IRS Notices 2020-29 & 2020-33

Posted on May 21, 2020

Recently, the IRS released two Notices that impact cafeteria plans and Flexible Spending Accounts (FSAs). Notice 2020-29 provides relief for cafeteria plans in response to the current COVID-19 pandemic, and Notice 2020-33, unrelated to the COVID-19 pandemic, provides a permanent increase to the carryover limit for health care FSAs.

Notice 2020-29 at a glance

Provides temporary relief for cafeteria plans in response to the COVID-19 pandemic. Effective January 1, 2020 and lasts through December 31, 2020.

Cafeteria Plan Mid-Year Election Changes:

  • Allows participants to make prospective election changes during calendar year 2020 regarding health care FSAs and dependent care FSAs, regardless of the reason for the election change and with no additional documentation requirements.
  • Participants may revoke an election, make a new election, or decrease or increase an existing health care FSA election and dependent care FSA election.

Extended Claims Period for Health Care FSAs and Dependent Care FSAs:

  • For grace periods ending in 2020 or for plan years ending in 2020 (i.e., an off calendar year plan), participants can use remaining health care and dependent care FSA amounts to pay or reimburse expenses incurred through December 31, 2020 for the same type of FSA.
  • This extension of time is available both to cafeteria plans that have a grace period and cafeteria plans that have a carryover.

Notice 2020-33 at a glance

Provides a permanent increase to the carryover limit for health care FSAs. 

  • Increases the current carryover amount of $500 to $550 to account for inflation.

Next Steps for Current MidAmerica Clients

  • Plans that currently offer any of these provisions will automatically be amended to accept the changes. For the 2020 year, the employer must adopt an amendment on or before December 31, 2021. If you do not wish to adopt any of these automatic changes, please email us at [email protected].
  • Employers must provide notice of these updates to all eligible employees. Click here to access a shareable version of these updates.
  • Plans that do not currently offer these provisions can adopt the new provisions upon the employer’s request. Simply email us at [email protected].

Additional Resources
To stay up to date regarding COVID-19 related items, check out our CARES Act page!

Retiree Season Tips & Tricks

Posted on May 7, 2020

Throughout the year, there are times when there will be an influx of employees nearing retirement. We understand that as a public sector employer, you’re likely helping these long-time employees navigate the transition from active worker to retiree. Oftentimes, employees are searching for need-to-know information about their retirement benefits, assessing whether or not they’re ready to retire and, if they are, what to do next.
As your plan administrator, we’re here to offer a few tips on how to help your employees—and yourselves—navigate this busy time of year.

Retirement Benefit Education
Naturally, employees nearing retirement feel uneasy about what their transition entails. Their anxieties are understandable—these life-changing choices can feel incredibly overwhelming. But with proper education about their benefits, employees will begin to feel more financially secure in their next stage of life.

MidAmerica is familiar with these concerns, which is why we have created a library of resources available to your employees on myMidAmerica.com. There, they can explore the Education Toolbox, which can be accessed by selecting Resources from home page. If they are a current plan participant, they can also gain access to their secure portal where they will find plan specific information and benefit management functionality. Of course, not every employee will be proactive in using these resources, so we highly recommend sending periodic reminders to them about these materials. Additionally, MidAmerica Account Managers are always available to discuss any questions or concerns you have regarding the current benefit plan(s) in place.

Assess Your Employees’ Retirement Readiness
Knowing when you are financially ready for retirement is not as clear-cut as it used to be. Because of this, employees count on their employers for guidance as they make this life-changing transition. As an employer, it’s important to understand where your more tenured associates stand with regards to their readiness.

In the past, public sector employers might have gauged the success of a voluntary retirement plan based on participation and contribution levels. While those statistics remain important, retirement readiness is affected by other behaviors as well, such as employees’ ability to set specific goals, make informed investment decisions and fully understand the retirement benefits you offer. A key concern for employees considering retirement is how they’re going to pay for health insurance once they leave the workforce. Clearly communicating how to maximize their benefits and how to cover common costs with their retirement funds will help employees make an informed decision (and feel confident about it).

