COVID-19 has caused upheaval in many ways. This includes employees’ work benefits, particularly pre-tax accounts. For employees with an HSA, Dependent Care FSA, and/or commuter plan, there may be the opportunity to make changes to their accounts.
Here are the main updates employees should know about.
UPDATE: See our blogs IRS releases new relief affecting FSAs and Relief for FSAs in Year-end Spending Bill to learn about additional relief passed that affects Medical FSAs.
Even apart from COVID-19, HSAs are fairly flexible when it comes to making changes. Money savvy employees enrolled in these accounts are probably aware that one of the benefits of the account (apart from the tax savings) is the ability to make election changes throughout the year.
While some employers may restrict how often election changes can take place, there is still a good degree of flexibility. Especially compared to other pre-tax accounts, like FSAs.
Why this matters now
With the tax filing and tax payment deadline both being pushed out to July 15th, the HSA contribution deadline was also pushed out. (It usually aligns with those two).
In short, it means people with an HSA have more time to increase their contribution to their account. This results in a larger tax return.
However, while the HSA contribution deadline was pushed out, it is still advisable to have all changes made by April 15 to get a speedy reimbursement.
Benefits changes and Dependent Care FSAs
UPDATE: See our blogs IRS releases new relief affecting FSAs and Relief for FSAs in Year-end Spending Bill to learn about additional relief passed that affects Dependent Care FSAs.
When it comes to benefit changes, Dependent Care FSAs usually don’t make the list. These accounts, while extremely useful in paying for childcare, are generally a one-and-done deal for elections.
Employees who enroll sign up during their company’s once-a-year Open Enrollment and after that, can’t change the dollar amount in the account. (Known as the “election”). The only reason an employee can change their election is if there is a qualifying event.
What’s a qualifying event? As a refresher, a qualifying event is a large life event — like marriage, divorce, or birth of a child– that allow an employee to change their benefits outside of the normal time frame.
For Dependent Care FSAs, a change in cost of care counts as a life event.
What does this mean for employees?
Many schools and child care centers throughout the country have temporarily closed. Since this probably resulted in a change in cost of care, it means employees can change how much they’re putting into their Dependent Care FSA.
Employees have different options. Some way want to increase their election to cover new, unforeseen costs. Others may way to decrease the amount in their account.
Either way, the best option is for employees to contact their employer, who can advise about benefits changes.
The last pre-tax benefit employees may want to change is their commuter account.
Benefit changes and commuter plans
With more and more employees working remotely, commuting needs have shifted dramatically. In some cases, employees have no commuting needs, period.
During this time, when cash flow may be tight and commuting needs are light, employees can adjust the money in the commuter accounts down to zero. (When commuting starts up again, it is advised that employees set up money in their commuter account two weeks before they will need the money).
If employees want to adjust the money in their account down to zero, they have a few options. Depending on how their employer has the benefit set up, employees might be able to make changes online or go directly through their employer.
What changes are most important?
It depends on who you ask. Regardless of what needs employees have during COVID-19, one thing they won’t need is to worry about their pre-tax benefit accounts.