The coronavirus pandemic has changed nearly every aspect of our society, and it's also resulting in new rules and regulations. The CARES Act loosened the regulations around retirement fund loans and withdrawals, for example, some banks and creditors are providing more flexibility when it comes to making debt repayments, and social distancing guidelines are changing the way Americans live their everyday lives.
There's one other new rule, though, that could affect your finances. And by taking advantage of this new opportunity, you could potentially save a lot of money.
New IRS rules under COVID-19
Amid the COVID-19 crisis, many people are realizing their current healthcare coverage doesn't fit their needs. As a result, the IRS is making one big change to help people make the most of their healthcare.
Under the IRS's new rule, you can now make mid-year changes to your healthcare plan. Normally, you're only allowed to make changes during the open enrollment period, so if you decide mid-year that your plan no longer works for you you're stuck with it until the next enrollment period rolls around. With this new rule, however, you can enroll in healthcare coverage, switch plans, or revoke existing coverage.
There's one caveat to consider, though: It's up to your employer whether to allow these changes. The IRS allows employers to amend their healthcare benefits, but employers are not required to do so. An organization may also choose to implement some of these amendments but not others. For example, your employer may allow you to switch from a more expensive plan to a less expensive plan, but you might not be able to sign up for coverage if you weren't previously enrolled.
Because it's up to each organization to decide whether to allow workers to make mid-year changes to their plan, check with your employer to see whether this is an option. If so, consider whether it would be a good idea to make adjustments. If your healthcare situation has changed and you require more or less care than you did when you initially signed up for coverage, it might be wise to rethink how much coverage you need.
How this rule can affect your FSA
In addition to being able to adjust your healthcare plan mid-year, the IRS is also allowing employees to make changes to their health and dependent care flexible spending accounts (FSAs). Again, it's up to your employer to decide whether to allow these changes. But under the new IRS rule, employers can allow workers to start or stop contributing to an FSA, as well as change the amount they contribute.
The IRS has also created more flexibility around FSAs. Typically, FSAs have a "use it or lose it" policy, meaning you'll lose whatever money you don't spend by the end of the year. However, under the IRS's new rule, employers can allow workers to carry over up to $550 of their unused funds into the next year.
Finally, the IRS is allowing employers to extend the FSA grace period. Normally, if you haven't spent all the funds in your FSA by the end of the year, you're allowed an additional 2-1/2 months at the beginning of the next year to spend it. However, the IRS now allows employers to extend that grace period through the end of the year. Keep in mind, though, that for health FSAs, employers can choose to adopt the carryover or extended grace period rule, but not both.
The coronavirus pandemic has caused significant financial hardship for millions of U.S. households, and many Americans are struggling just to get by. However, by taking a look at your healthcare plan and FSA and making adjustments as necessary, you could potentially save more money.