In these uncertain times, we are finding that participants are using their pre-tax benefits as a way to optimize savings and maximize allowable expenses. This situation is difficult to navigate, so we have brief updates below to keep you informed. Read on for information on regulatory changes, COVID-19 updates, and other considerations.
Please note: We’re monitoring the situation and updating as quickly as possible, but this post may not contain the latest information. Please review the CDC, DOL, and WHO websites for the most up-to-date information. The information in this post is for educational purposes only.
Repeal of OTC Prescription Requirement / Menstrual Products Now Eligible for Reimbursement
- On Friday, March 27th, Congress passed the CARES ACT (COVID-3 Stimulus Bill). This act now allows OTC (Over the Counter) drugs and medicines including items such as Aspirin, Tylenol, cough, common cold, flu, and allergy medications to be purchased without a prescription for reimbursement from a Health Care FSA, HRA, or HSA.
- In addition, the act now allows menstrual care products, including tampons, pads, liners, cups, sponges or similar products, to be reimbursed under a Health Care FSA, HRA or HSA.
- The change is effective immediately and is retroactive back to January 1, 2020.
COVID-19 Testing Expenses
- As part of the Families First Coronavirus Response Act (COVID-2), all major medical plans must cover COVID-19 testing expenses at in-person clinics, ERs, Urgent Care Centers or Telehealth visits with no cost sharing (i.e. no deductibles, coinsurance or copays).
- HDHPs (high deductible health plans) and HSA eligibility are impacted. With this act, employees are encouraged to seek treatment or testing for COVID-19 as HSA qualifying plans may provide these services with no deductible or a deductible below the minimum required deductible for a HDHP. Despite the ‘no or lower deductible’ requirement, HSA participants will remain eligible to make/receive contributions.
Status Changes for Flexible Spending Accounts
Dependent Care Accounts:
The purpose of the Dependent Care Account is to enable employees (and their spouses) to work, apply for jobs, or go to school. Currently, many daycare centers/schools are closed, summer programs are closing or reducing hours, or parents do not feel comfortable sending their child to a daycare or summer camp. In these instances, participants may change their election amount or stop contributing altogether per the IRS allowable event of a ‘change in the cost or coverage of the care.’ For eligibility, please keep in mind the following:
- Participants must make the change within 30 days of the event (or a longer time period, if your plan document allows for that).
- The change must not be less than total contributions to-date.
- No refunds of previous contributions are allowed.
Health Care & Limited Purpose Accounts:
Unfortunately, some companies have needed to lay off or furlough employees. If that is the case for your organization, keep in mind the following regarding the allowable status changes that may be made to a Health Care or Limited Purpose Account:
- First, a participant may make a change if it affects eligibility for coverage and is consistent with the type of status change event.
- If benefits are kept active during a furlough or paid leave, then participants will not be able to change the election since they are still eligible for the FSA.
- If hours are being reduced and participants are losing eligibility for benefits as a result, then that is a COBRA-qualifying event. Participants should be offered the opportunity to continue paying for coverage after tax on a monthly basis, provided they are underspent (total contributions are more than total claims paid to-date).
- If an employee is on an unpaid leave of absence, the employer will need to follow the standard practices per your Cafeteria Plan Documents and leave policies. Many employers offer employees the ability to continue coverage during an unpaid leave on an after-tax basis during the leave or upon return (by taking payroll deductions for the premiums missed). Unless the employee loses eligibility for benefits during the leave, they wouldn’t be able to change the election. If they are losing benefits, then COBRA should be offered.
Transportation Account Changes
Unlike the Flexible Spending Accounts, participants may make changes to or stop/start contributing to parking and/or mass transit accounts at any time. Now that many employees are working from home and mass transit services are operating with reduced or no schedules, it is an ideal time for employees to make changes so contributions do not become unused by the employee. In that case, consider the following:
- Participants can stop or reduce contributing to either their parking or mass transit account.
- If participants are no longer using mass transit services but driving to work, consider direct contributions to a parking account.
- In some cases, individual merchants may offer refunds for contracts paid for March, April or future months that will go unused. Participants should check with their provider and inquire about getting a refund made directly to their debit card or other credit card. Merchants may have restrictions on the amount and timing of refunds. Please note that refunds apply only to payments made for contracts between merchants, not contributions deducted from pay checks.
Health Savings Accounts
In addition for participants to use HSA funds for all eligible OTC items, the IRS extended the deadline for participants to make after-tax contributions to 2019 Health Savings Accounts to July 15, 2020, to coincide with the extended tax filing date. Also, consider the following:
- If participants are laid off and receiving unemployment benefits, they may use HSA funds to pay for health insurance premiums under COBRA/Continuation.
- If you make employer contributions, consider accelerating those funds or changing the amount to accommodate a potential increase in COVID-19 or other medical related expenses. If you are not currently making an employer contribution, consider offering a one-time amount or smaller, incremental amounts over the course of the year.
- Extend the Run-Out Deadline: Employees might be wondering how they are going to get documentation submitted in time for the plan run-out period as many providers are closed. Although there are no changes to Grace Periods or Carryover amounts at this time, you can consider extending your plan’s run-out period for the 2019 (if the plan year ends is 2020) or for the 2020 plan year (or ongoing).
- Active Employees with a 2020 Account: If participants made elections for the purpose of receiving certain services or surgeries (i.e. crowns or LASIK) and the provider is closed, encourage them to look at other ways to use their funds. Employees can also obtain OTC items available without a prescription. Another option for purchasing OTC items is to use the FSA Store, which has a link on our website. They sell only FSA/HRA or HSA eligible items. Otherwise, remind employees to make sure to reschedule their appointments when providers start seeing patients again.
- Employees Retiring (or Leaving Employment) in 2020: If participants are retiring, being laid off, or are leaving soon and still have funds left to spend, but may not be able to see a provider because they are closed, they can be encouraged to elect COBRA. As a reminder, COBRA (or the ability to make after tax payments) is offered if an account is underspent (total reimbursements are less than total contributions at the time of the retirement date). Making these payments for as many months as needed during the plan year allows participants the ability to incur expenses beyond the retirement (or termination) date.