May 29, 2020

IRS Offers New Flexibilities for HSA, FSA, and Cafeteria Plan Sponsors

On May 12, the IRS issued Notice No. 2020-29 which offers the following temporary flexibilities that health savings account, flexible savings account, and cafeteria plan sponsors may implement by amendment to the plan document:

  • Extend claims periods for participants 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.
  • Expand the ability of participants 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. 
  • Apply 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.

The IRS also issued Notice No. 2020-33, increasing the limit for unused health FSA carryover amounts from $500, to a maximum of $550, as adjusted annually for inflation.  Plan sponsors who elect this change must implement it by amendment to the cafeteria plan document.