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.
Mike Sha is CEO and Co-founder, SigFig. Previously, he held senior roles at Amazon where he launched and built the Amazon Visa Card into one of the fastest growing consumer loyalty
cards in history. He was also one of the original inventors of Amazon's Prime program.
Brian has over twenty years of experience in direct-to-consumer and affinity sales of financial products. Receiving his degree from The University of Michigan in 2000, Brian began his career as a mortgage banker at Quicken Loans (now Rocket Mortgage). Brian worked his way to an executive leadership position at the company, as well as National General Insurance, where he has always driven both company, community, and personal growth. In addition to being an insurance industry expert and dedicated pet enthusiast, he is passionate about company culture and the creation of inspiring workplace environments. Brian lives in the Cleveland-area with his wife, two daughters, and their chocolate Lab, JoJo.
Michael C. Macchiarola is CEO of Olden Lane Inc., and its subsidiary, Olden Lane Securities LLC, in Bridgewater, New Jersey.
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.
