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.
Tim Mattke is CEO of MGIC Investment Corporation and Mortgage Guaranty Insurance Corporation. He also serves as chair of U.S. Mortgage Insurers.
Shareen Minor is chief revenue officer, U.S., at Vitesse, financial infrastructure connecting the global insurance ecosystem. With more than 20 years of experience across carriers, TPA operations and PE-backed insurtechs, she leads Vitesse's commercial growth in the United States, bringing deep knowledge of the operational and financial pressures facing the U.S. insurance market.
Most recently, Shareen served as chief revenue officer at Ontellus, a leading provider of health records retrieval and claims intelligence, where she delivered sustained double-digit revenue growth, expanded enterprise client relationships across carriers and law firms, and helped position the business for a successful private equity exit. Before that, she held senior leadership roles including chief commercial officer at Charles Taylor Adjusting and Technical Services, SVP of Casualty Operations at Engle Martin and Associates, and regional vice president at NatGen Premier, where she helped launch and scale a new business unit from zero to $50 million in revenue in 15 months.
Michael Topol is co-founder and co-CEO of MGT Insurance (MGT), an insurer modernizing commercial P&C insurance for businesses and their agents.
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.
