May 25th 2020

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YOUR WEALTH

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A new IRS relief guidance will allow temporary election changes to Health Plans and flexible spending accounts. It's worthwhile to take some time to look into these changes.

Since Covid-19 has greatly impacted many individuals' health-care and dependent-care expenses, it has caused people to have over- or under-estimated expenses. If funds are not used by the end of the year on qualified expenses, they're generally forfeited to the company. However, the IRS is offering some relief now by allowing for mid-year changes to health plans and FSAs. Workers can also opt to put less money in an FSA and keep more in their pocket during this time.

Ordinarily, the opportunity to make changes to workplace health plans and FSAs happens only once a year. Of course, workers can make mid-year changes to their contribution to a dependent-care FSA if they experience a major life change, such as a divorce, job loss, death or new child.

The IRS guidance also allows for changes to pre-tax FSA and loosens the "use-it-or-lose-it" restrictions by increasing the "carryover" in spending accounts to $550, from $500, as well as extending the carryover period by six months.

That could free up a lot of cash considering that employees can contribute up to $2,750 for health care and $5,000 for dependent care this year.

Stay safe, everyone. Wear a mask when you go out and wash those hands!

For more key stuff like this, please follow me on Twitter @jimpavia and check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow.

In an effort to assist our audience when it comes to money, we urge you to sign up for our 8-week learning course to financial literacy, plus get tips on managing your money during times of crisis, delivered to your inbox. Visit: www.cnbc.com/money101/.

Jim Pavia
@JIMPAVIA

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