New FSA & DCAP Flexibility & Guidance – In addition to the CARES Act that was previously passed, the IRS has recently released additional guidance (Notice 2020-29 & Notice 2020-33), which have major implications for Flexible Spending Accounts (FSA) and Dependent Care Assistance Plan (DCAP) plans. Below is a general summary of the notices.
CARES Act
- Allows for over-the-counter medications & menstrual products to be considered eligible expenses.
- FSA Plan Documents and Summary Plan Descriptions should be reviewed & updated, if necessary, to indicate that the OTC drugs and menstrual products are now covered.
- A copy of the SPD amendment should be sent to all FSA participants as a way of notifying them of this amendment to their FSA.
IRS Notice 2020-33
- Allows an employer to amend their health FSA carryover limit for unused Health FSA amounts from $500 to $550.
- The employer does have to amend their plan to increase it from $500 to $550.
IRS Notice 2020-29 (Temporary Change for 2020 only)
- Allows mid-year election changes by employees for employer-sponsored health coverage, Health FSAs and DCAPs.
- For employer sponsored health coverage, an employee can make a new election, change an election or revoke an existing election provided that the employee attests in writing that the employee is enrolled, or immediately will enroll, in other “comprehensive” health coverage not sponsored by the employer.
- Allows an employee to revoke an election, make a new election, or decrease or increase an existing election for their Health FSA and/or their DCAP. Note, an employer does not have to allow these changes.
- Allows an employee to apply unused amounts remaining in a health FSA or DCAP as of the end of a grace period ending in 2020 or plan year ending in 2020 to pay or reimburse expenses incurred through December 31, 2020.
- The employer does have to amend their plan if allowing these changes.
COBRA Relief due to COVID 19 Outbreak – On April 28, the federal government released new rules and guidance related to employer-sponsored group benefit plans in response to COVID-19. For all plans subject to Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, the relief allows additional time in which a group health plan sponsor or plan administrator should provide certain notices, disclosures, or other documents affecting COBRA continuation coverage, special enrollment periods, benefit claims, appeals of denied claims, and external review of certain claims. The deadline extension is through the “Outbreak Period”. This period is defined as the period beginning March 1, 2020 and ending 60 days after the date on which the federal government declares the COVID-19 national emergency has ended (which has yet to be determined and which may vary by state or geographic region) or another date announced by the DOL and Treasury in a future notice. (*You may want to check with Stumm Insurance or your COBRA vendor as to how this is being handled for any COBRA beneficiaries.)
IRS Announcement of 2021 Changes – The IRS recently announced changes to Health Savings Account maximums for 2021. See chart below for the new amounts. Please contact your Stumm Insurance representative if you have questions or need assistance in changing and/or communicating the maximums for 2021.
| IRS Provision | 2020 | 2021 | |
| HSA Contribution Max | Single | $3,550 | $3,600 |
| Family | $7,100 | $7,200 | |
| Catch-Up (over age 55) | $1,000 | $1,000 |
PCORI Fee – The PCORI fee was set to sunset on Sept 30, 2019, but as we communicated to you earlier this year in January, legislation was passed to revive this fee for another 10 years. This fee funds the Patient-Centered Outcomes Research Institute with a fee of nearly $2.50 per covered life per year, paid by the insurers and self-insured plan sponsors annually on July 31. Insurance companies report and pay the fee for all fully insured medical plans. An employer that sponsors a self-insured health reimbursement arrangement (HRA) along with a fully insured medical plan, a self-funded, partially self-funded/level-funded plan, or MEC plan must pay PCORI fees based on the number of employees participating.
Should you have any further questions, please feel free to contact your Stumm Client Service Team.