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.
Mark Testa is the executive vice president of Regenexx for Business
This report analyzes how organizations are investing in direct care support and other benefits to alleviate the strain that affects caregiving employees.
Ravi has over 13 years of actuarial experience in the property and casualty insurance industry. Working in WTW's Insurance, Consulting, and Technology practice as an Associate Director, Ravi works with clients to provide industry leading insights and solutions. Throughout his tenure, he has worked as an effective leader and business partner on both the carrier and consulting side. Ravi's experience includes exposure to a vast array disciplines including analytics, ratemaking, reserving, capital management, and enterprise risk management.
In addition to his professional responsibilities, Ravi actively volunteers with the Casualty Actuarial Society.
Ravi holds a Bachelor of Science degree in Applied Mathematics from Kettering University. He is also a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.
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.
