IRS Tax Relief for Taxpayers in Section 125 Cafeteria Plans

To help taxpayers address unanticipated changes in expenses because of the COVID-19 pandemic, the IRS is allowing temporary changes to section 125 cafeteria plans, including:

  • Extended claims periods to apply unused amounts remaining in a health flexible spending arrangements (FSAs) and dependent care assistance program as of the end of a grace period or plan year ending in 2020 through December 31, 2020.
  • Mid-year elections for health coverage, health FSAs changes, and dependent care assistance programs.
  • Ability to apply earlier relief for high deductible health plans to cover expenses related to COVID-19 and a temporary exemption for telehealth services retroactively to January 1, 2020.
  • Increasing limit for unused health FSA carryover amounts from $500 to a maximum of $550.

For more information, see the IRS press release.