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.
Meredith Hathorn, Municipal Securities Rulemaking Board Chair
Founder, President & CEO of SPLICE Software, Tara Kelly (@TKtechnow), has a passion for enabling clients to engage in a meaningful, Data Driven DialogTM with their customers. As a serial entrepreneur who has developed three companies including one outside the technology field, Tara's expertise is multidimensional but focused on creating businesses that use technology to enhance operations, service and the customer experience.As an open source activist and recognized user experience designer, Tara Kelly served as a board member for the International Board for Voice User Interface Design and the Canadian Cloud Council. In addition to running SPLICE Software, Tara is an advisor for the Special Olympics Toronto, serves on the board of directors for Technology Alberta and is a member of the Entrepreneurs Organization.Recognition for Tara's achievements include Business In Calgary's Leaders of Tomorrow 2014, Bronze Stevie Award winner for Female Entrepreneur of the Year in Canada 2012-14, Profit/Chatelaine W100 2012-14, Profit 500 2013-14, Prairie Finalist for EY Entrepreneur of the Year 2012-13, TechWomen Canada 2013, Calgary's FastestGrowing Companies 2013, Alberta Venture's Fast Growth 50 2012, TechRev Innovation Award 2011, and Western Finalist for the RBC CWEA Award 2011.
Edward Gottfried is the VP of product at Betterment at Work
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.
