Temporary relief to FSA changes

On May 12, 2020, the IRS released IRS Notice 2020-29 that provides employers the ability to provide temporary relief to participants of FSA Plans impacted by the COVID-19 outbreak. The key areas addressed in the notice provide increased flexibility in regards to mid-year election changes and the extension of claim periods. Employers must amend their plans should they choose to allow these temporary reliefs to participants.
Here is a brief overview of the key areas addressed:

Option 1: Mid-year Election Changes Provision
Who is the provision applicable to? ACTIVE FSA Plans that:

• Have a plan year start date of 1/1/2020 or later; or 
• Have a plan year ending date before 12/31/2020 

Overview of the provision: Changes made during the calendar year 2020 must be made on a prospective basis. 

• Premium Payment Component (pretax group sponsored insurance premiums) of an FSA: an employer may opt to allow employees to (a) make a new election on a prospective basis, if the employee initially declined to elect group sponsored insurance; (b) revoke an existing election and make a new election to enroll in a different group sponsored insurance offered by the same employer; and (c) revoke an existing election under the employer’s group sponsored insurance, by attesting in writing that they are enrolled, or will immediately enroll, in other health coverage not sponsored by the employer.
• Health FSA Component and/or the DCAP Component of an FSA: an employer may opt to allow employees to (a) revoke an election; (b) make a new election, or (c) decrease or increase an existing election. Participants may not reduce their election to an amount that is less than the amount for which they have already been reimbursed.

Option 2: Extension of Claim Periods Provision
Who is the provision applicable to? FSA Plans that offer the Health FSA and/or DCAP Component and either:
·         Allowed Grace Period that ended or will end 10/31/2019 through 9/30/2020; or
·         Do not offer Grace Period and the plan year ended or will end 1/31/2020 through 11/30/2020.
Overview of the provision: An employer may opt to allow participants to use amounts remaining in their Health FSA or DCAP Component accounts as of the end of a grace period or plan year ending in 2020 to pay for service and dependent care expenses incurred through December 31, 2020.