Plan Succession Across All Departments
A succession plan that outlines each position’s key roles and responsibilities can help employers create opportunities to find excellent replacements for retiring workers. Historically, succession plans have been utilized for higher-level employees, but it is recommended that you pay attention to whether the majority of a department is closing in on retirement and manage accordingly. Employers should manage across generations, so that aging employees understand that it is part of their role to train the younger generation. For younger workers, set clear expectations around learning from more experienced staff in order to set the next generation up for quick success.

Customize your communications… And keep communicating!
Retirement planning looks very different for every individual. This is important to consider when crafting communications for employees. When communicating to participants about their retirement planning, it’s crucial to tailor the message so that it is well received and feels relevant to the audience.

A one-time message is unlikely to motivate employees to take control of their retirement planning. Consider sending multiple communications throughout the year to keep the topic top of mind and increase the likelihood of identifying which employees might need assistance with their planning.

How MidAmerica Can Help
Helping employees with their retirement planning is no small task, but it is a crucial element in ensuring long-term success for both the organization and the employee. The good news is you don’t have to do it alone! At MidAmerica, we have many resources available to you, like the Education Toolbox. We continue to develop these resources, so check back often! Beyond that, a dedicated Account Manager can discuss your unique retirement season challenges and develop a game plan to solve them.

MidAmerica is here to assist in caring for your employees and their livelihood, resulting in a more enjoyable transition into retirement for both you and your retirees.

On March 27, 2020, the president signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. Under the CARES Act, over-the-counter (OTC) drugs and feminine care products are newly eligible expenses for certain Health Reimbursement Arrangements (HRAs) and Health Care Flexible Spending Accounts (FSAs), and no longer require prescriptions for reimbursement, assuming an employer’s plan documents allow as such.

Over-the-Counter Products

The CARES Act reverses Affordable Care Act (ACA) restrictions on tax-favored reimbursement for OTC drugs and products. Now, items like ibuprofen, acetaminophen, cold & flu medications, allergy medication, and sleep aids can be reimbursed through an HRA and FSA.

Feminine Care Products

Additionally, feminine care products are new on the list of items eligible for reimbursement through an HRA and FSA. According to text in the CARES Act, feminine products include “tampons, pads, liners, cups, sponges, or similar products used by individuals.”

These provisions are retroactive to January 1, 2020, so any of the newly qualified expenses incurred in 2020 may be eligible for reimbursement. It’s important to note that HRA plan documents must allow for reimbursement of all IRS Code Section 213(d) medical expenses for OTC and feminine care products to be reimbursable.

For a comprehensive list of health care items and services that are considered eligible under IRS Code Section 213(d) rules, we encourage you to visit the Special Interest Groups for IIAS* Standards website at https://sig-is.org/eligible-product-list2/eligible-product-list-criteria.

If you have any questions regarding the impact of the CARES Act on your MidAmerica benefits, we’re here to help:

Service Center Hours of Operation

8:30 a.m. – 8:00 p.m. ET Monday through Thursday
8:30 a.m. – 6:00 p.m. ET Friday
Phone: 800-430-7999
Fax: 863-686-9727
Email: [email protected]

Contact Information by Plan Type
Health Reimbursement Arrangements/Flexible Spending Accounts
Phone: 855-329-0095
Fax: 863-577-4460
Claims and Documentation Submission Email: [email protected]
General Inquiry Email: [email protected]

Employers and Alliance Partners
Please reach out to your dedicated account representative, account manager or our Account Management team by emailing [email protected].

*What is IIAS?
Many major pharmacies are registered as Inventory Information Approval System (IIAS) certified. The pharmacy’s IIAS system allows them to differentiate between eligible and ineligible expenses, making it possible for eligible HRA and FSA products to be automatically approved at the point of purchase.

The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law by President Trump, addresses several key issues introduced by the COVID-19 pandemic. The act acknowledges the economic impact the outbreak has had on the country and seeks to provide financial support to businesses, employees, individuals and families. Additionally, it specifically provides guidance on retirement and health care benefits, many of which MidAmerica administers on behalf of public sector employers and employees across the country. To help you better understand how the CARES Act impacts Health Reimbursement Arrangements (HRAs), Flexible Spending Accounts (FSAs) and Dependent Care Accounts (DCAs), we have highlighted the key takeaways below.

