Everything Employers Should Know About the New IRS Healthcare Guidelines During COVID-19
For employers looking for ways to support their employees during COVID-19, there’s good news this week.
In response to the coronavirus outbreak, the IRS recently released new guidance that allows employees to make changes to their healthcare coverage mid-year, without a qualifying event. This new flexibility offers employers a chance to better serve employees who may benefit from different coverage due to unexpected health or financial changes driven by COVID-19, without having to wait for open enrollment.
So what’s included in the new guidelines, and what should employers know in order to take advantage? Let’s take a look.
What’s included in the new IRS health plan guidelines?
Thanks to the IRS’ response to COVID-19, there are three major changes employers can make to their health plan offerings right now. Here’s what’s new:
1. Health plan enrollments
Employers can permit employees to make these changes to their health coverage without a qualifying event:
- Sign up for a new health plan
- Drop out of a health plan
- Switch to a different plan
- Add dependents to their plan
2. FSA contributions
The new IRS guidance also allows for the following changes to healthcare FSAs and dependent care FSAs:
- If an employer allows it, employees can change their FSA contributions at any time. For example, an employee who was planning an elective surgery at the beginning of the year may need to postpone it now. If they were contributing to their FSA to cover the costs of the surgery, they can now reduce or stop their contributions.
- Employees can also change their DCFSA contributions. With daycares closed and summer programs cancelled, employees may want to pause their dependent care saving as well.
3. FSA grace periods and carryovers
FSA grace period provisions and carryover rules can now be expanded:
- Grace period provisions allow employees to be reimbursed for health-related expenses for a defined period after the plan year ends. Employers can choose to extend these grace periods.
- Carryover rules allow an employee to carry some FSA funds from one plan year into the next. Per the new IRS guidelines, employers can now increase the amount of time allowed for a carryover.
What else should employers know about the new IRS guidelines?
Employers aren’t required to make these changes.
The IRS is not requiring that employees be given these new healthcare options. It simply allows employers to opt in if they want. If an employer chooses not to act, employees have no new options at this time.
Employers have until the end of 2021 to opt in.
While 2021 is the deadline for employers to make a health plan amendment, it can be retroactive to the beginning of 2020.
Read the fine print.
Here’s the full set of new IRS guidance, along with earlier COVID-19 related relief efforts.
We realize that implementing these new guidelines will create a new administrative burden for your HR team. If you do opt to make some changes, ALEX can help! Talk to your Jellyvision representative or book a demo to learn how ALEX can support you and your employees during this time.