New Optional IRS guidelines for pre-tax plans plus Mandatory deadline extensions
Many of the links below are provided by our software partner Alegeus.
Optional rules for pre-tax plans and FSAs - the following changes are optional and require a plan amendment at a charge of $100 by December 31, 2021 and apply to mid-year changes from January 1, 2020 to December 31, 2020 on a going forward basis. Please also click to download .pdf summary:
Elections - Cafeteria plans - can allow new election to participate in employer health plan if coverage initially denied. Can revoke or change employer health plan coverage with certain conditions.
Elections - FSA - can terminate, make a new election, or change an election for Health FSA, Limited Purpose Health FSA, and Dependent Care FSA. New elections can only be made going forward. No refunds can be issued. Changes to elections cannot result in an election being less than what has been paid out.
Grace Period extension - plans that have a plan year OR a grace period (75 day extension into new year to incur claims) that ends in 2020 may amend the plan to allow employees to incur new claims against that account until December 31, 2020. This grace period extension is available to plans that offer or do not offer a grace period as well as plans that offer a carryover. Note that if your plan ended December 31, 2019 and you did NOT have a grace period then this extension would not be an option since neither the plan year nor the grace period ended in 2020.
Carryover increase - carryover can increase from current $500 to 20% of the IRS annual FSA limit for plan years 2020 and forward. Plan must be amended by December 31, 2020 to apply to 2020 plan year.
Mandatory deadline extensions - The IRS and DOL released rules that effectively extend deadlines for COBRA enrollment and payment as well as health claims filing and appeals. We have updated COBRA letters to provide a link to the guidance.
Under mandatory rules for ERISA-covered Health FSAs, Limited Purpose Health FSAs, and Health Reimbursement Arrangements any plan that has a claims filing deadline (also known as runout period) from March 1, 2020 until 60 days after the to-be-determined end of the COVID-19 national emergency must allow automatic extension for claims filing. This DOES NOT extend the time period for incurring a claim.
For example, consider a plan that ended December 31, 2019 whose runout period ended March 31, 2020. The automatic extension means that participants can file claims with dates of service through December 31, 2019 until at least 60 days after the to-be-determined end of the COVID-19 national emergency. The extension is automatic, mandatory and does not require a plan amendment.