The CARES Act, a landmark stimulus law passed by Congress today, includes a provision that will benefit participants in Health Flexible Spending Accounts (“FSAs”), Health Savings Account (“HSA”) bank accounts, and certain Health Reimbursement Arrangements (“HRAs”). The CARES Act repeals a rule from the 2010 Affordable Care Act that disallowed tax-free reimbursement of over-the-counter drugs or medicines (collectively “OTC”) without a prescription. This was an unpopular change that removed a tax break for employees beginning in 2011.
With this development, Health FSAs and HSAs can again cover OTC without prescriptions. Eligible OTC includes any drugs or medications that are primarily for treatment (not cosmetic or for general health). Most medical devices and supplies are already eligible without prescription, so there is no change with respect to those.
For FSA plans that we administer and HSA accounts that we support, this change is effective immediately. We are making and confirming necessary changes for cards, systems, and processes to implement the change, and
will provide additional practical details soon.
For HRA plans that include all IRS-allowed out-of-pocket medical/dental/vision expenses, those plans will immediately allow OTC coverage. Other types of HRA plans that define eligible expenses more narrowly will be unaffected by the change. Examples include deductible or coinsurance/OOP reimbursement plans.
Extension of 2019 HSA Bank Account Contribution Deadline to 7/15/20
The standard rule is that contributions toward the calendar year limit for HSA bank accounts must be made by the income tax deadline of April 15 each year. With the extension of the income tax deadline to 7/15/20, HSA account holders may now contribute funds through 7/15/20 toward the 2019 annual maximum.
As a reminder, HSA bank account contributions made through payroll may be changed on a monthly basis. This is a long-standing exception to the IRS Section 125 annual election rule. Any prospective change in HSA contributions is allowed without need for a qualifying event.
Clarification: No Deadline Extensions for COBRA Premium Payments, FSA Claims Runout, etc.
As of today, no guidance has been issued extending COBRA premium payment deadlines. COBRA already includes a payment grace period of 30 days past the due date. We are not expecting a change to that timeframe, but we will work with all COBRA clients regarding any changes or specific scenarios that employers wish to accommodate.
For FSA/HRA plans, the standard plan year and claims runout period deadlines apply. Our team will assist with any questions or special requests from employer plan sponsors. Otherwise, know that we continue to fulfill our role as service provider in working on behalf of your benefit plan(s), and we do not have authority to extend the plan year or claims runout period deadlines.
Links to Participant & Employer FAQs; Additional Resources
We currently have blog posts on our website including working lists of (1)
common participant FAQs
. These will continue to be updated as the situation progresses and as we monitor key developments and changes impacting our clients.
Also available are written resources on key topics such as how to handle benefit elections during a leave of absence. Our admin and compliance teams also remain available to assist with specific questions and scenarios.
If you need more information on these or any topics,
contact our team
. For more details on ProBenefits administrative or compliance services, visit