff advocates for the restoration industry and proudly holds the position of President for the Restoration Industry Association (RIA).
Brenna Johnson, SVP, product management at EZLynx, is a driving force behind several of the company's newest products. Johnson is passionate about leveraging technology to solve problems for independent insurance agents. As vice president of product management, she is actively involved in all phases of the development life cycle, and hopes to help transform the insurance industry by leveraging technology to improve agency profitability, productivity and serviceability.
In Notice 2020-29, the IRS is offering extra flexibility to taxpayers by:
- extending the 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 Dec. 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; and
- applying earlier relief for high-deductible health plans to cover expenses related to COVID-19, and a temporary exemption for telehealth services retroactively to Jan. 1, 2020.
In conjunction with that notice, the IRS also issued Notice 2020-33, in response to the Trump administration’s Executive Order 13877, which directs the Treasury secretary to “issue guidance to increase the amount of funds that can carry over without penalty at the end of the year for flexible spending arrangements.” The notice ups the limit for unused health FSA carryover amounts from $500, to a maximum of $550, adjusted each year for inflation.