Health Reimbursement Arrangements

The CARES Act includes a provision that removes the documentation requirement on certain eligible expenses. If your plan allows reimbursement of all Full 213(d) Medical Expenses, the following items will not require a prescription or doctor’s note to be considered eligible:

  • Over-the-counter drugs or medication
  • Menstrual care products

These changes are effective for items purchased after December 31, 2019.

Important note on debit card expenses:
Please note that if a participant uses their debit card to purchase one of the items above, the merchant’s Inventory Information Approval System (IIAS)* may not be updated yet to reflect the CARES Act provisions—most merchant systems will take several weeks to update. This means that these items may not be authorized at point-of-sale. If this happens, the participant would pay for the expense out-of-pocket and then submit a claim form to MidAmerica along with an itemized receipt. We would then process the claim and provide reimbursement.

Flexible Spending Accounts

The CARES Act further defines qualifying events as it pertains to the COVID-19 pandemic, ultimately providing greater flexibility for mid-year election changes on both medical and dependent care accounts.

Medical FSAs
As stay-at-home or shelter-in-place mandates continue to affect organizations across the country, change in employment status, reduction in hours or FMLA leave are becoming more common. As such, the Internal Revenue Service (IRS) recognizes the following as qualifying events that allow for election changes:

  •  Reduction in hours that causes a loss in coverage
  • A change in employment status
  • FMLA leave
  • A substantial change in employer benefits and cost

Dependent Care Accounts
For DCAs, the CARES Act recognizes that, as child care facilities and schools are temporarily closed, the need to increase or decrease the DCA election could be necessary. Some examples of these qualifying events include:

  •  Loss of child care services due to day care or child care facilities closing
  • The need for child care services due to school closures
  • Loss of employment or reduction in work hours that allows participant or eligible spouse/dependent to take of care in child in place of a day care or child care facility

For additional information on how the CARES Act and COVID-19 are impacting FSAs, download our Frequently Asked Questions document by clicking here.

If you are a current participant and need to change your FSA election due to one of the qualifying events above, download MidAmerica’s Change in Status Election Form by clicking here.

As MidAmerica continues to monitor COVID-19’s impact on our health & welfare plans, we are committed to providing updates to our partners, employers and participants. If you have any questions on the CARES Act, your benefits with MidAmerica, or need additional support during this time, we’re here to help. Our hours of operation have not been impacted and we are available via the contact information listed below.

Service Center Hours of Operation

8:30 a.m. – 8:00 p.m. ET Monday through Thursday
8:30 a.m. – 6:00 p.m. ET Friday
Phone: 800-430-7999
Fax: 863-686-9727
Email: [email protected]

Contact Information by Plan Type
Health Reimbursement Arrangements/Flexible Spending Accounts
Phone: 855-329-0095
Fax: 863-577-4460
Claims and Documentation Submission Email: [email protected]
General Inquiry Email: [email protected]

Employers and Alliance Partners
Please reach out to your dedicated account representative, account manager or our Account Management team by emailing [email protected].

Do you also have a retirement benefit, such as a Special Pay Plan, APPLE Plan or 3121 FICA Alternative Plan? To read more on how those benefits are affected by the recent CARES Act, click here.

*What is IIAS?
Many major pharmacies are registered as Inventory Information Approval System (IIAS) certified. The pharmacy’s IIAS system allows them to differentiate between eligible and ineligible expenses, making it possible for eligible HRA and FSA products to be automatically approved at the point of purchase.

The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law by President Trump, addresses several key issues introduced by the COVID-19 pandemic. The act acknowledges the economic impact the outbreak has had on the country and seeks to provide financial support to businesses, employees, individuals and families. Additionally, it specifically provides guidance on retirement and health care benefits, many of which MidAmerica administers on behalf of public sector employers and employees across the country. To help you better understand how the CARES Act impacts your 401(a), 403(b) or 457(b) retirement plan, we have highlighted the key takeaways below.

