To assist with the nation’s response to the COVID-19 pandemic, Internal Revenue Service (IRS) Notice 2020-291 provides increased flexibility with regard to mid-year elections under Section 125 cafeteria plans related to employer-sponsored health coverage, health Flexible Spending. Arrangements (health FSAs), and dependent care assistance programs.
Beginning July1, 2020, OPM is permitting FSAFEDS participants a 60-day limited period during which certain mid-year changes can be made to their existing elections. Although the COVID-19 pandemic is the reason for these additional flexibilities, participants do not need to be directly affected by COVID-19 and do not need to experience a Qualifying Life Event (QLE) or provide any documentation to make changes.
FSAFEDS Permitted Changes
Increase or Decrease Election in HCFSA, LEX HCFSA, and DCFSA
During the 60-day limited period, all participants who have enrolled in a 2020 Health Care Flexible Spending Account (HCFSA), Limited Expense Health Care Flexible Spending Account (LEX HCFSA), or Dependent Care Flexible Spending Account (DCFSA) will be allowed to make a one-time change (increase or decrease) in the amount of their annual election in each FSA account in which they are enrolled. In accordance with IRS guidance, the election change is effective prospectively, on the first pay period after approval by FSAFEDS. Accordingly, participants cannot receive a refund of allotments from pay they have already made to their FSA account(s) year-to-date. In addition, participants cannot decrease their election below the amount already allotted to the FSA account OR the amount already reimbursed for eligible expenses, whichever is greater.
This 60-day limited period to increase or decrease the FSAFEDS election should not be confused with the existing opportunity to increase or decrease DCFSA or HCFSA elections through September 30 based on a QLE such as cost or coverage changes in childcare or elder care. This 60-day limited period affects both HCFSAs as well as DCFSAs, does not require the participant to establish a QLE, and does not preclude a participant from submitting a QLE change before or after submitting a change during this 60-day limited period, provided the QLE is submitted no later than September 30, 2020.
Extended period to both incur eligible expenses and claim reimbursement of unused 2019
DCFSA amounts until December 31, 2020
Participants who made an election to a DCFSA for the plan year ending December 31, 2019 had until March 15, 2020 (the “grace period”) to incur eligible DCFSA expenses. Claims for reimbursement of these expenses was due by April 30, 2020, the deadline for submitting claims from the previous plan year. Any funds not used during the grace period are normally forfeited. An extension of this period is being allowed this year on a one-time basis. Specifically, participants who made an election to a DCFSA in the plan year ending December 31, 2019, will now be allowed to both incur eligible expenses and claim any 2019 funds remaining in their DCFSA account until December 31, 2020. The extended claim period is automatic for qualified participants.
HCFSA and LEX HCFSA carryover amount from 2020 into 2021 increased to $550
IRS Notice 2020-334 allows an increase in the carryover amounts for HCFSA and LEX HCFSA from $500 to $550. Participants may now carryover up to $550 of unused amounts in their HCFSA and LEX HCFSA remaining at the end of 2020 into 2021, if they re-enroll for the 2021. DCFSA allotments made in 2020 may be increased or decreased during the 60-day limited period, but the grace period for incurring eligible DCFSA expenses with respect to these funds will expire March 15, 2021 and claims for reimbursement will be due by April 30, 2021plan year. This increased carryover amount of $550 will continue in place for plan years beyond 2021.5
How to submit election changes
Participants to contact FSAFEDS by visiting www.FSAFEDS.com or by calling 1- 877-FSAFEDS (372-3337) to take advantage of theseFSAFEDS Program flexibilities, or for questions and additional information.