Cafeteria Plan Relief in Response to COVID-19 Pandemic (Coronavirus and the Law)


On May 12, 2020, the IRS issued optional relief for participants in cafeteria plans, health Flexible Spending Account (FSA) plans, and Dependent Care Assistance FSA plans. Less than two weeks ago, the IRS and the Department of Labor also issued “new final rules” providing timeframe relief under HIPAA, COBRA, and ERISA, explained here.

[clear]IRS Notice 2020-29 Summary

  1. Cafeteria plans may permit new optional mid-year election changes prospectively, including health and dependent care FSA contributions, to address the effects of COVID-19 pandemic.
  2. The grace period for health and dependent care FSAs may be extended through 2020, even for health FSA plans that allow carryovers of unused FSA amounts.
  3. Employers must notify eligible employees of these temporary plan changes, and adopt retroactive plan amendments by the end of 2021.

IRS Notice 2020-33 Summary

Under a companion notice, the IRS issued guidance to increase the maximum health FSA carryover amount from $500 to $550, starting with the 2020 plan year.

New Optional Mid-Year Elections to Change Health Plan Enrollment or FSA Contributions

Cafeteria plan elections are generally unchangeable during the plan year. However, plans may allow mid-year election changes for certain “change in status” events, such as termination of employment or significant cost changes.

Health Coverage

In response to the COVID-19 pandemic, the IRS provided optional election changes that cafeteria plan sponsors may adopt to permit new prospective mid-year election changes for health coverage:

  1. Employees who initially declined coverage for this plan year can choose to enroll;
  2. Currently enrolled employees can switch coverage options, add family members, or drop coverage if they certify in writing that they are or will immediately enroll in other health coverage. Notice 2020-29 sets out a model certification for employers to use for this purpose.


Mid-year election changes to a health or dependent care FSA also are allowed under IRS Notice 2020-29 because the COVID-19 pandemic has limited employees’ access to routine health care, and because school closures have impacted employees’ dependent care needs. Plans may permit prospective mid-year changes in 2020 to revoke or make elections or change existing elections under health and dependent care FSAs.

Option to Adopt or Extend Grace Periods for FSAs

Health and dependent care FSA grace periods may be extended through the end of the 2020 plan year, so expenses incurred in 2020 can be reimbursed from amounts that otherwise would have been forfeited as of March 15, 2020 (for a calendar year plan). Furthermore, for the 2020 plan year only, sponsors of health FSAs that have a carryover feature also may adopt a grace period.

Notice 2020-33 and the Increased Health FSA Carryover Amount

For health FSAs with a carryover feature, the maximum carryover amount is increased from $500 to $550, as of the 2020 plan year.

Required Notice to Employees and Plan Amendments

Employers adopting these optional relief provisions must notify eligible employees of the plan changes made under these temporary rules. Additionally, plan amendments for these optional changes must be adopted by December 31, 2021, and can be retroactive to January 1, 2020, as long as the plan is operated in accordance with the guidance set forth in these IRS notices.

Woods Rogers PLC continues to monitor employee benefits relief measures coming out of Washington to keep our clients informed. If your company has questions concerning these optional cafeteria plan changes, please contact a member of the Employee Benefits group.

Read more legal updates on COVID-19 from Woods Rogers attorneys.


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