Hardship Distributions

The CARES Act includes a provision that allows eligible plan participants impacted by COVID-19 to access their retirement funds—free of penalty—up to $100,000 between January 1, 2020 and December 31, 2020. To be eligible to make such a withdrawal, the individual participant, or his or her spouse or dependent, must have been diagnosed with COVID-19, the individual suffered adverse financial consequences due to COVID-19 (e.g., furlough, reduction in working hours, unable to work due to child care, loss of business, etc.), or other factors as determined by the Treasury Secretary.

The legislation also permits those individuals to pay tax on the income from the distribution ratably over a three-year period and allows individuals to repay that amount into the plan over the next three years (presumably filing for a tax deduction on the taxes they will have paid as a result of the premature distribution). Those repayments would not be subject to the retirement plan contribution limits.

Plan Loan Limits

The Act also doubles the current retirement plan loan limits to the lesser of $100,000 or 100% of the participant’s vested account balance in the plan. Individuals with an outstanding loan from their plan with a repayment due from the date of enactment of the CARES Act through December 31, 2020, can delay their loan repayment(s) for up to one year.

This only applies to loans made on or before September 23, 2020 (180 days following enactment of CARES) and is only for individuals who meet the same conditions outlined for the withdrawals noted above. Subject to plan approval, scheduled participant loan repayments due from March 27, 2020 (the enactment of CARES) through December 31, 2020, may be delayed for up to one year for qualifying employees. Interest continues to accrue during the period and the plan can extend the term of the loan for up to one year.

Required Minimum Distribution (RMD) Adjustments

The CARES Act waives the requirement for any RMD that is required to be paid in 2020. This includes an individual’s first RMD which is attributable to 2019 (not paid by January 1, 2020). If an RMD has already been received during 2020, then the participant may roll it over and defer paying taxes, including rolling back into the plan. We expect the IRS to extend the 60-day rollover period. For example, if a participant turned 70½ in 2019 and has a Required Beginning Date of 4/1/20:

  •  But has not yet taken the distribution— then no distribution is required in 2020 (for the 2019 distribution year)
  •  And has a distribution taken after 12/31/19, it is subject to the waiver for 2020 and the amount can be rolled over
  •  And the distribution was taken in 2019, no relief is available

An RMD is calculated using the balance of an individual retirement account on December 31 of the year prior to the date it must be distributed to a participant. The Dow Jones closed at 28,538 on December 31, 2019. On March 27, 2020, the Dow Jones closed at 21,636.78—a significant decrease. An RMD calculated based on a December 31, 2019 value could lead to a disproportionate RMD relative to today’s account values, forcing a disproportionately large taxable distribution.

Please note the RMD waiver is already in place for applicable MidAmerica retirement plans.

Plan Amendments

The legislation further permits retirement plans to adopt these rules immediately, provided the plan is amended before the last day of the first plan year that begins on or after January 1, 2022, or later if prescribed by the Treasury Secretary.

Our approach to completing plan amendments has been outlined below:

  • If your organization’s retirement plan already offers loan provisions, MidAmerica will amend your plan with a CARES Act provision to allow for the new expanded offerings.
  • All of our 401(a), 403(b) and 457(b) retirement plans will be amended with a CARES Act provision to allow for the expanded hardship distribution offerings.

As MidAmerica continues to monitor COVID-19’s impact on our health & welfare plans, we are committed to providing updates to our partners, employers and participants. If you have any questions on the CARES Act, your benefits with MidAmerica, or need additional support during this time, we’re here to help. Our hours of operation have not been impacted and we are available via the contact information listed below.

 

Service Center Hours of Operation

8:30 a.m. – 8:00 p.m. ET Monday through Thursday
8:30 a.m. – 6:00 p.m. ET Friday
Phone: 800-430-7999
Fax: 863-686-9727
Email: [email protected]

Contact Information by Plan Type

APPLE Plan
Phone: 800-634-1178

Special Pay Plan
Phone: 855-329-0097

3121 FICA Alternative (Premier Plan)
Phone: 800-430-7999

Employers and Alliance Partners
Please reach out to your dedicated account representative, account manager or our Account Management team by emailing [email protected].

