How Each Benefits Plan You Offer Has Evolved During Pandemic
April 28, 2020
For many employers, the start of their plan year was just a few months ago. In that time, the COVID-19 (coronavirus) pandemic and the legislation that followed have re-shaped the healthcare and employee benefits landscape. We’ve outlined some of our popular employee benefits offerings below and what recent changes may mean for you and your employees.
Employees who participate in Medical Flexible Spending Accounts (Medical FSAs) may do so for a variety of reasons, including:
- Recurring expenses, such as prescription drugs, annual check-ups or teeth cleanings.
- Anticipated major expenses, such as an upcoming surgery.
Many nonessential procedures and elective surgeries are being postponed due to the pandemic so healthcare facilities can focus their resources on urgent needs. As a result, your employees may be wondering how they will spend down their FSA balances.
If your employees do have funds in their Medical FSA that they’re concerned will now go unused, the CARES Act did expand FSA eligible expenses to include hundreds of over-the-counter drugs and medicines, along with menstrual care products. Our eligible expense list is updated to include these expenses. The CARES Act increased the number of expenses employees can spend their FSA funds on, which they couldn’t have anticipated when making the election.
Additionally, with so many schools and daycares closed, your employees’ Dependent Care FSA needs may have increased or decreased. Your employees can update their Medical FSA or Dependent Care FSA contributions in the middle of a plan year only when an IRS-approved qualifying event occurs and if your plan allows them to do so. Consult your plan document and a benefits attorney if you have questions.
Health Savings Accounts (HSAs) were also beneficiaries of the CARES Act reinstatement of over-the-counter drugs and medicines as eligible expenses. Unlike with FSAs, there’s no need to spend down an HSA balance because all HSA funds carry over from year to year. If your employees have surgeries or appointments that don’t happen this year, their HSA funds will still be there next year for when they need them. And if needs do emerge due to COVID-19, such as for thermometers, hand sanitizer or other eligible expenses, they’ll have funds available.
The CARES Act also allows High-Deductible Health Plans (HDHPs) with an HSA to cover any telehealth or remote care expenses in 2020 and 2021, even if the participant hasn’t reached his or her deductible.
Health Reimbursement Arrangements (HRAs) are customizable in so many ways. That means some HRAs may have been more influenced by the pandemic and the legislative responses to it than others. A couple common examples of how HRAs were affected are:
- Like with FSAs and HSAs, an HRA that reimburses for 213(d) eligible expenses saw those expenses expanded to include over-the-counter drugs and medicines.
- The Paycheck Protection Program, which is a part of the CARES Act, provided small businesses with forgivable loans during the pandemic. If you were able to take advantage of the program, you can use these funds for ICHRA reimbursement.
Lifestyle Spending Accounts (LSAs) are post-tax, employer-funded accounts that have been increasing in popularity. You get to decide what expenses are eligible, which is why these accounts have also become sought-after due to the COVID-19 pandemic. We’re currently offering a version of an LSA that’s called an Emergency Spending Account (ESA), which you can offer as a way to reimburse employees for common expenses related to the pandemic, such as:
- Additional daycare needs
- Work-from-home equipment (such as monitors, internet charges, cell phone expenses, etc.)
- Groceries meal delivery services
- Meal delivery kits
Beyond LSAs, if you’re looking for pandemic-related plans to help your employees, you can offer a Disaster Relief Payments (Section 139) plan, which may allow tax-free contributions to employees and employer tax deduction.
Many employees are working from home everyday during the pandemic. For those who participate in Commuter Benefits, this change has also completely changed the way they’re using these plans. If your employees need to adjust their contributions, they can easily do that in their online accounts. They should also communicate those changes to you since it would affect your payroll deductions.
For the most up-to-date information regarding your employee benefits, check out our COVID-19 resources page, which also includes information on new plans you can offer your employees during this challenging time.
The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.