Recently, the IRS issued guidance in IRS Notice 2024-71 and IRS Notice 2024-75 expanding (1) expenses treated as amounts paid for medical care to include certain types of contraception (which allows those expenses to be a pre-tax benefit) and (2) the list of preventative care services under a high-deductible health plan (HDHP) that can be covered before the deductible is met, explained further below.
Compliance Snapshot
- Amounts paid for condoms are now eligible to be paid or reimbursed under a health Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA), and Health Savings Account (HSA).
- Preventative care benefits provided before an HDHP deductible is met are expanded to include over-the-counter oral contraceptives, including emergency contraceptives, and male condoms.
New Guidance
Eligible Expenses under a health FSA, HRA, or HSA. Generally, amounts treated as expenses for medical care under Section 213(d) are eligible to be paid or reimbursed under a health FSA, HRA, or HSA. Further, medical care is defined by Section 213(d) as any amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. As explained in IRS Notice 2024-71, the IRS will now provide a safe harbor treating amounts paid for condoms as expenses for medical care under Section 213(d) and as such, those expenses are eligible to be paid or reimbursed under a health FSA, HRA, or HSA.
HDHPs & Preventative Care Coverage. An HDHP is generally not permitted to provide benefits for any year until the minimum deductible for that tax year is satisfied, except for preventive care. IRS Notice 2024-75 expands preventative care benefits provided under an HDHP to include over-the-counter oral contraceptives, including emergency contraceptives, and male condoms, effective for plan years that begin on or after December 30, 2022. The means that coverage for such expenses can be provided under the HDHP before the deductible is met and will not impact an individual’s ability to contribute to an HSA.
The notice also clarifies that:
- All types of breast cancer screening for individuals who have not been diagnosed with breast cancer are treated as preventive care;
- Continuous glucose monitors for individuals diagnosed with diabetes are generally treated as preventive care; and
- Certain insulin products is treated as preventative care regardless of whether the insulin product is prescribed to treat an individual diagnosed with diabetes or prescribed for the purpose of preventing the exacerbation of diabetes or the development of a secondary condition.
Employer Takeaways
Employers should be aware of these developments, and consider:
- Notifying employees of the change in eligible expenses, for employers who offer a health FSA, HRA, or HSA, and work with your Section 125/cafeteria plan vendor to make any plan amendments. Note that a plan amendment will only be required if plans itemize eligible expenses in their plan documents (versus a broad definition of covering 213(d) medical expenses, which is most common).
- Working with your carrier and/or third-party administrator (TPA) to ensure your HDHP (if offered) accommodates benefits described above without requiring a deductible.
Additional Resources
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
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