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Writer's pictureKarl J. Ruth Jr.

Reminder: COVID-19 Guidance for Section 125 Midyear Election Changes


The IRS released Notice 2020-29, which provides temporary flexibility for midyear election changes under a Section 125 cafeteria plan during calendar year 2020. The changes are designed to allow employers to respond to changes in employee needs as a result of the COVID-19 pandemic.


This guidance relates to midyear elections for:

  • Self-insured and fully insured employer-sponsored health coverage

  • Health flexible spending arrangements (health FSAs)

  • Dependent care assistance programs (DCAPs)

Employees may be permitted to prospectively make election changes described in the notice, regardless of whether they satisfy existing midyear

COVID-19 Guidance for Section 125 Midyear Election Changes election change rules.


The relief applies to all types of health FSAs, including limited-purpose health FSAs. In addition, employers are permitted to limit midyear elections for health FSAs and DCAPs to amounts no less than amounts already reimbursed.


Employer Action Steps

Employers using this relief may determine the extent to which such changes are permitted and applied. If these changes are permitted, the employer must adopt a plan amendment by December 31, 2021, and inform employees of the change. The amendment may be retroactive to January 1, 2020.


Changes to the plan may implicate other applicable laws, such as participant notification requirements under the Employee Retirement Income Security Act of 1974 (ERISA).

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