COVID – 19 and IRS Changes for Employee Benefit Plans

Due to the unprecedented COVID – 19 pandemic, the federal government has implemented the following changes under IRS Notices 2020-29 and 2020-33 to address the national healthcare crisis:


Employees may now make mid-year election changes to their Group Health Plans, Health Flexible Spending Accounts, and Dependent Care Accounts during 2020, previously only allowed if a “qualifying life event” occurred. Employees may now; revoke an existing election, enroll in a different plan or change coverage level. For Health FSAs and DCAs, prior election amounts can be increased or decreased. Enrollment in Dependent Care Accounts is also permitted mid-year for pre-tax deductions, benefiting those who have incurred unexpected childcare costs.


Grace periods have been extended for health Flexible Spending Accounts and Dependent Care Accounts, as well. Plan participants who have elected to contributed to FSAs and DCAs may have been inconvenienced when closures, such as out-patient surgery facilities or summer camps, prohibited the use of the already contributed funds. Previously, those funds would have been forfeited. Employers may now extend any grace period for 2020 plan participants, giving employees the option to use the funds they had already contributed.   


Additionally, the maximum carry-over limit for Health FSAs has been increased to 20% of the maximum salary reduction. Health FSA maximums are currently $2,750, and the Rollover limit has increased $50 to $550 moving into 2021 plan years.


Employers with Section 125 Cafeteria plans may also amend their plans, however, they must choose to make these changes, they are not implemented automatically. All employees must be notified of the changes. Plans must be amended by December 31, 2021 retroactive to January 1, 2020. All or some of these amendments may be implemented to qualifying plans. 


For healthcare coverage with unmet high deductibles, all costs for healthcare services and items relating to the testing, treatment of COVID – 19, certain diagnostic testing panels, services and items may now be covered before the deductible has been met. Telehealth and remote care may also be covered without the deductible having been met.


Changes to Individual Coverage Health Reimbursement Arrangements, plans in which employees pay for their healthcare premiums and employers reimburse the costs, have been implemented as well. Following the IRS notices, premiums that were paid in one month for coverage in the following month or year should be reimbursed at the time of payment, meaning employees would no longer have to wait for reimbursement.


For further information, or help with your benefit plans, give us a call!