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.
Molly Minnick, RN, BSN, is a Personal Health Advocate at Health Advocate specializing in supporting working caregivers with education, resources, and emotional support. She has previously worked with Penn Palliative Home Care, Eternally, and the Rosalyn Carter Institute for Caregivers, adding to her experience helping individuals navigate advanced care planning. Minnick earned her Bachelor of Science in Nursing from Villanova University and is currently pursuing certification as a Certified Dementia Practitioner and an Aging Life Care Manager.
Keri Robertson, D.O., is a Medical Director at Health Advocate and has more than 15 years of healthcare management experience with a strong track record of enhancing patient experiences and outcomes. Dr. Robertson trained and worked in Chicago as an emergency physician and held progressive leadership roles, which gave her insight into how a person's health is affected by their ability to navigate and advocate for themselves. At Health Advocate, she leads a team of Personal Health Advocate Nurses who educate, engage and advocate to help members take steps toward better health and well-being.
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.
