Amending Cafeteria Plans for CARES Act and Other COVID-19 Related Changes

Miller Johnson

Most employers have not had to amend their Section 125 Cafeteria Plans in several years. However, in light of COVID-19, employers must consider whether amending their Cafeteria Plans is necessary and, if so, when the amendment must be formally adopted (i.e. signed).  Cafeteria Plans may require amendments for the:

• Additional flexibility for employees to make mid-year election changes in 2020; Extensions of deadlines that occurred in 2020 for purposes of Medical and Dependent Care Flexible Spending Accounts (FSAs);
• Indexing of the maximum carryover for purposes of medical FSAs; and
• Reimbursement of over-the-counter (OTC) medicines and drugs that are not prescribed and menstrual care products from medical FSAs.

While the deadline to amend Cafeteria Plans for most of these changes is December 31, 2021, the amendment to allow the reimbursement of OTC medicines and drugs without a prescription and menstrual care products in 2020 must be adopted during the 2020 plan year. Employers should also be aware of a “quirky” IRS rule that may make it problematic for a medical FSA to reimburse OTC medicines and drugs without a prescription and menstrual care products before the necessary amendment to the Cafeteria Plan is formally adopted.

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