In light of the legislative changes taking place in response to COVID-19, ConnectYourCare recently hosted a webinar to give a detailed overview of what employers need to know about benefits administration in this critical time. Our expert speakers Barbara Boudreau, EVP of Strategic Development, and Jon Kolean, Executive Leader of Client Success, provided their insights into the changes affecting benefits and offered other ways for employers to support workers during the coronavirus crisis.
If you missed the webinar or need a recap, this is a summary of all the key information you need to help your employees and answer any tough questions you may be getting about benefits at this time. We also include some great resources for a deeper dive into certain aspects of these benefits programs and the surrounding legislation if you want more information.
The CARES Act
The Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act makes more than 20,000 health care products more accessible for participants who have a flexible spending account (FSA), health savings account (HSA), or health reimbursement arrangement (HRA). It also allows telehealth services to be covered pre-deductible. The main aspects of the CARES Act employers should know include:
Over-the-counter (OTC) medicines – OTC medicines previously required a prescription from a medical professional to be eligible for reimbursement with FSA, HSA, or HRA funds. The CARES Act has ended that requirement permanently, so participants can purchase cold and flu medicine, fever reducers, pain relievers, and other similar products that people may need during the pandemic (and beyond). This update is retroactive to January 1, 2020, meaning any products participants have bought this year are eligible for reimbursement—they just need to submit receipts for those items. This is great news for many Americans since the average adult spends $400 to $500 a year on these health care products, and helps to solve some previous confusion over why a prescription was necessary for non-prescription products. Vitamins and supplements are not included in this expansion.
Menstrual care products – Menstrual care products like pads, liners, tampons, sponges, and cups are now included in the list of FSA/HSA/HRA-eligible items. Even after the COVID-19 crisis, participants will be able to save on these essential items by using pre-tax accounts to cover the cost, as this change is also permanent.
- Telehealth services – The CARES Act temporarily covers telehealth pre-deductible, meaning these services are covered just like preventive care for employees with high-deductible health plans (HDHPs) and HSAs. This is great news, because the social distancing measures mean that many people must use telehealth services for doctor’s appointments and other necessary health checks, which are not typically covered by HDHPs. Now, those employees can save their HSA funds for other necessary products and services since telehealth is covered by insurance. This temporary provision will remain in place until December 31, 2021, giving people plenty of time to take advantage of the telehealth coverage.
COVID-19 Treatments
The IRS released guidance on March 11, 2020, clarifying that testing and treatment of COVID-19 is considered preventive care and may be covered pre-deductible by HDHPs. These additional expenses for testing and treatment will not affect HSA eligibility, which allows participants to focus their HSA funds on other essentials during this time of heightened medical concern. For more details relating to COVID-19, check our Coronavirus Resource Center.
Tax-Filing Date Extension
The IRS has extended the federal 2019 tax-filing deadline to July 15, 2020, and many states have also provided an extension as well. This gives employers more time to file paperwork, allows employees to maximize their HSA contributions for the 2019 plan year, and helps employees in a furlough situation to make contributions. (For ConnectYourCare clients: employees can submit a form online through the myCYC® app and portal to add HSA contributions for the 2019 plan deadline. Participants are always welcome to contact the CYC customer support team for assistance.) You can learn more about HSA filing rules in our HSA tax tips blog.
Section 139 Relief
During a time of widespread disaster, employers may provide payments to employees for certain personal expenses as qualified disaster-relief payments that are free from payroll and income tax under Section 139 of the IRS Disaster Relief Payments tax law. The Section 139 crisis relief payments code was added after 9/11 and is typically used as a way for employers to provide extra support to employees during natural disasters. Your tax and legal counsel can assist you with determining if your program will qualify for this specific tax exemption.
Other Ways to Support Employees During the COVID-19 Pandemic
In addition to the legislative changes for COVID-19 that impact employee benefits administration, these are other great ways for employers to offer support during the crisis.
