Common Employer and Broker Partner Questions Related to COVID-19
To our partners:
Update 5/15/20: The Department of Labor and the IRS have been busy, with several new rulings released in the last 10 days. These primarily affect FSA, HRA, and COBRA deadlines. See our 5/13 webinar recording for more information. We’ll be providing additional details soon as we review these changes and make system adjustments accordingly.
Update 3/31/20: The CARES Act, passed by Congress on Friday afternoon in response to the COVID-19 crisis, includes a provision that allows reimbursement of OTC drugs and medicines without a prescription. You can read more about this in our blog post, and we’ve added some considerations below regarding this important change.
3/27/20: We are working daily to support your plans from both an administrative perspective and a compliance perspective during this unprecedented time. We will continue to provide information in writing and remain available to assist you by phone and email with your questions and scenarios.
While many things have changed due to the COVID-19 health crisis, at this point, the rules regarding Health and Dependent Care FSAs, HRAs, HSAs, Transportation plans, and COBRA largely remain the same. We continue to monitor any changes to applicable rules and regulations and will update you if and when guidance is released.
The information below is provided in response to common questions we are receiving from our partners and participants during this crisis. We also have a common questions post specifically for participants, which can be found here. These posts will continue to be updated as the situation progresses and as we monitor key developments and concerns of our clients.
If you don’t see your question here, or if you need more information about any topic, please do not hesitate to contact us – we’re here to help.
6/17/20 COBRA Compliance & Administration Update watch now
5/13/20 COVID-19 Era Updates: COBRA & Section 125 watch now
4/21/20 Key Compliance Topics During Health Crisis: Benefit Elections, Leaves of Absence, COBRA, & More watch now
Missed any of our emails on these topics? Catch up here:
4/2/20 OTC Prescription Requirement Repealed, and Other COVID-19 Information
6/16/20 Important update on COBRA deadline extensions
5/21/20 IMPORTANT: Update on COVID-19 Benefits Changes – Pre-Tax Elections, FSA, HRA, COBRA, & HSA
5/1/20 Compliance Alert: New Federal Rule Impacts Benefits Plans and COBRA
4/14/20 Update on Compliance Resources & Webinar Invitation for 4/21
3/27/20 Breaking News: Important Change for FSAs/HSAs/HRAs – OTCs Eligible w/o Rx
3/27/20 Compliance Update: Common Questions Related to COVID-19
Important recent updates (May 2020):
- Expanded pre-tax election changes are allowed under IRS Section 125 for the 2020 calendar year. As a temporary relief measure, through 12/31/2020, you may allow participants to make additional election changes outside of the usually strict requirements for health plan pre-tax premiums, Health FSAs, and Dependent Care FSAs. Please contact us if you have an employee election change request that you are not sure about, and we will be happy to help you evaluate the situation.
- Claims & appeals deadlines for Health FSA and HRA plans have been extended. For claims runout periods ending after 3/1/2020, this rule extends the final claim filing date to the end of the “Outbreak Period.” The Outbreak Period is defined as March 1, 2020 until 60 days after (a) a yet-to-be announced end of the COVID-19 national emergency, or (b) an end date announced by the regulatory agencies, which is not to extend beyond March 1, 2021. Typical runout periods are 90 days for FSAs and 90-180 days for HRAs, so this change affects most Health FSA and HRA plans that ended 12/31/2019 or later, and some HRAs that ended as far back as 9/30/2019. The final filing date for these plans has been extended in our system to at least 8/31/2020, and will continue to be changed as necessary depending on the duration of the outbreak period. Please note that this DOL/IRS rule was released on 5/4, and overlaps to some degree with IRS Notice 2020-29, released 5/12, which also affects the final filing dates for some FSA plans (explained below).
- Eligible dates of service have been extended for incurred expenses under Health FSAs & Dependent Care FSAs. For Health FSAs, Limited Dental/Vision FSAs, and Dependent Care FSAs that originally included eligible dates of service of 1/1/2020 or after, IRS Notice 2020-29 extends the dates of service to 12/31/2020. This includes all FSA plans that end in 2020, as well as Health FSA plans that ended 10/31/2019 through 12/31/2019 and included the 75-day grace period. For FSA plans that end in 2020 and include the 75-day grace period, the eligible dates of service extend through either 12/31/20 or the end of the grace period, whichever is later. This also effectively extends the claims runout periods for these plans to at least 12/31/2020. We have made these deadline extensions in our system for all applicable plans. That said, we are aware that certain employers may have exceptional circumstances such that the claims incurred extension could be problematic (including mid-2020 implementation of HSA bank accounts). We will do our best to accommodate such special request if the request is made to us by 5/31/2020. We will have less administrative flexibility after that time. Accordingly, we will be communicating this change to participants soon after 5/31/2020. Even so, know that participants are already able to file claims under the new deadlines and take advantage of the COVID-19 friendly rules.
