The U.S. government continues to develop and enact legislation to aid employers and individuals in light of COVID-19. Today, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes, among numerous provisions designed to stimulate and protect the American economy, a provision to allow individuals to use their Flexible Spending Account (FSA), Health Reimbursement Arrangements (HRA), and Health Savings Account (HSA) funds tax free to purchase over-the-counter medications without the need for a doctor’s prescription. In addition, health plans can now cover telehealth services prior to the minimum HSA-qualified deductible having been met without affecting HSA eligibility.
The CARES Act considered “Part III” of the legislative response to the coronavirus pandemic, with the Coronavirus Preparedness and Response Supplemental Appropriations Act as “Part I” and Families First Coronavirus Response Act as “Part II”. It includes many spending provisions and tax relief for individuals and businesses.
Over the Counter (OTC) Medications
Under the CARES Act, over-the-counter (OTC) medications are eligible for reimbursement from Health Care FSAs and HSAs (as well as HRAs that cover all IRC § 213(d) expenses) without a prescription. This is a reversal of a rule that took effect in 2011 under the Affordable Care Act (ACA) that required a doctor’s prescription for reimbursement of OTC medications.
Additionally, all menstrual care products (including tampons, pads, liners, cups, sponges, or similar products for menstruation) will now be considered medical care under IRC § 213(d) and can be reimbursed from a Health Care FSA (other than a limited health FSA), certain HRAs, or HSA.
This change is made effective retroactive to January 1, 2020. Therefore, individuals who previously purchased OTC medicines or menstrual products can request reimbursement for these items if they saved their store receipts. As with all FSA, HRA, or HSA expenses, receipts are required for reimbursement.
Please note that any electronic payment card, such as the Employee Benefits Corporation Benefits Card, may not immediately work for many of these purchases. The Special Interest Group for IIAS Standards (SIGIS) is actively working to add OTC medication and menstrual care products to the list of expenses that are automatically substantiated with the card at the point of sale. Until these products are added, participants may want to purchase the item with another form of payment and submit a claim form along with an itemized receipt for reimbursement.
A change of this nature is not considered a permitted election change event, therefore participants will not be able to adjust their Health Care FSA elections because of it. However, any funds in a Health Care FSA will be able to be used for OTC medications or menstrual products purchased on or after January 1, 2020, which might enable participants to use up their Health Care FSA balances sooner than predicted.
Similar to COVID-19 testing and treatment, HSA-qualified high deductible health plans can now cover telemedicine services prior to the minimum IRS deductible having been satisfied without impacting HSA eligibility. Prior to this change, having first-dollar coverage for telemedicine would have been considered disqualifying coverage for HSA contributions. This exception will only be allowed for plan years beginning on or before December 31, 2021.
You May Have Missed…
On March 20, the IRS announced a postponement of the tax filing deadline for individuals until July 15, 2020. Since the deadline to make prior-year HSA contributions is tied to the tax filing deadline for that year, this change provides additional time for individuals to make after-tax HSA contributions for 2019, until July 15, 2020.
Keeping up with Changes
In the coming days, weeks, and months, we know that federal, state, and local governments will be considering additional measures to support individuals and businesses impacted by this national health crisis. Below are some helpful links to help you stay abreast of legislative and regulatory changes enacted at the federal level.