As the COVID-19 pandemic changes daily, this may result in changes to rules surrounding your pretax benefit plans administered by HRC Total Solutions (HRCTS). Our goal at HRCTS is to provide helpful information on these changes to allow Employers and Participants a better understanding of how their Plans are affected.

 

Health FSA & Limited Purpose FSA Accounts (FSA/LPFSA):

Can participants change their Health FSA or Limited Purpose FSA election due to COVID-19 Pandemic?

 

  •          Answer: Election changes are only permitted if the participant has experienced an IRS approved Qualifying Event. At this time, the IRS has not released any new rulings allowing a change to elections due to the COVID-19 Pandemic.

 

How does the Cares Act, signed into Law on March 27, 2020 by President Trump affect these Plans?

 

  •          Answer: The Cares Act enhanced the Health FSA Accounts by allowing Over the Counter (OTC) medications/drugs and Menstrual Care Products to be eligible FSA expenses retroactive to January 1, 2020. Prior to this new law, OTC medications/drugs required the participant to obtain a prescription (Rx) or Letter of Medical Necessity (LMN) from their Provider in order to use their pretax FSA contributions towards these expenses. Please note, if your Limited Purpose FSA is considered a Post-Deductible FSA, these rules will apply to your Plan also.

 

Has there been any new rules surrounding extending Runout Periods on these Plans?

 

  •          Answer: The IRS has not released any rulings surrounding the length of the runout for these Plans. Keep in mind, the Employer has the legal ability to contact their Administration and request to extend the runout timeframe for their Plans. A standard runout period is 90 days for Plans administered by HRCTS but can be extended upon request.

 

Have there been any new rules surrounding extending the timeframe participants have to incur expenses for their current FSA/LPFSA Plan Year?

 

  •          Answer: Unfortunately, the IRS has not released any new rulings allowing participants to incur expenses outside of their current Plan Year. At this time, participants can only be reimbursed for expenses incurred within their FSA/LPFSA Plan year. Keep in mind, if your Plan has the 2 1/2 month Grace Period feature, you are allowed to incur additional expenses for 75 days after the end of your Plan year.

 

 

If an employee is Laid-off from work, how are these Plans affected?

 

  •          Answer: There have not been any new rulings on how these Plans are affected due to the COVID-19 Pandemic. That said, you would approach a layoff like you would normally by terminating the participant from the Plans and offering them under COBRA if the participant is eligible to be offered these Plans under COBRA. As a reminder, a terminated employee is only eligible to be offered the Health FSA or Limited Purpose FSA under COBRA if they have underspent their account. (Meaning they have contributed more to their Health FSA/LPFSA vs what was reimbursed from the Plan)

 

If an employee is on a Furlough/unpaid Temporary Leave of Absence, how are these Plans affected?

 

  •          Answer: This scenario would require the Employer to suspend the Plan for the participant, which including suspending the debit card, during this unpaid leave. Participants would then catch up on their missed contributions upon return to work and they can then submit for reimbursement for any eligible expenses incurred while on their unpaid leave.

 

Dependent Care FSA Accounts (DCA):

 

Can participants change their Dependent Care FSA election due to COVID-19 Pandemic?

 

  •          Answer: Though there have not been any new rulings allowing additional Qualifying Events for this Plan. The current IRS approved Qualifying Events does include a Change in the Cost of the Daycare Program. That said, a current participant is permitted to decrease their election or terminate their account due to the closure of their daycare as it is looked at as a change in the cost of the Daycare Program. Keep in mind, participants may prefer to reduce their election vs terminate their DCA account in order to have the ability to increase their election upon the date their dependents return to their Daycare program. It is also a benefit to have the DCA participant reduce their election vs terminate the account if they have a balance in their DCA plan so they can spend it down on expenses incurred once their dependents return to their Daycare program. If the participant terminates their account, they will have a runout period to submit claims incurred within the Plan year and would forfeit any unused funds after the runout has ended.

 

If an employee is Laid-off from work, how are these Plans affected?

 

  •          Answer: There have not been any new rulings on how these Plans are affected due to the COVID-19 Pandemic. That said, you would approach a layoff like you would normally by terminating the participant from the Plans. The participant would have a 90-day Runout period to submit claims incurred prior to termination and within the Plan year allowing them to reduce or exhaust their DCA account balance vs forfeiting unused funds.

 

 

If an employee is on a Furlough/unpaid Temporary Leave of Absence, how are these Plans affected?

