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.
Darlene Pasquill is head of the equity division at Mizuho.
Robert Lewis is senior vice president of innovation and development at Verisk, where he uses data, analytics, and technology to drive efficiencies and automation in the claims handling process.
Rob was president of Verisk's Casualty Solutions from 2011 until 2022. He joined Verisk when it acquired Crowe Paradis Services Corporation (CPSC), a company he co-founded in 2006. Rob was vice president of sales and marketing from its founding until the acquisition, when he was promoted to president.
Prior to joining Verisk, Rob practiced insurance defense litigation in New Jersey and North Carolina and was a partner in the New Jersey law firm of Capehart & Scatchard. In 2004, he was selected by the New Jersey Law Journal as one of the "Top 40 lawyers under the age of 40."
Ilya Filipov has over 15 years of experience leading growth strategies across life, property, and casualty insurance. As Total Expert's General Manager of Insurance, he leads vertical growth and works directly with customers and prospects to address industry pain points and promote enhanced customer experiences across the entire financial enterprise.
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.
