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.
David Tobias serves as the chief product officer at Nearmap. Previously, he co-founded Betterview, the leading Property Intelligence Platform for P&C insurers, which was acquired by Nearmap in December 2023. David plays a pivotal role in driving the market strategy for Nearmap, enabling users to effectively identify and mitigate risk, enhance operational efficiency, and build a more transparent customer experience. Before founding Betterview, David was instrumental in scaling Research Specialist Incorporated, an insurance loss control company. Under his leadership, the company expanded to conduct over 30,000 inspections annually with a network of more than 500 inspectors across the United States. Research Specialist Incorporated was later acquired by Alpine Intel. A veteran of the insurance and property intelligence industry, Tobias is focused on finding actionable, usable solutions to complex geospatial challenges.
John Bowers is the Actuarial Product Director from RNA Analytics.
Craig West is founder and chairman of Capitaliz, a digital platform for exit planners and advisors to deliver scalable business valuation, succession and exit planning outcomes.
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.
