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.
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Colin Royal is a recent graduate of Morehouse College, and current NYU graduate journalism student.
At Morehouse, he obtained the distinction of Co-Valedictoriant while being heavily involved on-campus. He was the former Editor-in-Chief of The Maroon Tiger and Director of Morehouse Journalism Departments 2024-2025 Senior Capstone Documentary.
Professionally, he has worked with multiple companies covering a variety of disciplines. He has worked for professional media organizations like Dow Jones and the Harvard Business Review.
This summer he joined The Bond Buyer team after training with Dow Jones' News Fund.
Kathryn Miller covers wealth management and financial advisors for Financial Planning as part of the Dow Jones News Fund program.
Her reporting focuses on the people, firms and policy issues shaping the advice industry, with a particular interest in the intersection of wealth management and health care. She brings experience covering health care, business, politics and local government.
Kathryn is completing her master's degree in Magazine, News and Digital Journalism at Syracuse University. She has served as assistant executive producer of The NewsHouse and worked as a health reporting intern at Syracuse.com. She previously covered health care for the Fort Worth Report, where her work included reporting on hospital expansions in Fort Worth.
A native of Arlington, Texas, Kathryn earned her bachelor's degree in psychology from Texas A&M University in 2023. At Texas A&M, she was editor of the student newspaper.
In her free time, Kathryn enjoys yoga, very long walks and supporting her local movie theater.
Connect with Kathryn on LinkedIn or reach her at kathryn.miller@arizent.com.
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.
