May 14 (UPI) -- The IRS has released new guidance to allow more flexibility in employer-based health plans because of unexpected expenses related to the coronavirus pandemic.
Under the new guidance, temporary relief for high deductible plans related to covering expenses for testing and treatment of COVID-19 applies retroactively to Jan. 1. The guidance also allows telehealth services exemptions to apply retroactively to the same date.
It also allows mid-year changes to health coverage for pre-tax flexible spending accounts and dependent care assistance programs as a result of unanticipated expenses from the pandemic.
Among these changes, employers can let employees drop their existing coverage in exchange for other health coverage not offered by their employer outside of the normal fall enrollment period.
Related
Employers can also allow employees to enroll in different coverage offered by the same employer or add family members to their current plans.
"This is important for individuals that were on a spouse or partner's plan and they lost their job due to COVID-19," said Chatrane Birbal, director of policy engagement at the Society for Human Resource Management.
New guidance also allows parents watching children while working from home due to the unexpected closures of school and child-care services to decrease allocations to dependent care assistance.
"This is an opportunity to take back some of that money and have it in their pocket at this time," Birbal said.
The new guidance also increases the "carryover" amount of unused FSA expenses to $550 from $500 as adjusted for inflation and extends the claims period for taxpayers to apply unused FSA expenses through Dec. 31. It also extends the period to apply unused dependent care assistance program expenses to the same date.
"I cannot think of a time when the IRS has been this flexible," said David Speier, managing director of benefits accounts at Willis Tower Watson.
Speier added that it will still be up to employers to weigh the additional costs and decide whether their employees can take advantage of the new options.
"It's very important that there is communication going on between employers and employees," he said.
