The Internal Revenue Service recently issued a pair of notices to provide relief to participants in and sponsors of Section 125 Cafeteria Plans, health flexible spending account plans, and dependent care assistance programs. IRS Notice 2020-29 provides relief for midyear election changes (including new health plan coverage elections, enrollment changes, and revocations, as well as changes to health flexible spending account and/or dependent care assistance program elections) and allows pretax treatment for such elections on a prospective basis. This notice also allows employers to extend grace periods for reimbursable claims under a health flexible spending account and dependent care assistance programs through December 31, 2020.
IRS Notice 2020-33 allows employers to increase the carryover limit for unused funds in a health flexible spending account to $550 for 2020 and 20% of the overall annual contribution limit for subsequent years. Employers must adopt plan amendments no later than December 31, 2021, in order to implement the relief afforded under IRS Notices 2020-29 and 2020-33. Read the full article.