COVID-19: IRS Announces Increased Flexibility for Employer Sponsored Plans

May 15, 2020

The Internal Revenue Service (IRS) issued two notices to assist with the nation’s response to the 2019 Coronavirus outbreak. The first notice increases flexibility with respect to mid-year elections under a §125 cafeteria plan during calendar year 2020 related to employer-sponsored health coverage, health Flexible Spending Arrangements (health FSAs), and dependent care assistance programs (DCAPs). This notice also provides increased flexibility with respect to grace periods to apply unused amounts in health FSAs to medical care expenses incurred through December 31, 2020, and unused amounts in dependent care assistance programs to dependent care expenses incurred through December 31, 2020. Finally, this notice clarifies that recently announced exemptions for high deductible health plans (HDHPs) to remain HSA qualified apply retroactively to January 1, 2020.

The second IRS notice increases the carryover limit (currently $500) of unused amounts remaining as of the end of a plan year in a health Flexible Spending Arrangement (health FSA) under a § 125 cafeteria plan that may be carried over to pay or reimburse a participant for medical care expenses incurred during the following plan year. Secondly, this notice clarifies the ability of a health plan to reimburse individual insurance policy premium expenses incurred prior to the beginning of the plan year for coverage provided during the plan year.

As part of Graham Company’s continued commitment to keep you informed on the various laws that may impact your organization during the COVID-19 pandemic, please click here for information on the new IRS rules.

For additional COVID-19 resources and risk management recommendations, please visit our COVID-19 Risk Management Center.

A PDF of the above information can be found here.

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