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.
Guizhou Hu is Vice President, VP, Head of Risk Analytics at RGA, where he supports global RGA underwriting initiatives and produces internal and external thought leadership pieces based on RGA's in-depth risk analytics. Before joining RGA in 2018, Guizhou served as Vice President, Chief Decision Analytics, for Gen Re and as a Senior Vice President for BioSignia Inc. Guizhou holds a medical degree from Beijing Medical University and a Ph.D. in Philosophy from Cornell University.
Taylor Pickett is a Vice President and Actuary at RGA. Taylor currently works as part of the pricing team supporting RGA's US Mortality business, serving as the actuarial subject matter expert for Underwriting Modernization. Taylor assists clients in understanding, incorporating, and evaluating the impacts of emerging underwriting programs and new sources of evidence. His responsibilities include supporting newer underwriting paradigms through program monitoring, data analysis and assumption development. Taylor has over 10 years of life reinsurance experience including roles in valuation, experience studies, research, and pricing. Taylor holds a Master of Science degree in Actuarial Science from Maryville University in St. Louis, Missouri. He is a Fellow of the Society of Actuaries and a member of the American Academy of Actuaries.
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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.
