TAX IMPLICATIONS EXIST FOR TAXPAYERS MAKING 2021 HEALTHCARE PLAN ELECTIONS
In light of the COVID-19 pandemic, health insurance coverage is particularly important this year. The Internal Revenue Service (IRS) took the unusual step in 2020 of authorizing mid-year changes to health plan elections and flexible spending accounts (FSAs) due to so many persons having changed circumstances due to the pandemic. Now, we are approaching the regular annual enrollment periods with the pandemic still with us. The individual mandate, which under the Affordable Care Act required a payment with a tax return for failure to maintain minimum essential health insurance coverage, was repealed effective January 1, 2019. Also, the Supreme Court will be reviewing a case that may decide whether the repeal of the individual mandate invalidates the entire Affordable Care Act.
Uncertain times and healthcare enrollment flexibility
Surrounded by this uncertainty, the healthcare enrollments for the 2021 year are proceeding in the normal fashion, with the exception that some of the deadlines may be more flexible if COVID-19 issues have interfered with meeting the deadlines.
Employee enrollments in employer-sponsored health plans typically occur in the last quarter of the year. Even if employees were able to do mid-year 2020 revisions to their health plans and FSAs, they must still enroll again for 2021
Despite the uncertainty around the Affordable Care Act, open enrollment with the Health Insurance Marketplace continues normally for 2020, with the 2020 open enrollment period from November 1, 2020 to December 15, 2020, with coverage starting January 1, 2021
A special enrollment period with the Health Insurance Marketplace may also be available for the remainder of 2020 for people who have special situations, such as lost health coverage, getting married, moving, or having a baby or adopting a child
Open enrollment for MEDICARE health and drug plans runs from October 15, 2020 through December 7, 2020
Eligible low-income individuals may enroll in MEDICAID or the Children’s Health Insurance Program (CHIP)
Individuals affected by COVID-19 may be granted extensions of some of these deadlines
The medical expense deduction threshold, which remains at 7.5 percent of adjusted gross income on 2020 tax returns, under current law reverts to 10 percent of AGI for 2021 tax returns
Wolters Kluwer Tax and Accounting 2020