The Internal Revenue Service (IRS) has issued Notice 2020-29 to allow for Section 125 cafeteria plan amendments that will provide flexibility to accommodate for disruptions caused by the coronavirus pandemic. First, employers will have the option to allow certain election changes on a prospective basis. These changes are not automatic or mandatory and include:
- Allowing employees who previously declined coverage to enroll in employer-sponsored coverage
- Allowing employees to change coverage to another employer-sponsored plan
- Allowing employees to drop coverage to enroll in another plan not sponsored by the employer
- Allowing employees to enroll, or change election amounts, in a Healthcare or Dependent Care Flexible Spending Account (FSA)
The permitted election changes and guidelines are detailed in the United Benefit Advisors (UBA) Compliance Memo Internal Revenue Service Notice 2020-29.
Clarification is still needed to confirm whether these plan election changes will apply only to medical plans or if they also apply to dental and vision plans, and how the insurance carriers will allow the changes to be administered.
The second optional amendment described in the Notice is an extension of the claim deadline for plans with a grace period or plan year ending in 2020. Because of interruptions in medical services and dependent care caused by the pandemic, the deadline to incur and submit claims is extended to December 31, 2020.
Below is one example illustrated in the UBA Compliance Memo:
“As an example, take a Section 125 cafeteria plan with a health FSA that has a calendar year plan year and has a grace period ending March 15, 2020. The employer may amend the plan to permit employees to use amounts that remain in an employee’s health FSA as of March 15, 2020, to reimburse medical care expenses incurred through December 31, 2020.”
After reviewing the optional amendments, employers should contact the Flexible Spending Account (FSA) vendor for guidance on whether the temporary election changes and/or claim period extension changes are right for your plan. If implemented, any amendment must be adopted by December 31, 2021.
These new IRS rules are separate from the claim filing extensions based on the Outbreak Period described in our May 6, 2020 COVID Update.
The IRS released Notice 2020-33 that increases the health FSA carryover amount from $500 to $550 for plans that allows for unused amounts to be carried over to the next plan year. This will be effective for plan years beginning in 2020 for amounts carried over into 2021. The Notice also clarifies that individual insurance premiums can be reimbursed when incurred prior to the beginning of the plan year for coverage provided during the plan year.
The UBA Compliance Memo Internal Revenue Service Notice 2020-33 provides additional details.
UBA has published Families First Coronavirus Response Act Leave Department of Labor Temporary Regulations – Part II that includes clarification and examples regarding:
- Counting Employees
- Expanded FMLA Leave
- Rate of Pay Calculation
Guidance has been released by the Department of Homeland Security (DHS) to allow for alternate methods of verifying I-9 documents when employment verification is done remotely. The timing is still required within 3 business days, but the employee may submit the document by fax, email or video link. Original documents will need to be verified once business operations are back to normal.
Employers will also be allowed to accept expired documents on a temporary basis, as many people have been unable to renew licenses due to the stay-at-home orders.
The U.S. Citizenship and Immigration Services (USCIS) has posted the temporary policy updates on their website: https://www.uscis.gov/i-9-central/temporary-policies-related-covid-19
ThinkHR continues to expand their COVID-19 resources. In addition to the COVID-19 Resources on the login landing page, there is an extended library within the Comply section, COVID-19 subsection. One new resource is a Recall from Furlough letter, attached for your convenience.