Health FSA Carryover Amount Increased
Overview The maximum allowable health FSA carryover is increased from $500 to $550 for plan year 2020. This only applies to Health FSA plans with the rollover/carryover provision. The maximum carryover amount is now calculated as 20% of the maximum annual health FSA contribution amount (for 2020, 20% of $2,750 = $550). Timing This change is permanent and applies to all future plan years. If adopted, the change would apply to plan years beginning in 2020, so the increased carryover amount would apply to the 2021 plan year. The change does not apply retroactively to 2019 plan years, thus amounts carried over from 2019 to a 2020 plan year are not impacted by this change. Employer Choice This change is optional, and employers may elect to adopt it or not. If adopted, all participants must be notified. The amendment may be adopted as late as December 31, 2021 and apply retroactively to January 1, 2020. Employer Action Considerations It is assumed that essentially all employers with a rollover/carryover plan provision will adopt this increase. It is projected to quickly become a default plan design assumption.
Clarification of COVID-19 HDHP Guidance
Prior Guidance Prior IRS guidance and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided that HDHPs must cover COVID-19 testing at no cost, without a deductible and that HDHPs may also provide first-dollar coverage for COVID-19 treatment. Clarification The recent guidance clarifies that these changes may be applied retroactively to January 1, 2020 and that they do not interfere with the employee’s eligibility to contribute to an HSA. Telehealth and remote care are included. Individual Coverage Health Reimbursement Arrangement (ICHRA) Overview An ICHRA is designed to reimburse an employee’s individual health insurance premiums. They may be applied on a class basis but cannot be used in conjunction with any other traditional group health plan offering within the same class. Clarification The IRS clarified that premiums an employee pays before the ICHRA plan year starts may be reimbursed if the premium is for substantiated health insurance coverage during the plan year. For example, if an employee paid a premium in December 2019 for coverage that started January 2020, the premium is reimbursable from the 2020 ICHRA .
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