The IRS recently announced it is allowing mid-year changes to health-care plans sponsored by employers, including changes in flexible spending accounts (FSA’s) which lets employees use pre-tax dollars for health expenses.
The new rules will give workers impacted by the coronavirus pandemic options to alter their previous health-care choices that were made prior to the COVID-19 outbreak. They can change the amount of contribution to an FSA to free-up money that can be used for other expenses, elect coverage if they previously declined coverage, or make changes to the type of plan they have, i.e., going from an individual to a family plan.
It is up to each employer’s discretion to offer these changes since it is not a requirement, but many employers have already allowed employees to take loans and/or distributions from their retirement plans to help them during the pandemic. It is important to note that funds that have already been deducted from paychecks and put into FSA accounts will not be impacted; only future contributions would be affected.
Other changes the IRS made include expanding the eligible items for reimbursement from an FSA account and increasing the carry-over amount from one year to the next from $500 to $550. To view the IRS Notice 2020-29, visit: https://www.irs.gohttps://www.irs.gov/pub/irs-drop/n-20-29.pdfv/pub/irs-drop/n-20-29.pdf