In response to COVID-19 circumstances, the IRS issued cafeteria plan (Section 125) guidance notably permitting employees to make certain mid-year election changes during calendar year 2020 without a change in status or other qualifying event. This relief is particularly welcome since some carriers and Third Party Administrators (TPA) have allowed these election changes since March. Per Notice 2020-29, cafeteria plans may be amended to allow employees to:

  • Prospectively make or revoke a health plan election mid-year (during 2020). An employee who revokes an existing election must enroll in other health coverage;
  • Prospectively make, revoke or change a Health or Dependent Care Flexible Spending Account (FSA) election amount; and
  • Apply FSA amounts (unused as of the end of a grace period or plan year ending in 2020) to pay or reimburse applicable expenses incurred through December 31, 2020.

In addition, the Notice allows the exemption for telehealth services covered by a High Deductible Health Plans (per Notice 2020-15) to apply retroactively to January 1, 2020.

Separately, the IRS released Notice 2020-33 which:

  • Increases the Health FSA carryover limit based on inflation index (from $500 to $550 for the 2020 plan year amount carried over to the 2021 plan year); and
  • Clarifies that an employee can be reimbursed for individual insurance premiums incurred prior to the beginning of the plan year for coverage provided during the plan year.

See our bulletins below for additional information on these notices. Employers who want to make changes to their cafeteria plan must amend their plan in a timely manner and communicate the changes to all eligible employees. Flex plan administrators and other TPAs and carriers are assisting clients with these plan amendments and communication needs.

Section 125 Mid-Year Election Change Rules Bulletin

Unused Health FSA and DCAP Funds Bulletin

If you have questions or need help, please contact one of our benefit consultants.

 

Check out our COVID-19 Resource Center for more resources and information.