FAQs in the Moment: How COVID-19 and the CARES Act Impact Health Accounts, Lifestyle Spending Accounts, Child Care, and More

Lifestyle spending accounts provide employers with a means to help their employees cover unexpected costs, whether in emergency situations or routine changes in everyday life.

As a form of employer-subsidized relief, lifestyle spending accounts can cover employee expenses in the following categories:

Lifestyle spending accounts are very flexible and can cover all employees or any defined subset of employees. If set up as post-tax accounts, there is no additional tax reporting required for employees or employers. Contributions are simply added to employees’ taxable income.   Additionally, employers may set different contribution amounts for employees.

Probably. While there is no explicit timeframe prescribed for a run-out period, employers should review their plan document with counsel and determine whether the plan can be amended to extend the run-out date. Extending the run-out period is an attractive option as it gives participants additional time to obtain and submit sufficient documentation for expenses incurred during the plan year.

Plan documents should likely be amended if possible and that amendment should be communicated to employees. Once your plan is amended, your FSA administrator should be able to quickly and easily update your run-out dates in their system.

Under IRS rules and as defined in employer plan documents, employees generally cannot make changes to their FSA elections unless they have a qualifying life event. However, a qualifying event as it relates to COVID-19 may include:

The COVID-19 pandemic has had an unprecedented impact on the lives of American workers, parents, and children. An employer’s dependent care flexible spending account program (also known as a “dependent care assistance program”) generally has flexibility during times like these while parents work.

Due to recent life events, participants may be eligible to increase or decrease their dependent care FSA elections for situations they may be experiencing, including:

Please to be sure to check your plan documentation for eligibility. If eligible, and experiencing an election change event, participants typically have 30 days from the date of the event to submit their request. Participants should contact their employer’s benefits office for more information on the process to change elections.

Yes, employees can change their HSA contributions at least once per month through their employer. If payroll contributions are no longer an option, employees can contribute directly to their HSA and it will still be an above the line tax deduction.

Please note that 2019 contributions can be made to your HSA until July 15, 2020 based on recent IRS Guidance.

The Internal Revenue Service (IRS) released guidance on March 11, 2020, clarifying that testing and treatment of COVID-19 is preventive care and therefore can be covered, pre-deductible, by a high deductible health plan.

IRS Notice 2020-15 explains that this accommodation is due to the “unprecedented public health emergency posed by COVID-19.” For more information, please see our related blog post.

The IRS has extended the 2019 tax-filing deadline until July 15, 2020. It is important to note that the tax responsibility for HSAs does vary by state. HSA participants should check their local state tax laws to determine if local authorities have extended tax filing deadlines in line with the federal extension, or work with their tax advisors to ensure correct filing.

For more information, please refer to IRS Publication 969.

 Employees have until the claims submission deadline to submit their HRA claims, but the date of service must be on or before their coverage termination date.

Since commuter orders are made with pre-tax funds, the IRS does not allow refunds to be issued. However, commuter benefits participants enrolled in ConnectYourCare’s program can return products for a credit, which can be used toward future orders.

Click here for a full list of transit agencies and return policies that are updated regularly.

If you are enrolled in a pre-tax parking program, you can contact your parking provider directly to best determine their credit options, since each parking provider operates independently and under its own rules.

Eligibility for COBRA is generally predicated on a loss of coverage. If your company is subject to the requirements of COBRA and a furlough results in a loss of group health coverage, then furloughed employees will generally be eligible for COBRA.

(Employers: Learn more about the dos and don’ts of administering COBRA with COBRA Academy.)

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into effect on March 27, 2020, and positively impacts participants’ purchasing power by expanding the list of eligible items.

Retroactively effective as of January 1, 2020, the CARES Act allows participants to now purchase the following items and services, pre-tax, using their HSA, FSA, or HRA:

Please keep in mind that merchants will need some time to get their point-of-sale systems and inventory updated with the expansive list of more than 20K newly eligible products.

You can view our updated list of eligible items here:

Please see our recent blog for more information on the CARES Act.