Health insurance button on keyboard None of these changes are mandatory, and it's up to anemployer to decide whether they will offer any or all of theincreased flexibility options to employees. (Photo:Shutterstock)

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When employees made their annual health plan enrollmentdecisions last fall, no one was expecting the chaos of the COVID-19pandemic. Many consumers are rethinking the choices they made (orfinally giving the elections the proper amount of attention employers have beenurging for years). And in light of the current situation, the IRSis giving employers and employees a one-time do-over.

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This week, heeding the requests of employer groups, the IRS announced that it would allow employeesto make mid-year changes to their health plan. Those who originallyopted not to enroll in a plan can now do so, or those who areenrolled in a plan drop it, provided they have alternative coverageoptions. Alternatively, an employee can decide to switch from onetype of plan to another.

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Related: HSA, retirement, and tax deadlines cheatsheet

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The latter could be particularly meaningful to employees who aredealing with a significant decrease in their income and looking fora cheaper alternative.

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In addition to changing their health insurance coverage,employees will also be able to change their FSA contributions.Unused FSA contributions are forfeited at the start of the nextplan year, which could be a problem for consumers who hadpreviously budgeted for elective care but are now putting it offuntil the pandemic has subsided.

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The IRS is also allowing employers to increase the carryoverlimit from $500 to $550–or 20% of the maximum FSA contributionlimit–and also offer an extended grace period for employees to useup their 2019 carryover balance.

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None of these changes are mandatory, and it's up to an employerto decide whether they will offer any or all of the increasedflexibility options to employees.

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The latest updates follow other tweaks to FSAs and HSAs includedin the CARES Act, which expanded eligible items for usewith these accounts to include over-the-counter drugs.

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Emily Payne

Emily Payne is director, content analytics for ALM's Business & Finance Markets and former managing editor for BenefitsPRO. A Wisconsin native, she has spent the past decade writing and editing for various athletic and fitness publications. She holds an English degree and Business certificate from the University of Wisconsin.