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.
Peter Piotrowski is Hippo's Chief Claims Officer. He and his team provide Hippo customers with a technology-enabled, industry-leading claims experience. Pete is a key member of Hippo's executive team and possesses an intimate knowledge of claims management, loss prevention, and mitigation strategies essential to supporting customers when they need it the most. Pete previously served as Chief Claims Officer at Vault and held leadership roles at The Hanover Insurance Group, AIG, and Chubb. He earned a BS in Business Administration and Management from Montclair State University.
Donna Roughan is CEO of Accountests. A Chartered Accountant, she brings 22 years of accounting and business advisory experience, including as a director with PwC New Zealand and as a CFO.
Vitaliy Shtyrkin is the chief product officer of B2BINPAY, an all-in-one crypto ecosystem for business.
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.
