Recently, the IRS released two Notices that impact cafeteria plans and Flexible Spending Accounts (FSAs). Notice 2020-29 provides relief for cafeteria plans in response to the current COVID-19 pandemic, and Notice 2020-33, unrelated to the COVID-19 pandemic, provides a permanent increase to the carryover limit for health care FSAs.
Notice 2020-29 at a glance
Provides temporary relief for cafeteria plans in response to the COVID-19 pandemic. Effective January 1, 2020 and lasts through December 31, 2020.
Cafeteria Plan Mid-Year Election Changes:
- Allows participants to make prospective election changes during calendar year 2020 regarding health care FSAs and dependent care FSAs, regardless of the reason for the election change and with no additional documentation requirements.
- Participants may revoke an election, make a new election, or decrease or increase an existing health care FSA election and dependent care FSA election.
Extended Claims Period for Health Care FSAs and Dependent Care FSAs:
- For grace periods ending in 2020 or for plan years ending in 2020 (i.e., an off calendar year plan), participants can use remaining health care and dependent care FSA amounts to pay or reimburse expenses incurred through December 31, 2020 for the same type of FSA.
- This extension of time is available both to cafeteria plans that have a grace period and cafeteria plans that have a carryover.
Notice 2020-33 at a glance
Provides a permanent increase to the carryover limit for health care FSAs.
- Increases the current carryover amount of $500 to $550 to account for inflation.
Next Steps for Current MidAmerica Clients
- Plans that currently offer any of these provisions will automatically be amended to accept the changes. For the 2020 year, the employer must adopt an amendment on or before December 31, 2021. If you do not wish to adopt any of these automatic changes, please email us at [email protected].
- Employers must provide notice of these updates to all eligible employees. Click here to access a shareable version of these updates.
- Plans that do not currently offer these provisions can adopt the new provisions upon the employer’s request. Simply email us at [email protected].
To stay up to date regarding COVID-19 related items, check out our CARES Act page!