 

  •          Answer: This scenario would require the Employer to suspend the Plan for the participant, which including suspending the debit card, during this unpaid leave. Participants would then catch up on their missed contributions upon return to work and they can then submit for reimbursement for any eligible expenses incurred while on their unpaid leave. Please note, the IRS typically doesn't allow DCA expenses incurred while the member is not "gainfully employed" so they would not normally be able to submit for expenses incurred while on leave upon return to work. At this time, HRCTS is taking the stance that any eligible DCA expenses incurred while on leave will be eligible for reimbursement as the IRS most likely will not penalize anyone for reimbursement of any fees to a participant has to pay in order to "HOLD" their dependents spot in their Daycare Program.

 

Commuter Transit & Parking Accounts (TRN/PKG):

 

Can participants change their Commuter Plan election due to COVID-19 Pandemic?

 

  •          Answer: The good news on this Plan is that the IRS does not require a participant to experience a Qualifying Life Event in order for a change of election or to all the member to terminate their participation in the Plan. Keep in mind, participants may want to simply decrease their election to $0 while not needing the benefit if they have a current balance to avoid forfeiting any unused funds. Upon return to work, they can increase their election and use up any balance they have in their account on eligible expenses.

 

Health Savings Accounts (HSA):

Has the length of time to submit 2019 HSA Contributions been extended due to the COVID-19 Pandemic?

 

  •          Answer: The IRS has confirmed that 2019 HSA Contributions may be accepted up to the Tax Return filing deadline of July 15, 2020.

 

Can participants change their contribution amount at any time?

 

  •          Answer: Yes, participant can request to change their election by contacting their Employer directly. The Employer will then be required to notify their Payroll Administrator of the changes in order to stop or update any future pretax deductions from the participants' payroll. The Employer would then be responsible to notify HRCTS of any changes through their HRCTS Employer Portal.

 

What if employees are terminated from Employment and elect the HSA Compatible Medical Plan under COBRA, can they still contribute to their HSA administered by HRCTS?

 

  •          Answer: Yes, any HRCTS HSA participant can submit contributions to their account through their HRCTS Online Portal or the HRCTS Mobile App. These would be post-tax contributions, but the participant would capture any tax savings when they file their personal Tax returns.

 

 Are Employers required to continue contributing to HSA Plans for employees who are laid off?

 

  •          Answer: No, Employer HSA Contributions are not COBRA eligible and do not have to be continued after an employee is terminated from the Plan. Keep in mind, the HSA is portable, and the participant can continue to use their funds towards out of pocket expenses incurred after termination.

 

Can Employers amend their HSA Employer Contribution Schedule due to the COVID-19 Pandemic?

 

  •          Answer: An employer must use the same contribution method for all employees who were comparable participating employees for any month during the calendar year. That said, an Employer can make a change to the amount they contribute as long as they are making comparable contributions each month for all employees eligible any given month.

An Example is as follows:         

Beginning on January 1, employer Eastco contributes $50 per month on the first day of each month to the HSA of each employee who is an HSA-eligible individual on that date. Eastco does not contribute to the HSAs of former employees. In mid-March of the same year, employee Xena, an HSA-eligible individual, terminates employment after Eastco has contributed $150 to her HSA. After Xena terminates employment, Eastco does not contribute additional amounts to her HSA. In mid-April of the same year, Eastco hires employee Yolanda, an HSA-eligible individual, and contributes $50 to her HSA in May and $50 in June. Effective in July of the same year, Eastco stops contributing to the HSAs of all employees, and makes no contributions to the HSAs of any employee for the months of July through December. In August, Eastco hires employee Zoltan, an HSA-eligible individual. Eastco does not contribute to Zoltan's HSA. After Zoltan is hired, Eastco does not hire additional employees. As of the end of the calendar year. Eastco has made the following HSA contributions to its employees' HSAs: $150 to Xena's HSA, $100 to Yolanda's HSA, $0 to Zoltan's HSA, and $300 to the HSA of each employee who was an HSA-eligible employee and employed by Eastco from January through June. Eastco's HSA contributions satisfy the comparability rules.*

HRCTS will be working diligently to update our Clients and Partners with any new changes that affect these Plans if/when any new rulings are released by the IRS. If you have any specific questions on your Plans, please contact your Dedicated Account Manager at HRCTS, email clientrelationsdepartment@hrcts.com or call our Employer Customer Service Team using 603-647-1147 Ext 2.

 

 

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