Health Reform WK-EDGE Just under half of employers will allow some type of Sec. 125 midyear election change
Thursday, July 2, 2020

Just under half of employers will allow some type of Sec. 125 midyear election change

By Lauren Bikoff, MLS

Employers are considering allowing midyear election changes to employer-sponsored health coverage.

Just under half (47 percent) of employers said that they will allow some type of midyear election change, according to recent research from Mercer. However, the Mercer COVID-19 Survey noted that 53 percent of employers said they are not considering allowing midyear changes.

Background. Under Notice 2020-29, the IRS provided increased flexibility with respect to 2020 midyear elections under a Code Sec. 125 cafeteria plan related to employer-sponsored health coverage, health flexible spending arrangements (health FSAs), and dependent care assistance programs (DCAPs). The IRS also provided increased flexibility with respect to grace periods to apply unused amounts in health FSAs to medical care expenses incurred through December 31, 2020, and unused amounts in DCAPs to dependent care expenses incurred through December 31, 2020. This relief is retroactive to January 1, 2020.

Results. Of the 47 percent of employers that said they would allow midyear election changes, the most popular changes are "changing contributions to a dependent care FSA" (43 percent) and "changing contributions to a health care FSA" (29 percent). Fewer employers are planning to allow changes to medical plan elections, such as enrolling in a plan after having waived coverage (11 percent) or adding a dependent (10 percent).

"Allowing participants to change their contributions to dependent care or health FSAs can be a relatively simple way for employers to support employees coping with COVID-19 related issues," said Jay Savan, partner in Mercer’s Health business. "Maybe a child’s summer camp is closed, or someone cancelled some planned dental work, or a spouse is out of work and the employee just needs more money in their paycheck."

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