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IRS provides tax relief for health-related cafeteria plans

Andy Baumruk

May 18, 2020


IRS is currently allowing temporary changes to section 125 cafeteria plans (Notice 2020-29 and Notice 2020-33). These changes extend the claims period for health flexible spending arrangements (FSAs), dependent care assistance programs, and allow taxpayers to make mid-year changes.
 
These changes to the notices were issued because of the coronavirus (COVID-19) pandemic and provide temporary relief for high deductible health plans that may be applied retroactively to January 1, 2020. It also increases for inflation the $500 permitted carryover amount for health FSAs to $550.
 
Notice 2020-29 (PDF):

  • Extends claim periods so taxpayers can 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.
  • Expands the ability for taxpayers to make mid-year elections for health coverage, health FSAs, and dependent care assistance programs.
  • Applies 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.

Notice 2020-33 (PDF) increases the number of funds that can carry over without penalty at the end of the year for flexible spending arrangements. The notice increases the limit for unused health FSA carryover amounts from $500, to a maximum of $550, as adjusted annually for inflation.

Click here to view the full IRS.gov article

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