New Guidance for Section 125 Mid-Year Election Change Rules

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The IRS has relaxed mid-year election change rules for fully insured and self-insured employer sponsored health coverage, FSAs, and DCAPs for 2020. The changes are designed to allow employers to respond to changes in employee needs because of the COVID-19 pandemic.

For a health FSA or DCAP, participants can revoke their elections, increase or decrease existing elections, or make new elections.

For employer-sponsored health coverage, a Section 125 cafeteria plan may permit an employee to:

• Revoke an existing election if the employee is or will be enrolled in other health coverage
• Make a new election if the employee previously declined coverage
• Revoke an existing election and enroll in different health coverage sponsored by the employer

A plan may permit any of the election changes described in the Notice 2020-29, regardless of whether they satisfy existing mid-year election change rules.

Employers using this relief may determine the extent to which such changes are permitted and applied. For changes implemented, the employer must adopt a plan amendment by December 31, 2021. The amendment may be retroactive to January 1, 2020. Employees must also be notified of these changes.

Download the bulletin for more details.

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This blog is intended to be a compilation of information and resources pulled from federal, state and local agencies. This is not intended to be legal advice. For up to the minute information and guidance on COVID-19, please follow the guidelines of the Centers for Disease Control and Prevention (CDC) and your local health organizations.