On February 18, 2021, the IRS offered a few special rules for Section 125 or Cafeteria plans (which allow employees to choose between non-taxable and taxable benefits), health flexible spending arrangements (FSAs), and dependent care assistance programs (DCAPs) during the current “health emergency” arising out of the coronavirus fiasco.
Rules regarding the Health FSAs and DCAPs
The Consolidated Appropriations Act of 2021 provides flexibility in carrying over unused amounts, extensions for the time period for incurring claims, post-termination reimbursements from health FSAs and special rules for dependents who “age out” of DCAP coverage amidst the ‘pandemic’. Notice 2021-15 details the nuts-and-bolts of these rules along with examples.
Mid-year Election Changes
Cafeteria plans may allow employees to make or remove election changes in certain circumstances regardless of their initial choices. The chaos surrounding the coronavirus the past year has resulted in various unprecedented changes in the demand and supply of medical care. Thus, employers have been willing to offer employees who initially declined to choose/elect group health coverage another chance to elect health coverage, or to allow employees enrolled in group health coverage to enroll in different health coverage offered by the same employer or drop existing employer-sponsored health coverage to enroll in other health coverage not offered by their employer (e.g., coverage offered by their spouse’s employer). These changes used to be allowed only if employees experienced a change in status (such as marriage, new birth of a child, etc.).
Notice 2021-15 clarifies that employers can decide how long to allow mid-year election changes during the plan year, changes that aren’t typically in line with the standard change in status criteria as per IRS regulations prior to the notice.
Over-the-Counter Drugs
The Notice also expands reimbursement expenses for FSAs and HRAs to include over-the-counter drugs and menstrual care products, with reimbursements beginning on or after January 2020.
Whether or not you, as an employer, offer expensive benefits like Health FSAs and DCAPs, you can safely rely on offering group health insurance as group health is one of the most known and attractive benefits for employees today. EmblemHealth is a great way for employers to save money and still provide a strong benefit plan. If you are looking to offer your employees a strong benefits plan at an affordable rate for your company, contact NY Small Health and ask about EmblemHealth.