In light of the COVID-19 pandemic, the IRS has increased flexibility for 2020 midyear elections under a Sec. 125 Cafeteria Plan in regard to employer-sponsored health coverage, flexible spending arrangements (FSAs) and dependent care assistance programs.
Elections in these areas would normally need to be made before the first day of the plan year, and are irrevocable unless certain circumstances are met, such as a change in status or significant change in cost of coverage.
However, due to the ongoing pandemic, employees will now be given the option to make the following changes to their 2020 elections midyear:
- Employees may make a new election if they initially declined to elect employer-sponsored health coverage
- Employees may revoke an existing election and elect to reenroll in different employer-sponsored health coverage
- Employees may revoke an existing election to enroll in other health coverage not sponsored by the employer.
- Employees may revokean election, make a new election, or decrease or increase an existing election applicable to a health FSA
- Employees may revoke an election, make a new election, or decrease or increase an existing election regarding a dependent care assistance program.
- The carryover limit on unused amounts in health FSAs has been increased from $500 to $550
Other updated guidance includes:
- Unused amounts in health FSAs may be applied to medical care expenses incurred through December 31, 2020
- Unused amounts in dependent care assistance programs may be applied to dependent care expenses incurred through December 31, 2020.
- Telehealth and other remote services that now qualify as expenses reimbursable by HDHPs, may be applied retroactively to January 1, 2020.
- A health plan may now reimburse individual insurance policy premium expenses incurred before the beginning of the plan year for coverage provided during the plan year.
If you have any questions on the recent guidance issued by the IRS, please leave a comment below, or feel free to reach out to me directly. Additionally, visit our COVID-19 Resource Center at for the latest updates, alerts and impacts.
