Your company can now allow for a slew of mid-year changes to your Section 125 cafeteria plan. And it’s because of the current coronavirus pandemic.
IRS just issued two pieces of new guidance to account for the COVID-19 chaos and its impact on health plans:
- Notice 2020-29, and
- Notice 2020-33.
Here’s what you need to know about the Section 125 plan changes to help employees out during this difficult time and keep your benefits program in compliance.
IRS Notice 2020-29 offers more flexibility on several fronts, including:
This year, employees can make mid-year elections for health coverage, health flexible spending accounts (FSAs) and dependent care assistance programs. That means eligible workers can enroll in your health plan if they aren’t participating.
Already enrolled? They can modify their coverage by selecting a different plan.
Note: Employees can now also discontinue their health coverage. But they must certify — in writing — that they’ll be enrolling in another health plan not sponsored by you.
Employees can 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.
This new notice retroactively pushes back earlier-granted relief for high deductible health plans for COVID-19 expenses and a temporary telehealth exemption. They’re now effective starting Jan. 1, 2020.
More money to carry over
You have one more new administrative change for your finance team to handle. Notice 2020-33 green lights you to let employees carry over up to $550 in unused health FSA amounts without penalty. That’s a $50 increase over the original 2020 limit.
All of these Section 125 plan changes need to be pushed out to employees as quickly as possible. So you’ll want to huddle with your team to determine the best way to communicate them.