Prompted by the COVID-19 pandemic, the IRS has issued more guidance addressing cafeteria plan election changes, flexible spending accounts (FSAs) and Health Savings Accounts (HSA). The guidance attempts to clarify and address questions stemming from prior legislative and regulatory actions. The temporary relief applies to 2020 activity only.
Under this guidance employers may, but are not required to, allow:
The IRS also clarified that prior COVID-19 relief regarding HSA eligibility and pre-deductible coverage for COVID-19 testing and treatment and telehealth services is effective retroactively to January 1, 2020.
The permanent guidance increases the health FSA carryover limit to 20% of the salary reduction contribution limit (indexed for inflation). For plan years starting in 2020, carryovers to the 2021 plan year may increase from $500 to $550 (20% of the 2020 contribution limit of $2,750).
Employer health plans should notify plan participants of any temporary plan changes they choose to adopt. Plan amendments for any of the above changes are required by December 31, 2021, and may be applied retroactively to January 1, 2020.
If you have questions, please reach out to your Mercer consultant. A detailed GRIST analysis of this guidance will soon be on our Law & Policy page.