These are challenging times. New information is coming out on a daily basis. There is a good chance that the way you run your personal life today is not the way you were running it when the new year started. We asked our writers to create articles that help you run your personal life while maintaining your social distancing. We will be adding new articles every week.
If you are someone who contributes money to a healthcare or dependent care flexible spending account (FSA) to take advantage of tax free money for these expenses, odds are good that because of the coronavirus you either won’t come anywhere near the amounts you initially expected to spend on healthcare or childcare this year, or your expenses may have actually surpassed your initial expectations – depending on your individual situation. Fortunately, the government made provisions within the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) to allow people to adjust the money they’ve allocated to such plans, or to use the funds for expenses that are traditionally excluded.
Between social distancing and stay-at-home orders that forced schools across the country to switch to virtual learning and parents to work from home, many people who typically rely on childcare no longer had the need for – or the ability to utilize – such care over the past few months. Added to that, ongoing social distancing requirements have caused the majority of camps to close this summer, eliminating another major expense that many people earmark for part of the funds they contribute to Dependent Care FSAs. On the flip side, many families who typically rely on older family members for childcare suddenly found themselves having to spend money on such care due to concerns about jeopardizing the health of older family members.
The impact on people’s anticipated healthcare costs has been similar, with social distancing forcing most doctors and healthcare workers to close up shop over the past few months for anything other than critical care or emergency conditions. As a result, many people’s healthcare or childcare costs will be significantly different for the 2020 calendar year than they had initially projected.
Given these realities, the CARES Act has altered the rules surrounding FSA and health savings account (HSA) plans. Though the elections a person makes for FSA contributions are typically set in stone once made – meaning you cannot increase or reduce the amount of money you’ve allocated after the election period, and you lose anything not spent on qualifying costs during the calendar year it was earmarked for – the Internal Revenue Service is making an exception because of the coronavirus. The IRS is letting companies give employees the option to change the amount they are contributing to their healthcare and dependent care FSAs, whether they want to decrease or increase their contributions. The maximum contributions, however, remain the same, with an annual contribution limit of $500 for child care costs in 2020 and a limit of $2,750 for healthcare FSAs.
The IRS has also expanded the items that FSA money can be used for in 2020 due to the pandemic, including non-prescription pain, allergy, and cold medicines, and feminine hygiene products.
It pays to review your spending to-date and talk with your employer’s benefits department to see if you have the option of adjusting your FSA accounts for the 2020 calendar year.