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COVID-19 PPE is now FSA, HRA and HSA

On March 26, 2021 the IRS released guidance which allows Health Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs) to reimburse plan participants for amounts paid to purchase face masks and other personal protective equipment used to prevent COVID-19.  The guidance also allows owners of Health Savings Account (HSAs) to receive tax free disbursements from their account to cover the same expenses.

These new policies can be found in IRS Announcement 2021-7.  The IRS clarifies that the eligible expenses include “amounts paid for personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of the Coronavirus Disease….”  The announcement further clarifies that the new rule applies to expenses incurred as early as January 1, 2020.

If a Health FSA or HRA was written to exclude these items, the announcement allows the Plan Sponsor to adopt a retroactive amendment to make such expenses eligible so long as the amendment is written no later than December 31, 2022. 

Health FSA documents prepared by Admin America will not require an amendment to take advantage of this revised rule.  Our plans are already written to allow all expenses that are considered to be for medical care under Section 213(d) of the Internal Revenue Code (which now includes COVID related PPE as a result of this announcement).

Likewise, HRA documents that previously provided expense eligibility for all Section 213(d) medical care expenses will not need to be amended to take advantage of this new rule.  Plan Sponsors of other HRAs that would like to take advantage of this new rule by allowing Participants to be reimbursed for PPE expenses may contact an Admin America HRA administrator via e-mail at hra@adminamerica.com to request this change.

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Federal Income Tax Return Deadline Postponement Also Extends 2020 HSA Contribution Opportunities

In March, the IRS announced that Federal income tax returns and any tax payments in connection with those forms, with an original due date of April 15, 2021, are now due May 17, 2021.  The filing and payment extension for federal income tax returns automatically postpones to May 17, 2021, the deadline for making 2020 contributions to Health Savings Accounts (HSAs).  The extension is available to contributions made by individuals or employers.  If employer HSA contributions are made for a prior year, the employer must notify the HSA trustee or custodian and inform the employee of that designation.

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Update on COVID-19-Related Extensions Impacting COBRA and Claims Filing Deadlines

Last week the U.S. Department of Labor issued guidance regarding when certain COVID-19 related deadline extensions will end.  This new guidance was released in EBSA Disaster Relief Notice 2021-01 which can be found online here.  In short, the guidance clarifies that deadline extensions will continue beyond March 1, 2020 but the length of each deadline extension is determined on a case-by-case basis (instead of all deadlines ending on the same future day) and limited to one year. 

The guidance issued last week supplemented guidance originally announced last May by the DOL and the IRS (available online here).  The COVID related deadline extensions announced last year required group health plans to disregard certain deadlines under COBRA, ERISA and HIPAA.   Last May’s guidance had a clear starting point.  It applied to any deadlines that would have otherwise occurred on or after March 1, 2020.  The end point was not as clear.  There was not a specific date announced as to when the deadline relief would end. Instead it provided that the period for calculating deadlines would not start again until 60 days after the COVID-19 national emergency was declared over by the President.   While that definition seems specific, it was complicated by a one year limit on the DOL and IRS’s ability to extend these types of deadlines.  Therefore, as February 28, 2021 approached, there was uncertainty as to how the end of the deadline extensions would impact plans and participants.

Notice 2021-01 clarifies that applicable deadlines will be extended until the earlier of (1) one year from the date the deadline would have otherwise applied, or (2) 60 days after the end of the announced COVID-19 National Emergency. Once the extension period has ended, the period of time for determining the applicable deadline will resume. For example, if a COBRA qualified beneficiary would have been required to make a COBRA election by May 15, 2020, the deadline is extended until May 15, 2021. Similarly, a qualified beneficiary whose COBRA premium payment grace period for November 2020 should have ended on November 30, 2020 may now pay their premium for November 2020 coverage as late as November 30, 2021 (presuming the COVID National Emergency does not end at least 60 days before that date).

The Notice also indicates that plans should consider sending updated notices to participants regarding their revised deadlines. Plans are also advised to consider notifying participants who are losing coverage of other coverage options, such as through the recently announced COVID-19 special enrollment period in the Exchanges. The notice acknowledges that the COVID-19 pandemic and other circumstances may disrupt normal plan operations and reassures employers acting in good faith and with reasonable diligence that enforcement will emphasize compliance assistance and other relief. The notice indicates that other federal agencies with jurisdiction over employer sponsored group health plans concur with this new guidance and its application to laws under their jurisdiction.

Admin America is working with the vendors of our benefits administration software to incorporate this new guidance into our administrative procedures with the expectation that the necessary adjustments will be completed this month.  Employers and/or their professional benefits advisors with any questions about this most recent guidance are invited to submit their questions via Admin America’s online Q&A portal available here