Do you also have a health & welfare benefit, such as a Health Reimbursement Arrangement or Flexible Spending Account?
To read more on how those benefits are affected by the recent CARES Act, click here.

At MidAmerica, we continue to closely monitor the ever-evolving COVID-19 pandemic, keeping the health and welfare of both plan participants and our own employees a top priority. We understand that now more than ever, our mission to take care of those who take care of our communities is crucial. As such, we wanted to provide an update on the actions we’ve taken to ensure plan administration and service remains uninterrupted.

Steps We’ve Taken
MidAmerica employees who are at greater risk for contracting COVID-19 were provided with essential work equipment and began working from home early last week in an effort to comply with social distancing recommendations. Additionally, we made significant investments to enable a large scale, long term work-from-home arrangement for critical function employees. As of Friday, March 20, all associates are prepared to work remotely.

We want to assure you that we will continue to carry out our core business functions and deliver on our service commitments. Our goal is to minimize disruptions, and we are working diligently to triage an increase of incoming requests and refine our remote work processes. We thank you in advance for your patience as we transition, while ensuring our partners, employers and, most importantly, participants continue to receive consistent, reliable service.

The Path Forward
The challenges of COVID-19 mean we’ll potentially navigate high call volume, as well as higher-than-usual claim and distribution activity. However, we’re confident in our ability to provide for both our plan participants and employers. We remain a strong and consistently profitable corporation, and our participant investment accounts are backed by American United Life Insurance Company®, a OneAmerica® company—an A+ rated financial institution by A.M. Best Co.

We’ll continue to closely monitor the situation at hand, all while evaluating additional measures to support our customers, partners, and communities. We’re here to help you through these uncertain times and are available during our normal business hours if you have any questions or concerns.

We greatly appreciate the trust you’ve placed in MidAmerica, and we’ll continue to work tirelessly and safely to care for those who do so much to take care of our communities.

Sincerely,

Jim Tormey
President & CEO

 

We’re here to help.

If you have questions or need additional support during this time, please contact us using the information below:

Service Center Hours of Operation
8:30 a.m. – 8:00 p.m. ET Monday through Thursday
8:30 a.m. – 6:00 p.m. ET Friday
Phone: 800-430-7999
Fax: 863-686-9727
Email: [email protected]

Contact Information by Plan Type
APPLE Plan
Phone: 800-634-1178

Health Reimbursement Arrangements/Flexible Spending Accounts
Phone: 855-329-0095
Fax: 863-577-4460

Claims and Documentation Submission Email: [email protected]

General Inquiry Email: [email protected]
Special Pay Plan
Phone: 855-329-0097

Employers and Alliance Partners
Please reach out to your dedicated account representative, account manager or our Account Management team by emailing [email protected].

PCORI Fee Extension

Posted on February 10, 2020

In 2010, the Affordable Care Act (ACA) created the Patient-Centered Outcomes Research Institute (PCORI). It’s a government-sponsored organization that helps patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans.

PCORI Fee Update
Under the ACA, the PCORI fees were scheduled to apply to policy or plan years ending on or after October 1, 2012, and before October 1, 2019. On December 20, 2019, a the SECURE Act was signed into law that extends PCORI fees 10 years, through plan years ending until September 30, 2029 (for calendar year plans, the final fee payment will be due by July 31, 2029). This means that specified health insurance policies and applicable self-insured health plans must continue to pay these fees through 2029.

What Happens Next?
This fee will apply to plans with calendar year plan years that end on December 31, 2019 and that payment will be due by July 31, 2020. Note there is some question regarding the fee’s application to plan years ending between October 1, 2019 and December 19, 2019, but we expect that the IRS will offer additional guidance on the matter.

PCORI Fee Filing
Plan sponsors of self-inured plans should be prepared to file the Form 720 and pay the 2019 fee by July 31, 2020. Plan sponsors of insured plans will not owe the fee, but they could see their health premiums increase as insurers look to recoup the fee through increased premiums. The IRS has not yet issued the 2019 fee amount, but we expect the IRS will do so in the near future.

MidAmerica continues to monitor the development on this change and will ensure that our partners, clients, and participants receive the latest information available.

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