Relaxation of Cafeteria Rules

Relaxation of Cafeteria Rules

On May 12, 2020, the federal government made temporary changes to Section 125 of the Internal Revenue Code as to flexible benefit plans, or cafeteria plans, in order to provide tax relief and flexibility during the COVID-19 pandemic. These changes can be found here. Under normal IRS rules, employees elect health coverage before each plan year during the open enrollment period and cannot change these elections, except in limited circumstances. IRS Notice 2020-29 suspends these rules and permits employers to amend their Section 125 plans to allow for mid-year changes to coverage for the 2020 plan year, regardless of whether the change would normally be allowed under pre-existing IRS regulations. Employers have discretion on how to implement these newly-allowed changes. The employer also has discretion not to allow any changes at all.