Today (March 26, 2021) the IRS announced that “the purchase of personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of coronavirus are deductible medical expenses under Section 213(a) for purposes of personal income taxes.
The amounts paid for personal protective equipment are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).
BUT, there’s a catch….ANOTHER amendment MAY be required to your plan document(s)!
The IRS specifically stated :
Group health plans, including health FSAs and HRAs, under the terms of which expenses for COVID-19 PPE may not be reimbursed, may be amended pursuant to this announcement to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after January 1, 2020, and such an amendment will not be treated as causing a failure of any reimbursement to be excludable from income under § 105(b) or as causing a § 125 cafeteria plan to fail to meet the requirements of § 125. Group health plans may be amended pursuant to this announcement if the amendment is adopted not later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, no amendment with retroactive effect is adopted after December 31, 2022, and the plan is operated consistent with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date the amendment is adopted.
If your health FSA allows full scope reimbursement of 213(d) medical expenses, a plan amendment is not needed. If however, the definition of reimbursable expenses is not broad enough, an amendment is required to allow reimbursement of these additional expenses. Even if the definition of reimbursable expense is broad enough, the employer should consider a communication piece to participants letting them know that this expense is reimbursable going forward and retroactively to January 1, 2020. If for any reason the expenses were submitted and denied, it is the participant’s responsibility to re-submit.
|IMPORTANT: Other reimbursement requirements still apply, including the requirement that an expense be incurred, and that the incurred expense be reimbursed from health FSA dollars attributable to the year in which the expense was incurred. For health FSAs operating on a calendar year, PPE expenses incurred in 2020 still must be paid with health FSA dollars attributable to 2020. In other words from health FSA carryover dollars. PPE expenses incurred in 2021, may be paid with carryover dollars from 2020 or with new dollars attributable to the 2021 health FSA calendar year. Another health FSA requirement is that all expenses be adequately substantiated and incurred for the benefit of a person that is covered under the health FSA (e.g., employee, spouse, dependent child(ren)).|
If you need assistance with a plan amendment, clarification regarding this IRS announcement, or any other benefits-related questions, please feel free to contact us.
As a leader in employee benefits law, Darcy Hitesman founded HitesmanLaw in order to help public and private employers, insurers and third-party administrators nationwide stay informed and minimize the risk of non-compliance issues.
HitesmanLaw provides a wealth of legal experience to their clients in the areas of ERISA, COBRA, HIPAA, Health Care Reform, welfare plans, cafeteria plans, HRAs, and VEBAs.
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