Flexible Spending Account (FSA) plans are now allowed to make temporary, new plan design changes to give employees flexibility during the COVID-19 pandemic. The changes are completely optional and depend on a plan’s setup. The IRS has indicated that employers must properly adopt plan changes and communicate them to plan participants.
Calendar year plans with a grace period that ends in 2019 may make the following changes:
- Extend the grace period to any date that ends in 2020 to allow claims incurred in 2020 to be reimbursed with remaining 2019 funds
- Allow mid-year enrollments, disenrollments and contribution election changes (reductions may be limited to not more than amounts already reimbursed from the FSA) through the end of 2020
Fiscal year plans with or without a grace period may make the following changes:
- For the 2019 plan year, either add a new grace period or extend an existing grace period to any date in 2020 to allow claims incurred in 2020 to be reimbursed with remaining 2019 funds
- Allow mid-year enrollments, disenrollments and contribution election changes (reductions may be limited to not more than amounts already reimbursed from the FSA) through the end of 2020
Any Health FSA with a carryover option may make the following changes:
- Increase the carryover amount for 2020 to $550
- Allow mid-year enrollments, disenrollments and contribution election changes (reductions may be limited to not more than amounts already reimbursed from the FSA) through the end of 2020
All changes must be properly documented and communicated to employees. Employers with flexible spending account plans should consider the best plan design for their workforce and adopt plan changes accordingly.
