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.
With more than 25 years of experience in the insurance and technology industries, George Robertson provides a seasoned perspective on emerging technological trends and their impact on insurance professionals and clients. As a former board member of the Independent Insurance Agents & Brokers of America (IIABA) Agency Council for Technology, he has played a key role in tracking strategic developments that shape consumer expectations and business opportunities. He also serves on the board of the Network of Vertafore Users (NetVU).
George also served as co-chair of the Cyber Workgroup, where he helped develop The Cyber Guide for Insurance Agents, a resource designed to assist agents with cyber regulation compliance and safeguard both agencies and their customers. With expertise in cyber insurance, insurtech, artificial intelligence, and agency automation, he delivers valuable insights that drive innovation and progress within the insurance industry. He can be reached at grobertson@ncinsquote.com.
Gail McGiffin is the Managing Director and Global Insurance Advisory Lead at EPAM, where she helps insurers deliver large-scale transformation programs focused on growth, efficiency and digital innovation. With over 35 years of experience in insurance leadership, she specializes in underwriting modernization, data-driven platforms and operational efficiencies.
Before joining EPAM, Ms. McGiffin was the Chief Information and Operations Officer and board member at Vantage Group Holdings Ltd., where she led technology and operations. She previously served as Global Insurance Underwriting Lead and Partner/Principal at EY, Chief Information Officer and a member of the board of directors at ProSight Specialty Insurance and Managing Partner at Accenture, where she established and led the Global Underwriting Practice. Ms. McGiffin began her career at Chubb, holding leadership roles in underwriting and product innovation.
Justin Grooms is the president of Bolt, a checkout technology company.
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.
