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.
From strategic planning to talent acquisition, Fallon wears a number of different hats at Sentinel. Senior managers look to her for guidance in their everyday duties, and her efforts to build positive employee relations are reflected in the company's culture. When Fallon isn't working face to face with employees, her leadership comes through in her diligent work on policy design and compensation planning.
Darien Shanske is the Martin Luther King Jr. Professor of Law at the University of California, Davis School of Law.
Glenn Hall is Executive Vice President, Information Services and oversees Arizent's editorial and subscription sales teams. Over the course of three decades, Hall has held senior leadership roles in journalism, digital content strategy, and business information services. Before joining Arizent, he was a Partner and Executive Editor at Brunswick Group, where he led global content initiatives that helped business leaders navigate complex issues, including cybersecurity, sustainability, and regulatory change. Previously, Hall served as Global Chief Editor of Dow Jones Newswires and Head of Professional News at The Wall Street Journal, overseeing the WSJ Pro and C-Suite news, data and research services. His career also includes top editorial roles at MarketWatch, TheStreet, The Orange County Register, and Bloomberg, where he played a pivotal role in shaping business intelligence products, expanding audience engagement, and developing innovative research and data-driven content offerings.
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.
