IRS Notice 2020-29 provides for increased flexibility with respect to mid-year elections made under a § 125 cafeteria plan during calendar year 2020 related to employer-sponsored health coverage, health Flexible Spending Arrangements (health FSAs), and dependent care assistance programs. The notice also provides increased flexibility with respect to grace periods to apply unused amounts in health FSAs to medical care expenses incurred through December 31, 2020, and unused amounts in dependent care assistance programs to dependent care expenses incurred through December 31, 2020. Further, the notice provides that the relief provided in Notice 2020-15, 2020-14 IRB 559 regarding high deductible health plans and expenses related to COVID-19, and in Section 3701 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) regarding a temporary exemption for telehealth services, may be applied retroactively to January 1, 2020. This notice is being issued to assist with the nation’s response to the 2019 Novel Coronavirus (COVID-19), this notice
Notice 2020-33 increases the $500 limit for unused amounts remaining in a health flexible spending arrangement (health FSA) that may be carried over into the following year by making the carryover amount 20 percent of the maximum salary reduction amount under § 125(i), which is indexed for inflation. This calculation had been the basis for the $500 limit under Notice 2013-71, but the $500 limit did not incorporate the indexing. Thus, for 2020, under this new notice the carryover amount will increase to $550. The notice cross references Notice 2020-29 for guidance on how a § 125 cafeteria plan may be amended to allow prospective health FSA election changes for the 2020 calendar year. Notice 2020-29 provides relief in response to the COVID-19 pandemic that, among other things, permits employers to amend § 125 cafeteria plans to provide participants flexibility to change health FSA contribution elections at such times as the employer permits through the end of 2020, provided that any changes are applied only prospectively. Regarding individual coverage health reimbursement arrangements (HRAs), the notice also provides clarification regarding reimbursement for premium expenses occurring prior to the beginning of the plan year (generally addressing the need to pay the premium for January health insurance coverage in December of the previous year).
Both Notice 2020-29 & Notice 2020-33 will be in IRB-2020-22, dated May 26, 2020.