There is has been plenty of news rolling in during the month of April.
With all the recent activity, there has also been some confusion regarding Flexible Spending Account (FSA) mid-year changes, and growing interest in a new vehicle for employers to provide tax-free funds for employees via IRS Code Section 139.
The following recap provides some insight and clarity on these developments.
Update: IRS Announces Form 5500 Filing Extensions in Response to COVID-19
This will only be for certain plan years that would otherwise be due on or after April 1 and before July 15, 2020.
In effect, this is for plans that ended in September, October or November of 2019. The filings will now be due on July 15, 2020.
Notably, the relief is not provided to calendar year plans with filings due on July 31, 2020.
Reminder: FSA Changes for Employees
The rules for when an employee can make a change in their elections remains unchanged. The IRS has not released any guidance that indicates the currently permitted election changes will be expanded.
The most commonly permitted election changes relevant to the COVID-19 era includes the following:
- Loss of eligibility due to a change in employment status (employee or spouse)
- Gain of eligibility due to a change in employment status (employee or spouse)
- Enrollment in Medicare or Medicaid
The following are commonly permitted changes that apply to Dependent Care FSAs only:
- Change in daycare providers
- Increase or decrease in the cost of qualifying day care expenses (i.e. the daycare closes)
If/when the daycare provider reopens, this is an “increase in cost” that would permit the employee to restart their Dependent Care FSA contributions.
Please review your FSA plan documents to verify that your plan includes the above permitted election changes as not all IRS permitted changes have to be adopted by the plan.
Reminder: Employers May Provide Direct Tax-free Assistance to Employees.
Trump declared a national emergency in early March that enacted the IRS Section 139 tax code. There is no specific cap on the amount of assistance that may be provided to an employee under Section 139 other than it must be “reasonable and necessary” and must not be for an expense reimbursable by the employee’s insurance.
Third party administrators (TPA) have started rolling out programs under Section 139. For example, an “Employee Care Card” that the employer funds for the employee to use for expenses like groceries, office supplies, education and clothing. To learn more about programs like this, please contact your employee benefits insurance broker.