A: Yes. On May 12, 2020, the IRS. announced additional options with respect to unused amounts and future deductions for Flexible Spending Accounts.
The IRS approved changes that will:
- Extend period for incurring expenses
- Increase medical FSA carryovers
- Allow prospective mid-year changes to the current year elections
Specifically, the changes to FSA’s permitted in IRS Notice 2020-29 and IRS Notice 2020-33 include:
Temporary Changes for the Current Plan Year Only:
- Employers may permit employees to apply unused amounts remaining in a health FSA or a DCAP at the end of a Plan Year ending in 2020 (or a Grace Period ending in 2020) to reimburse covered expenses incurred through Dec. 31, 2020. This relief applies to all health FSAs, including health FSAs that allow carryovers in lieu of the grace period.
- Temporarily allows participants to make prospective mid-year changes to current elections including revoking future elections, making a new election, and increasing or decreasing current elections.
Permanent change to Healthcare FSA’s:
- The increase to maximum rollover dollars is increased to $550 for plan years beginning on or after January 1st, 2020.
Q: Do employers have to implement these changes?
A: No. It is up to the employer to decide which, if any, of the changes they would like to implement for their employees.
Q: What do employers need to do if they would like to implement any of the new changes into their plans?
A: Employers should work with their broker and FSA vendor if applicable to determine when the FSA vendor system will be updated to implement the changes and amend their plan documents. Employers will need to communicate the changes with participants as soon as a decision is made. The Plan Document must be amended by December 31, 2021.
If you have any questions or would like additional information, please contact your Liberty Advisor.