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Source: HEALTH EQUITY, 5/21/20 On May 12, 2020, the Department
of the Treasury (the Treasury) and the Internal Revenue Service (IRS) published
two notices as part of ongoing relief efforts related to the coronavirus
(COVID-19) outbreak. The guidance provided in these notices allow employers the
option for additional flexibility with respect to their section 125 cafeteria
plans, Health Flexible Spending Arrangements (health FSAs) and Dependent Care
Flexible Spending Arrangements (dependent care FSAs) during the 2020 calendar
year.
Summary of Changes
These notices provide the option to apply the
additional flexibility outlined below to your plan benefits.
- Employers
may amend their health FSAs and/or dependent care FSAs with a grace period
ending in 2020 or a plan year ending in 2020 to permit employees to apply
unused amounts to pay for reimbursable expenses incurred on or before
December 31, 2020. This relief does not apply to plans with carryover that
ended December 31, 2019 or earlier with claim it by runout dates in 2020.
- During
the 2020 calendar year, employers may amend their plan to offer the
ability to make prospective mid-year elections for health coverage, health
FSAs, and dependent care FSAs.
- For
plans beginning in 2020, employers may amend their health FSAs to permit
employees to carryover up to $550 to subsequent plan year beginning in
2021 (now indexed for inflation).
- Clarifies
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 (was March 27, 2020).
- Clarifies
that the Individual Coverage Health Reimbursement Arrangement (ICHRA) is
permitted to treat healthcare premiums as incurred on (1) the first day of
each month of coverage, (2) the first day of the period of coverage, or
(3) the date the premium is paid. Payment of the premium for coverage made
before the beginning of the plan year can be reimbursed if the insurance
coverage starts during the plan year.
Potential Impact to HSAs
If you began offering health savings accounts (HSAs) in 2020 and you choose to change any health FSA grace period deadlines based on the new guidance, those changes will impact an employee’s ability to contribute to their HSAs.
Read our full analysis on our COVID-19 information page.
The notices are complex and dynamic, and we
strongly encourage employers and plan sponsors to consult their legal or
benefits advisors for conclusive guidance in their circumstances. We are
actively reviewing how these changes affect plan services and closely
monitoring developments. We will follow up as more information is available.
Thank you for your trust in HealthEquity as we
navigate these times of uncertainty together.
1. https://www.irs.gov/pub/irs-drop/n-20-29.pdf
2. https://www.irs.gov/pub/irs-drop/n-20-15.pdf
3. https://www.irs.gov/pub/irs-drop/n-20-23.pdf
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