Crisis Relief Accounts – A Crisis Relief Account is a specific type of Lifestyle Spending Account that employers can provide to employees to cover expenses beyond those that traditional benefits cover. Lifestyle Benefits Accounts have been around for a long time, but are usually applied to fitness and financial planning services as an added perk. A Crisis Relief Account is designed to help employees affected by a crisis pay for personal expenses like groceries, rent, mortgage payments, utilities, dependent care, home office expenses, and other bills during an unexpected emergency. This type of account is also quick and easy to implement and completely customizable to suit companies of all types and sizes
To learn more about your options, check our in-depth Lifestyle Spending Account blog that details all the ways these accounts can be utilized during the pandemic.
COBRA – For employees facing job layoffs, COBRA continuation coverage is incredibly important. It provides employees and their families access to group health care plans in a time where qualifying events lead to loss of coverage. Many employers are also subsidizing COBRA coverage for employees because of the financial hardships and health concerns during the pandemic. Employers can choose to administer COBRA in-house, or outsource it to a third party to alleviate some of their administrative burdens and ensure compliance. If you want to know more about administering COBRA, including common mistakes to avoid and ways to stay compliant, check out our user-friendly COBRA Academy.
FSA and HRA – FSAs and HRAs can be added at any time to provide employees with pre-tax spending accounts to offset health care expenses like urgent care visits, emergency room visits, and telehealth appointments. Employers can also extend their FSA and HRA claim-filing deadlines to allow employees to avoid forfeiture of funds for 2019. However, employers should review their benefits plan document with legal counsel to determine whether the 2019 plan filing run-out date can be amended. (An additional note on FSAs: When reviewing the plan document, employers should also check the eligibility requirements for FSA allocation changes. Most plans allow employees to make FSA allocation changes whenever there is an employment status change such as a reduction in hours, going on FMLA leave, or even a change in the number of dependents.) Employees on paid leave may still be able to access FSA and HRA funds, but employees on unpaid leave may not be eligible, depending on the stipulations in employer plan documents.
Dependent Care FSA – An employer’s dependent care FSA generally has flexibility during times when child care or elder care services may have changed. Due to the pandemic, employees may be eligible to increase or decrease their dependent care FSA elections for situations including: change of day care provider; cost of care changes (unless the care provider is a relative); and need for care changes due to a job change or work hour change. For employees who may have dropped dependent care during the pandemic, they should be able to add the dependent care when it starts up again. As with a health care FSA, employees on paid leave may still be able to access dependent care FSA funds, but employees on unpaid leave may not be eligible, depending on the stipulations in employer plan documents.
Child care is the third-largest expense in the family budget behind food and housing –“The Cost of Raising a Child.” U.S. Department of AgricultureHSA – Employees can change their health savings account (HSA) contribution amount at least once per month—or possibly more or less depending on any limitations the employer may have put on changes. If payroll contributions are no longer an option, employees can still contribute directly to their HSA and file it as an above-the-line tax deduction. In addition, HSA On Demand® allows employers to give employees access to their entire HSA balance at any time during the plan year, to cover costs upfront without worrying about balance availability.
Commuter Benefits – Employers should know that the IRS does not allow refunds to be issued since commuter orders are made with pre-tax funds.
(Participants enrolled in ConnectYourCare’s commuter program can return products they purchased for a credit that can be applied to future orders. For employees enrolled in a parking benefits program, they will need to contact their parking provider to discuss their credit option since parking providers operate independently and have their own rules. ConnectYourCare can certainly help with those discussions.)
Current regulatory updates have allowed for more coverage from health care and other pre-tax accounts. When turbulent times occur, you want to be there for your employees to help them cover unexpected costs associated with changes to their everyday work and family routines. Organizations can empower and bring comfort to employees with consistent plan updates and information on plan features. The flexibility of tax-advantaged health care plans with built-in adjustments for life events should be embraced.
If you have further questions regarding the COVID-19 impact on pre-tax accounts and other ConnectYourCare solutions, don’t forget to visit our COVID-19 resources page.
