Client Alert: New COVID-19 Guidance for Section 125 Mid-year Election Change Rules

by Ryan Laude, Client Advisor

The IRS has relaxed the mid-year election change rules under a Section 125 cafeteria plan during calendar year 2020. The changes are designed to allow employers to respond to changes in employee needs as a result of the COVID-19 pandemic.

Permitted Election Changes
For employer-sponsored health coverage, a Section 125 cafeteria plan may permit an employee to prospectively:

• Make a new election if the employee previously declined coverage;
• Revoke an existing election and enroll in different health coverage
  sponsored by the employer; or
• Revoke an existing election, if the employee is or will be enrolled in
  other health coverage.

Employees may also prospectively revoke an election, make a new election or decrease or increase an existing election for a health FSA or DCAP. A plan may permit any of the election changes described in the notice, regardless of whether they satisfy existing mid-year election change rules.

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Ryan Laude is a Client Advisor at Gulfshore Insurance specializing in employee benefits. Ryan works with a wide range of businesses to create the best funding options that fit their needs. Comments and questions are welcome at rlaude@gulfshoreinsurance.com