IRS Allows Employee Mid-Year Health Benefits Changes Without a Qualifying Event Due to COVID-19

Over the last couple of months, life has changed in ways no one could have imagined or expected. Being stuck inside means that most of us have been unable to keep routine doctor and dental appointments. The onset of COVID-19 has impacted our ability to use Flexible Spending Accounts (FSA) either for healthcare or dependent care expenses. However, there is good news for these extraordinary times.  

First, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law by the president in March. The over $2 trillion economic relief package aided various individuals and employers in several areas. Most relevant to health care, is the fact that over the counter (OTC) medicines have become FSA-eligible —meaning that you no longer have to pay out of pocket for these products. 

Secondly, the Internal Revenue Service (IRS) recently issued guidance that enables employers to amend their healthcare and FSA plans to let employees make specific changes. With Notice 2020-29 and Notice 2020-33, the IRS opened up mid-year FSA changes to account holders and increased the carry-over limit. Typically, plans don’t allow employees to make mid-year changes unless they have a qualifying life event such as if they get married or divorced, adopt or have a baby, or lose healthcare coverage under a spouse’s plan. 

Now, health plans may permit eligible employees to make a new plan election, even if an employee initially declined to elect employer-sponsored coverage. The employee may also revoke an existing election to enroll in a different health plan sponsored by the same employer as well as change enrollment from self-coverage to family coverage, among other options. Also, employers may permit similar employee actions concerning FSAs and dependent care assistance programs. The IRS also said health plans might allow employees to apply unused amounts remaining in a health FSA or dependent care program from 2019 to pay or reimburse medical care expenses or dependent care expenses.

This article lays out details about the notices and changes allowed. Here is the one thing to know: this will only be available to account holders whose employers allow these mid-year changes. Check with your benefits administrator or HR department to find out what your employer will permit. Move quickly, though, because even if your employer allows changes, there may be a small window of opportunity and a fast-approaching deadline.