The Internal Revenue Service relaxed its rules in response to the coronavirus pandemic last month, waiving the normal enrollment periods to allow workers to make changes to their health insurance plans and flexible spending accounts. Typically, adjustments are prohibited during the middle of the year unless certain life events occur. The new IRS guidelines give employees a little more freedom and flexibility.
What the New IRS Guidelines Mean for Workers & Employers
The new guidelines stipulate that employees are free to un-enroll from their health insurance plans if they have another option, or sign up if they didn’t do so earlier in the year. They may also add family members to their plan, or switch to a different workplace plan. Employers are not required to offer these options and must “opt in” if they are interested. While this will create some logistical problems, many employer groups have been lobbying the Treasury Department to allow them to offer options to their staff. It’s a sign of goodwill during a difficult and stressful time when many employees have been furloughed and have temporarily lost benefits. Other employees who decided against signing up for health insurance during the last open enrollment period may be having second thoughts now that they have seen the effects of COVID-19 on those less fortunate.
Another benefit to offering employees this flexibility is that they are likely to be happier to return to work after being out of the office for an extended period. Having health coverage is instrumental in easing the minds of those who are worried about returning to work and exposing themselves to the virus.
Employers who follow the new guidelines can choose to allow workers to make changes to their existing pretax flexible spending accounts that help cover health expenses and dependent care. COVID-19 has forced many to scramble, as they have had fewer options for spending money they had set aside for childcare services and elective medical procedures—two widespread victims of quarantine and lockdown rules. Money that sits unused in these accounts is normally forfeited. Now, employers may allow workers to enroll in flexible spending accounts mid-year, and increase or decrease the amount of contributions they are setting aside (within the normal account limits).
Additionally, employers are free to make exceptions on rollovers. Plans that end their spending periods during the calendar year may allow people the rest of 2020 to spend their money; other extensions are allowed for plans ending in different spending periods.
Whether or not to allow these options for your employees will depend on the extent to which you and your workers have been affected by the coronavirus.