IRS Issues COVID-19 Guidance for Cafeteria Plans

Vectra DigitalBlog, Health & Welfare, Private Self-Funded Health Plan

Due to the COVID-19 crisis, the IRS has issued Notice 2020-29 to announce the opportunity for employers to allow mid-year changes to employer-sponsored health coverage and dependent care assistance program elections (listed below). The notice also allows employers the option to extend health and dependent care FSA grace periods that would have ended earlier in 2020, in order to make unused funds from plan years beginning in 2019 accessible for expenses incurred through December 31, 2020. Employers are not required to adopt these changes. Which plan(s) will be affected and what change(s) will be made is at the sole discretion of the employer and the employer may limit the period during which election changes can be made. 2020 plan year changes made as a result of the flexibility provided by Notice 2020-29 must be adopted by plan amendment no later than December 31, 2021. Adopted changes may be effective retroactively to January 1, 2020 provided the employer informs all employees eligible to participate in the plan when the decision to adopt the changes has been made. Despite when a decision is made to adopt one or more of these changes, participant election changes and revocation of current elections may only be made on a prospective basis.

  • Health Plan Elections – Contact your Foster & Foster consultant for more information prior to making a change to your self-funded health plan eligibility and enrollment provisions
    • Enroll in coverage, if the employee previously waived coverage
    • Revoke an existing election and make a new election (including changing from single to family coverage)
    • Revoke an existing election, provided the employee attests in writing to enrollment in other health coverage
  • Health and Dependent Care FSAs
    • Revoke, increase, or decrease an existing election     
      Note:  Employers are permitted to limit mid-year election changes to amounts no less than amounts already reimbursed
    • Make a new election
    • Extend 2019 plan year grace periods through December 31, 2020   
      Note: Exercise caution when adopting a grace period extension as it can have an adverse effect on an individual’s eligibility to contribute to an HSA

If you have any questions about the changes permitted by Notice 2020-29 or would like assistance in drafting a plan amendment, please feel free to contact your F&F consultant.