Notice 2020-29 provides temporary flexibility for mid-year election changes under a Section 125 cafeteria plan during the 2020 calendar year, allowing employers to respond to changes in employees’ needs as a result of the COVID-19 pandemic. The major changes allowed are:
- Make a new election for employer-sponsored health coverage on a prospective basis if you initially declined coverage
- Make changes to your health coverage (for example, change from individual to family coverage, or change from one type of plan to another)
- Revoke coverage on a prospective basis, if you confirm in writing that you’ll get coverage elsewhere
- Revoke an election, make a new election, or decrease or increase an existing election regarding a healthcare FSA on a prospective basis
- Revoke an election, make a new election, or decrease or increase an existing election regarding a dependent care account on a prospective basis.
Notice 2020-33 modifies notice 2013-71 to increase the $500 carryover amount for a plan year to an amount equal to 20 percent of the maximum health FSA salary reduction contribution for that plan year. This increases the 2020 maximum carryover amount from $500 to $550, which reflects 20% of the current $2,750 salary reduction limit. An employer that wishes to allow this increased carryover amount, must amend their current plan to reflect the change.