May 13, 2020

The Internal Revenue Service (IRS) issued IRS Notice 2020-33 (Notice) that increases the limit for unused health flexible spending account (health FSA) carryover amounts from $500 to a maximum of $550 (carried over from a 2020 plan year to a 2021 plan year), as adjusted annually for inflation. Notice 2020-33 also clarifies the ability of a health plan to reimburse individual insurance policy premium expenses incurred prior to the beginning of the plan year for coverage provided during the plan year. According to Notice 2020-33, the Department of the Treasury (Treasury) and the IRS intend to revise the proposed cafeteria plan regulations to reflect the guidance in this notice, but taxpayers may rely upon Notice 2020-33 in the meantime.

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Marlborough, Massachusetts