- The maximum carryover amount for Health FSAs is increased for plan years beginning 2020 and beyond. Like the OTC prescription requirement changes, this change is intended to be permanent. For Health FSA plan years beginning in 2020, the amount that can be carried forward into 2021 plan years will increase from $500 to $550, and going forward will be indexed at 20% of the IRS Health FSA maximum election amount. This increase will automatically take place for affected plan years in our system.
- COBRA deadlines for elections & premium payments have been extended. ProBenefits is working with our partners and carrier contacts to determine how carriers will be handling the practicalities of these coverage changes and how state laws may apply. The extended deadlines apply retroactively to March 1, and will extend through 60 days after a defined “outbreak period.” More details to be provided soon to COBRA clients.
- HIPAA special enrollment periods & deadlines for plan sponsors to provide required notices have been extended. Special enrollment periods extended include: (1) period when employee or dependent loses eligibility for other health coverage in which they were enrolled, or when an eligible employee acquires a dependent through birth, marriage, or adoption; and (2) period triggered by changes in eligibility for state premium assistance under CHIP.
- Some of these recent changes do require updates to the legal documents for your plans. Our compliance team is working to address this need, and you will be receiving new documents soon. NOTE: Your participants are eligible to take advantage of the relief measures prior to your receipt of the updated SPD, so the documents are not a holdup to any new change.
CARES Act – Over-the-Counter Drugs and Medicines Considerations
- Eligible Items. The CARES Act includes a provision repealing a previous ruling from 2010 that required a prescription for reimbursement of over-the-counter (OTC) drugs and medicines from Health FSAs, HSAs, and 213(d) HRAs (HRA plans that include all IRS-allowed out-of-pocket medical/dental/vision expenses).
- The change is retroactive to the beginning of the year, so any OTC drugs and medicines (such as pain relievers, cold and allergy medicines, acne treatments, and many others) purchased since 1/1/20 and within an active plan year are now reimbursable without a prescription.
- The CARES Act also added menstrual care items to the eligible items list.
- Note that vitamins and supplements require a Letter of Medical Necessity for reimbursement, not a prescription; this requirement has not changed.
- Non-drug OTC medical supplies and equipment such as bandages and thermometers did not previously require a prescription or Letter of Medical Necessity (unless the item was dual-purpose), and this has not changed either.
- We have received many questions about the eligibility of masks and gloves. While the CARES Act changes did not affect these items, due to the current CDC recommendations for mask-wearing to prevent the spread of the virus, masks are currently eligible without a letter of medical necessity. Gloves still require a letter of medical necessity to be eligible. Read more here.
- Debit Card Usage. The master eligible items list used by most merchants around the country is expected to be updated with over 20,000 newly-eligible OTC drugs and medicines and menstrual care items by April 15th, 2020. At that point, each merchant will be responsible for updating their internal systems with the new information. Additional items will continue to be reviewed and added to the master list in the coming months. Due to the rather massive nature of this change, it is likely that participants’ benefits debit card experience with these items will be inconsistent in the near future; however, we expect that it will improve quickly. And in the meantime, participants may purchase these items out-of-pocket and submit a Health FSA or 213(d) HRA reimbursement claim or HSA distribution request on our web portal or mobile app.
- Previously Denied Claims. If participants have claims for OTC drugs and medicines purchased since 1/1/20 and during an active plan year that were previously denied due to no prescription, they may re-submit them and we will process them under the new rules.
Health FSA Considerations
- Termination of Employment. If an employee is terminated and loses coverage under the Health FSA, COBRA should be offered if the FSA is underspent. There is a terminated employee claims run-out period (usually 90-days) in which a terminated employee can submit claims for reimbursement for expenses incurred prior to termination.
- Rehire after Termination. If an employee is rehired during the same plan year, contact your ProBenefits Account Manager for assistance with determining the permissible election upon rehire. If an employee is rehired in a new plan year, the permissible election is the plan’s annual maximum for that plan year.
- Non-FMLA Leave of Absence/Reduction of Hours without loss of eligibility
- There is no allowable change event if the participant’s Health FSA benefit eligibility is not affected.
- If a participant is paid during the leave/reduction of hours, the Health FSA benefit can continue as is on a pre-tax basis.
- If a participant is on an unpaid leave, Health FSA contributions can be made by pre-payment before the leave (pre-tax), pay as you go (post tax), or catch up contributions (pre-tax) upon return based on the employer’s policy.
- Non-FMLA Leave of Absence/Reduction of Hours with loss of eligibility
- The beginning and end of an unpaid leave of absence with loss of eligibility for the Health FSA is a change event under IRS rules allowing the employee to change his/her election mid-year.
