COVID-19 Update
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act created new laws and guidelines surrounding COVID-19, to be effective January 1, 2020, and made some revisions to the Families First Coronavirus Response Act (FFCRA) that was signed earlier this month.
OTC Eligible Expenses Expanded
The CARES Act expanded the qualified healthcare expense that can be purchased with a Flexible Spending Account (FSA), Health Savings Account (HSA) and Health Reimbursement Arrangement (HRA), once again allowing over-the-counter medications to be purchased. This includes non-prescription pain relievers, allergy medicine and cold/flu medications. Also included in the expansion is the coverage of menstrual care products under a FSA, HSA or HRA.

While McGregor & Associates, Inc. is ready to approve these new charges, we do anticipate inconsistencies in participant's shopping experiences. With the change to allowable expenses, merchants will need to update their point of sale systems. Over-the-counter medications may be allowable at one merchant, but not another as the industry makes the transition. If participants experience trouble paying for over-the-counter medications, we recommend them paying out of pocket and submitting the receipt to us for reimbursement.
Retirement Plan Provisions
Coronavirus-Related Distributions
Under the new rules, plans may permit eligible individuals to withdraw, penalty-free, up to a total of $100,000 from their retirement accounts in a coronavirus-related distribution. A coronavirus-related distribution is made during 2020 to an individual:
  • Who is diagnosed with either SRS-COV-2 or COVID-19 by a test approved by the US Centers for Disease Control and Prevention (CDC); or
  • Whose spouse or eligible dependent is diagnosed with either of the above diseases; or
  • Who, due to either of the above diseases:
  • Experiences adverse financial consequences as a result of being quarantined, furloughed, or laid-off; or
  • Has his or her work hours reduced; or
  • Is unable to work due to lack of childcare; or
  • Who is subject to other factors, as may be determined by the Secretary of the Treasury.
These distributions are subject to the following requirements:
  • Limit to $100,000 per tax year, aggregated across all plans of the employer or controlled group.
  • Not subject to 20% mandatory tax withholding upon distribution,
  • Exempt from 10% early withdrawal penalty generally applicable to distributions made to participants who are 59 1/2 or younger.
  • Eligible to be indirectly rolled into an IRA or employer plan within 3 years from the date the distribution is taken.
  • Amounts not indirectly rolled into an IRA or employer plan are included in gross taxable income, ratable, over 3 tax years (beginning with the tax year of the distribution), unless the participant elects to include all amounts in a single tax year.

Coronavirus-Related Loan Relief
Two types of loan relief were also provided:
  1. Plans may allow eligible participants to take loans up to the lesser of $100,000 or 100% of the participant's vested account balance for the specified period.
  2. Upon the request of an eligible participant, plan sponsors must suspend loan repayments due on outstanding loans that are in good order for a period of up to 12 months. This relief expires on December 21, 2020. The suspension period is to be added to the original loan term when repayments, including accrued interest, resume, regardless of the length of the loan's original term.

Waiver of Required Minimum Distributions (RMDs)
Qualified 401(a)/(k), 403(b), and governmental 457(b) plans will not be required to make any RMD payments for 2020. If a 2020 RMD is provided, it may be rolled over to an IRA or employer plan. A participant's RMD or beneficiary's life expectancy RMD for 2021 will need to be paid.

Defined Benefit Plan Relief
The CARES Act provides a delay in 2020 funding obligations as well as benefit restrictions. All single-employer funding obligations due during 2020 are not required to be made until January 1, 2021, with interest for late payments. A plan sponsor may elect to apply the plan's funded status for the 2019 plan year in determining the application of benefit restrictions for plan years which include calendar year 2020.
McGregor & Associates, Inc. is committed to providing our clients with updated information as it applies to their benefit offerings. If you have any specific questions or concerns regarding the Families First Coronavirus Response Act (FFCRA) or the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and how they might affect your benefit plans, please do not hesitate to contact us at 859.233.4377.