With many thanks to Chris Guldberg for this post.
On May 12, 2020, the IRS released Notice 2020-29 (the “Notice”) providing greater flexibility to make mid-year election changes under Code Section 125 cafeteria plans during 2020 with respect to employer-provided health coverage and health and dependent care flexible spending accounts (“FSAs”). The notice also provides additional time in which unused amounts in FSAs can be used to pay expenses and avoid forfeiture.
Mid-year Election Changes
As background, cafeteria plans are the vehicle that allow employees to elect to pay their share of benefit premium costs for certain welfare benefits (for example, the employee premium portion paid for medical coverage) on a pre-tax basis rather than paying for those costs on an after-tax basis. In general, employee cafeteria plan elections must be made prior to the first day of the plan year and cannot be changed during the plan year except for specific change in status type events permitted under the relevant regulations (for example, the birth of a child).Continue Reading Increased Flexibility for Taxpayers in Section 125 Cafeteria Plans in Response to COVID-19