The IRS has released new and updated provisions which pertain to group health plans and employees that may be impacted by COVID or economic conditions due to COVID. These new provisions are for this year only and provide greater flexibility in enrolling in and making changes to an employees' coverage choices.
Mid-Year Changes to Group Health Plans:
Under the new rules, employers — this year only — can let employees make mid-year changes that would be in effect for the remainder of the year.
For example, they could let employees who declined coverage enroll in a plan, or change plans or add or drop family members. They could also drop group coverage entirely if they certify that they are enrolled or immediately will enroll in other comprehensive coverage.
This could be helpful, especially if an employee had a significant salary reduction or was furloughed but still had health coverage and wanted to switch from a higher-cost to a lower-cost plan.
Flexible Spending Accounts & Dependent Care Accounts
Flexible Spending Accounts allow for pre-tax purchases of qualified health, dental, and vision expenses. Normally, employees must decide before the plan year starts how much to set aside. After that, they can’t change the amount except for specified life-changing events.
This year only, they can make mid-year changes going forward for any reason, if the employer allows.
This is important because if employees set aside more than they spend in a year, they lose anything left in the account, unless the employer offers a grace period or carryover. Forfeited money goes to the employer.
Employees who have been setting aside money for orthodontia, elective surgery or routine health care may want to reduce their contribution if medical, dental and vision care remains hard to come by. If things open up, they can later increase the amount.
Likewise, parents that are paying for child-day care expenses can reduce their elections mid-year. This would be beneficial if parents have experiences restricted day-care schedules or closures altogether.
Also included in the ruling is an increased rollover amount maximum of $550 (previously capped at $500).
The full text of the ruling can be found here: https://www.irs.gov/pub/irs-drop/n-20-29.pdf
