On Tuesday, May 12, 2020, the IRS issued Notice 2020-29 and Notice 2020-33. These Notices included major changes to Section 125 and FSA benefits that may be financially beneficial to plan participants. Some provisions, however, require adoption by the plan. Here is a summary of the provisions included in each Notice:
IRS Notice 2020-29 IRS Notice 2020-33
– Extends claims periods for employees to apply unused amounts remaining in a health FSA or dependent care assistance program for expenses incurred for those same qualified benefits through December 31, 2020.
– Expands the ability of employees 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.
– Applies earlier relief for high deductible health plans to cover expenses related to COVID-19, and a temporary exemption for telehealth services retroactively to January 1, 2020
– Increases the limit for unused Health FSA (and Limited Purpose FSA) carryover amounts from $500, to a maximum of $550, as adjusted annually for inflation. This increase applies to any plan year beginning in 2020.
Permitted Election Changes
– Make a new election if the employee previously declined coverage;
– Revoke an existing election and enroll in different health coverage sponsored by the employer; or
– Revoke an existing election, if the employee is or will be enrolled in other health coverage.
Employees may also prospectively revoke an election, make a new election or decrease or increase an existing election for a health FSA or DCAP. A plan may permit any of the election changes described in the notice, regardless of whether they satisfy existing mid-year election change rules
The final rule also announced extensions to deadlines tied to benefit plans. These extensions cover HIPAA Special Enrollment, COBRA, and claims filing. The claim filing extensions apply to any Health FSA, Limited Purpose FSA, and HRA (but not Dependent Care and Commuter Accounts). This means that any plan year which was in its run-out period on or after March 1, 2020 will have an extended period of time to submit expenses incurred during the plan year, though the end date to submit claims will not be defined until the National Emergency is declared to be over.
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