The Internal Revenue Service (IRS) confirmed in an announcement that expenses for personal protective equipment (PPE) for the primary purpose of preventing the spread of COVID-19, such as masks, hand sanitizer, and sanitizing wipes, are qualifying medical expenses under IRS Code Section 213(d). This means that COVID-19 PPE expenses are eligible for reimbursement under health flexible spending arrangements (FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer medical savings accounts (MSA).
The announcement provides IRS confirmation for plans that have already been permitting COVID-19 PPE reimbursements. Employers with plans that have not allowed COVID-19 PPE reimbursements thus far may allow these reimbursements retroactive to January 1, 2020, at the earliest. We recommend employers check in with their vendors who administer their HSA, FSA, and/or HRA to determine if any further action will be required for their specific plan(s). Most plans already allow for all Section 213(d) expenses to be reimbursable, so an amendment to the plan may not be necessary.
Plan Amendments: Employers who must amend their plan to allow for COVID-19 PPE reimbursements must do so before the last day of the calendar year following the end of the plan year in which the change takes effect. For instance, employers that want COVID-19 PPE reimbursements to be effective as of January 1, 2020, must amend their plan before December 31, 2021. Retroactive amendments are not permitted after December 31, 2022.
Notice to Employees: Employers may want to notify plan participants about the ability to reimburse COVID-19 PPE so they can take advantage of the new IRS guidance. Below is sample language employers can use (employers should fill in the bracketed sections according to their plan amendments):
Our [Health Savings Account, Flexible Spending Account, and/or our Health Reimbursement Arrangement] plan(s) now provide for the reimbursement of personal protective equipment (PPE) for the primary purpose of preventing the spread of COVID-19, including protective masks, hand sanitizer, and sanitizing wipes. This provision is effective for expenses incurred after [insert the applicable effective date, with January 1, 2020 being the earliest].
- Review your health FSA, HRA, and/or HSA plan documents to determine if your plan does not currently allow reimbursements for COVID-19 PPE.
- If reimbursements are not currently allowed, determine whether to allow COVID-19 PPE reimbursements and the effective date for the changes.
- Connect with your program vendor to implement COVID-19 PPE reimbursements and amend plan documents, as needed. Some program vendors have communicated to employers that they will automatically begin permitting these reimbursements.
- Communicate these eligible reimbursements to plan participants.
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved