Options Include an Extended Period for Incurring Expenses and Increased Health FSA Carryover Limit
Flexible spending accounts are about to get more flexible for people who have seen their household budgets upended by the Coronavirus pandemic.
Account holders will be able to make mid-year changes on their contribution amounts — either increasing or decreasing the amount — and they’ll also be able to carry over slightly more money into next year, the Internal Revenue Service announced.
The agency also said workers will be allowed to enroll in their employer’s health plan outside of the typical open enrollment season. This change enables workers to quickly get themselves and their family on their company’s plan if they’ve previously been covered by a spouse who’s lost their job.
On May 12, 2020, the IRS announced more options with respect to unused amounts in health flexible spending accounts (FSAs) and dependent care assistance programs (DCAPs). These options allow employers to permit:
- An extended period for incurring health FSA or DCAP expenses; and
- Health FSA carryovers of up to $550.
Due to the COVID-19 outbreak, employees may be more likely to have unused amounts in their health FSAs or DCAPs. IRS Notice 2020-29 allows employers to 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 pay or reimburse expenses incurred through Dec. 31, 2020.
IRS Notice 2020-33 increases the health FSA carryover limit for unused funds remaining at the end of a plan year from $500 to $550 to reflect indexing for inflation. This change is effective for plan years beginning in 2020 (and reflects the maximum amount that may be carried over to the immediately following plan year beginning in 2021).
Recent Posts
IRS Guidance on Nutrition, Wellness, and General Health Expenses
The Internal Revenue Service (IRS) has recently highlighted that costs associated with nutrition, wellness, and general health do not typically qualify as reimbursable medical expenses [...]
HSAs Today and Every Day: A Triple Threat Against Rising Healthcare Costs
The healthcare landscape is constantly evolving, and in 2024, rising costs remain a top concern for both employers and employees. Fortunately, Health Savings Accounts (HSAs) [...]
April Showers Don’t Cause Accidents (Distracted Driving Does): Stay Safe on the Road This Month (and Every Month)
Spring is here, and with it comes April's designation as Distracted Driving Awareness Month. While the changing seasons and blooming flowers might tempt you to [...]