If you’re an employer with questions about how to navigate COVID-19 legislation (i.e., the Families First Coronavirus Response Act, the CARES Act and a flurry of new federal notices) while maximizing existing benefits, you’re not alone. We’ve been fielding four questions in particular from employees. Below are the answers to each.
Does the IRS consider the pandemic a qualifying event allowing employees to change their FSA elections?
The IRS did not release new guidelines making the COVID-19 pandemic (in itself) a qualifying event. However, as a result of IRS Notice 2020-29, you may allow your employees to newly elect, change or revoke a Medical or Dependent Care Flexible Spending Account election in the middle of a plan year. Prior to this notice, the employee needed to experience an IRS-approved qualifying event in order to make mid-year changes. Notice 2020-29 temporarily waives that requirement. This optional relief applies to mid-year elections made during calendar year 2020.
What changes to HSAs, FSAs and commuter plans are allowed at this time?
Health Savings Accounts: You can increase, reduce or stop pre-tax payroll contributions to an employee’s HSA at any time. Note that all funds in an HSA carry over from year to year. And not all plans support employees updating contributions in their online account. If they’re unable to update their election, they can contact you with the requested change to confirm that payroll deductions were adjusted after making changes in their online account.
FSAs: Pre-tax payroll contributions to an employee’s Medical or Limited Purpose FSA can be increased, reduced or stopped temporarily during this time as a result of IRS Notice 2020-29. You may also allow your employees to tap into unused funds from any FSA plan with a grace period or plan year that ends in 2020. These unused funds can then be used on medical care or dependent care expenses incurred through December 31, 2020.
Commuter plans: Pre-tax payroll contributions to an employee’s commuter benefits (transit or parking) can be increased, reduced or stopped at any time.
Can we extend our run-out or grace period of our FSAs and HRAs?
The rules under EBSA Disaster Relief Notice 2020-01 require you to give participants additional time after the COVID-19 national emergency is declared over to submit Medical FSA claims for any plan year that has a run-out period ending during the relevant timeframe (March 1, 2020 until 60 days after the end of the COVID-19 national emergency). Dependent Care FSAs are not subject to this rule.
Health Reimbursement Arrangements were also granted a temporary extension of run-out periods. These extensions are also retroactive to deadlines occurring from March 1, 2020, until 60 days after the COVID-19 National Emergency is declared over.
What temporary extensions have been made available to COBRA members as a result of the COVID-19 pandemic?
Under EBSA Disaster Relief Notice 2020-01, qualified beneficiaries and COBRA members have extra time to send certain notifications about COBRA coverage, to elect COBRA coverage, and to make premium payments. These changes are retroactive to any deadline occurring from March 1, 2020, until 60 days after the COVID-19 National Emergency is declared over.
COBRA Election Period Extension: Prior to the temporary rule change, qualified beneficiaries had 60 days from the date of the Specific Rights Notice (SRN) to elect COBRA. With this COBRA election period extension, the period from March 1, 2020 to 60 days after the end of the National Emergency is disregarded in determining the end of the 60-day COBRA election period.
COBRA Grace Period Extension: Prior to the temporary rule change, COBRA members had a 30-day grace period to pay monthly COBRA premiums in order to maintain coverage, and a 45-day grace period to make an initial payment upon first electing COBRA coverage. With this COBRA grace period extension, the period from March 1, 2020, to 60 days after the end of the National Emergency is disregarded in determining the end of the COBRA premium payment periods.
Second Qualifying Event and Disability Notifications: Prior to the temporary rule change, COBRA members had 60 days to notify their administrator of a second qualifying event that would extend the COBRA coverage period from 18 months to 36 months. COBRA members also had 60 days to notify their administrator of receiving a Social Security Administration disability determination to extend the COBRA coverage period from 18 months to 29 months. With this COBRA notification extension, the period from March 1, 2020, to 60 days after the end of the National Emergency is disregarded in determining the end of the required notification periods for a second qualifying event and disability determination.
Continue reading the Health Trends & Insights blog for information on the CARES Act and how employers can use benefits to provide COVID-19 solutions for employees.
The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.