The IRS recently released two notices of interest to employers offering flexible spending accounts (FSAs).
Notice 2020-29 relates to cafeteria plan elections and FSA grace periods, both of which are optional. These plan amendments must be adopted before December 31, 2021.
- Cafeteria plans can be amended to permit employees to make certain prospective mid-year changes to their salary reduction elections, applied retroactively to mid-year changes made after January 1, 2020.
- Health FSAs and dependent care assistance FSAs can be amended to extend the standard grace period for a full year. Unused funds as of December 31, 2019 can be used to pay for expenses incurred before December 31, 2020.
Notice 2020-33 increases the $500 carryover amount for health FSAs to $550 in 2020. The plan amendment to effect this change must be adopted by December 31, 2021 and can be retroactive to the 2020 plan year.
These IRS notices and a MedBen notices summary can be found and downloaded at MedBen’s COVID-19 Resource Center at MedBen.com.
If you would like to discuss these options further or would like to amend your FSA plans, please email MedBen Director of Administration Sharon A. Mills at smills@medben.com or call 800-423-3151 ext. 438.