IRS Provides Additional Cafeteria Plan Flexibility in Response to Pandemic

The IRS has issued two notices that provide additional flexibility to participants in cafeteria plans as a result of the coronavirus (COVID-19) pandemic. Notice 2020-29

  • permits mid-year election changes on a prospective basis for elections made during calendar year 2020;
  • permits unused amounts in health flexible spending arrangements (FSAs) and dependent care FSAs that remain at the end of a grace period or plan year that ends in 2020 to be used for expenses incurred through December 31, 2020; and
  • provides additional detail and confirmation that individuals enrolled in high deductible health plans (HDHPs) providing COVID-19 testing and telehealth services prior to the satisfaction of a deductible will continue to remain HSA-eligible.

Notice 2020-33 increases the maximum amount permitted for FSA carryover to $550, to be adjusted for inflation, for plan years beginning in 2020.