- If the event triggering the loss of eligibility is a COBRA event (e.g., reduction of hours), then COBRA should be offered if the Health FSA is underspent.
- FMLA Leave
- Participants can continue or revoke Health FSA coverage during FMLA leave. Remember some portion of FMLA may be paid and some portion may be unpaid.
- If paid FMLA, Health FSA contributions can continue as is on a pre-tax basis.
- If unpaid FMLA:
- The start of FMLA leave and return to work is an allowable change event permitting a mid-year election change.
- Participant contributions can be made by pre-payment before the leave (pre-tax), pay as you go (post tax), or catch up contributions (pre-tax) upon return based on the employer’s policy.
- Plan Design Questions
- Extension of Plan Year. IRS rules and regulations require a plan year to be 12 months or shorter. The current rules do not allow the plan year to be extended. We encourage employees who have appointments scheduled for the end of the plan year that are cancelled due to the crisis, to submit other eligible expenses they may have which have not yet been submitted for reimbursement and use FSA Store or other merchants to spend their funds. If the Health FSA has a carryover, this feature will help the employee maintain their funds (up to $500). If there is a grace period, the employee will have an additional 2 ½ months after the plan year ends to incur claims.
- Extension of Claims Runout. Unlike the plan year rules, the IRS does not require the claims runout period to be a certain length. Employers may amend their plans to extend the claims runout. Please contact your ProBenefits Account Manager for assistance.
- Extension of time to submit documentation. Employees who are unable to provide requested claim documentation to substantiate their claims can request an extension of time and we will grant the extension request. Again, you can also encourage employees to submit other claims they may have which have not yet been submitted for reimbursement.
- Saving for an elective procedure. Unfortunately, the IRS has not granted relief yet to aid employees who have set aside Health FSA dollars for elective surgeries that have been cancelled due to the crisis. We hope this relief will be addressed. In the meantime, we encourage employees to submit reimbursement for other claims and use FSA Store or other merchants to spend their funds.
- Extension of grace period. The IRS has not granted relief at this time to extend the grace period for plans with this feature beyond the allowable 2 ½ months.
Dependent Care FSA Considerations
- Terminated Employee. If an employee is terminated from employment, the Dependent Care FSA benefit terminates. There is a terminated employee claims run-out period (usually 90-days) in which the terminated employee can submit claims for reimbursement for expenses incurred prior to termination.
- Spenddown. Employees terminating with positive Dependent Care FSA balances can continue to submit claims during the terminated employee claim run-out period for expenses incurred during the plan year or during the terminated employee claim run-out period.
- Allowable Mid-Year Election Changes. Participants may want to consider whether they have already incurred expenses equal to their annual Dependent Care FSA election before changing the election mid-year. The following are events that allow a mid-year election change:
- Change in employment status or change in employment location (e.g., move from full-time to part-time or move to working remotely);
- Loss of eligibility (e.g., reduction of hours);
- Commencement of FMLA and return to work following FMLA; and
- Daycare provider is closed/opens due to the crisis.
- Furlough/Reduction of Hours. If there is a loss of coverage, then COBRA should be offered. Employers can keep employees on their plans but should check with insurance carriers and stop loss (if plan is self-funded) to ensure these partners are on board.
- Employer Subsidy of COBRA Premium. Employers subsidizing COBRA premiums can enter this information in our system when entering the COBRA qualifying event. Employers can specify the length of the subsidy and complete the subsidy information on a benefit by benefit basis. If you submit COBRA information through a file feed, the subsidy information must be set up through the employer’s ProBenefits Account Manager. We recommend that employers subsidizing COBRA premiums do so on a nondiscriminatory basis. Please let us know if you need any assistance.
- COBRA premium payment deadlines/late payments. The COBRA premium payment deadlines remain the same. No guidance has been issued at this time extending the deadlines. ProBenefits does not have authority to extend the payment deadline on behalf of the plans we administer.
- Large number of COBRA events/non–file case. If an employer has a large number of COBRA qualifying events to submit and they are not a file feed case, we can import a large number of qualifying events if we have the correct information.
- Contribution Changes Mid-Year. HSA contributions can be changed on a prospective basis (monthly). No change event is required.
- Deadline to Contribute to HSA Extended to July 15, 2020. Contributions may be made to an HSA for a particular year, at any time during the year or by the due date for filing the return for that year. Because the IRS granted relief extending the deadline to file Federal income tax returns to July 15, 2020, under this relief, participants may make contributions to their HSAs at any time up to July 15, 2020.
Transit/Parking Plan Considerations
- Employees may want to change their transit/parking plan elections if they are no longer using these services. This can be done monthly on a prospective basis. No change event is required.