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As we discussed in our previous blog post, Temporary Relief Allows Flexible Spending Arrangements to be More Flexible, Section 214 of the Consolidated Appropriations Act, 2021, Pub. L. 116-260 (the “Act”), allows employers to offer an extended use-it-or-lose-it and/or extended spend-down periods during which participants in a health flexible spending arrangement (“ health FSA”) may have access to unused health FSA amounts until the end of the subsequent plan year and/or after they terminate participation in the health FSA mid-year, respectively. In certain cases, access to unused health FSA amounts can make an individual ineligible to contribute to a health savings account (an “HSA”).
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Continue Reading Preserving HSA Eligibility With An Extended Health FSA Use-It-Or-Lose-It Period

Section 214 of the Consolidated Appropriations Act, 2021, Pub. L. 116-260 (the “Act”), allows sponsors of health and dependent care flexible spending arrangements (“FSAs”) to delay forfeitures of unused account balances for 2020 and 2021 plan years and grant participants, including former participants, more time to spend down account balances. Section 214 and implementing guidance also give employers another opportunity to allow participants to change their elections with respect to FSAs and health plans. On February 18, 2021, the Internal Revenue Service (“IRS”) issued IRS Notice 2021-15 to help explain and expand the parameters of this relief.
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Continue Reading Temporary Relief Allows Flexible Spending Arrangements to be More Flexible

Employers that have employees residing in California are now required by AB 1554 to provide notification in two different forms to employees about deadlines for withdrawing funds from flexible spending accounts (“FSAs”).  One of the forms of notification may be electronic.  Examples of permissible notification forms include: e-mail, telephone, text message, mail, or in-person.  The notice requirement purports to apply to all FSAs, including dependent care FSAs, health care FSAs, and adoption assistance FSAs.  Virtually all other aspects of implementing the law are left open to interpretation.
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Continue Reading California’s New FSA Notice Requirement Leaves Employers Asking Questions

On March 13, 2020, the President declared the COVID-19 pandemic to be an emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford Act”).  The decision to declare an emergency is addressed in a letter from the President to Administration officials in which he explained that his decision to issue an emergency declaration was “based on the fact that our entire country is now facing a significant public health emergency.”

Employers may be wondering whether this declaration provides an opportunity to offer “qualified disaster relief payments” under Internal Revenue Code § 139 to employees as a means of mitigating the pandemic’s effects.  It is not entirely clear.  Because the President declared an emergency—not a major disaster—it is not clear, until we get further guidance from the IRS that employers that they may rely on Code § 139 as a means of providing tax-free benefits to their employees.  Section 139 refers specifically to a declared disaster as do the regulations under section 165(i), which are cross-referenced in the section 139 rules.  Less formal IRS guidance in the form of revenue procedures have conflated the two types of declarations in the past, however, and the IRS has indicated that for purposes of section 165(i), “a disaster includes an event declared a major disaster or an emergency.”  However, in the interim, employers may still adopt other policies, such as leave-sharing, that will ease the pandemic’s toll on affected employees.

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Continue Reading COVID-19 Emergency Declaration: Code § 139 Uncertain; Leave-Sharing Policies Permitted

In May, the IRS issued a private letter ruling to an individual taxpayer regarding the deductibility of 23andMe’s at-home DNA test kits under section 213(d) of the Code, which permits the deduction of medical expenses.  In the ruling, the IRS determined that an allocable portion of the purchase price may be treated as a deductible medical expense and the taxpayer may use a medical flexible spending account to purchase the kit.

23andMe provides a DNA collection kit that is used to collect a DNA sample from an individual and to send the sample to 23andMe for genetic testing.  The sample is then tested by a third-party laboratory.  The genetic information from the test is then analyzed by 23andMe and a report is provided to the individual with results from the laboratory and general information regarding genetic health risks, carrier status, wellness, and traits. The individual may then provide the information to a healthcare provider for additional testing, diagnosis, or treatment.

The IRS determined that the health services provided by 23andMe may be deductible medical expenses based on three revenue rulings, Revenue Ruling 54-457, Revenue Ruling 71-282, and Revenue Ruling 2007-72.  Revenue Ruling 54-457 determined that an allocable share of a lump-sum fee charged by a university for medical care and other expenses is eligible for deduction under section 213(d). Revenue Ruling 71-282 holds that the fee paid for storage of medical information in a computer data bank is deductible under section 213(d). Revenue Ruling 2007-72 determined that full-body scans performed without a doctor’s recommendation and for an individual experiencing no symptoms falls within the broad definition of “diagnosis,” which encompasses determinations that a disease may or may not be present, and includes testing of changes to the function of the body that are unrelated to disease.

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Continue Reading IRS Rules 23andMe’s Home DNA Kit Eligible for Partial FSA Reimbursement

(This article was originally published in Law360 and has been modified for this blog.)

Employers commonly offer a wide array of employee benefit plans and programs.  In addition to traditional staples, many employers today offer an employee assistance program, dependent care, accident insurance and even pet insurance.  In an increasingly competitive labor market, offering a full spectrum of employee benefits is an important way to maintain a competitive advantage.  While the type of programs offered have increased, employees may not always have sufficient knowledge to make use of them.  In a 2017 survey, only 60 percent of employees thought their employers effectively educated them to select the benefits options that meet their needs.  Underutilization means employers are not receiving the full benefit of their offerings.

That is why some employers are starting to use a navigator, or concierge service, to help employers realize a greater return on their investment in these programs by raising employees’ awareness of available benefits and promoting employees’ access and utilization of them.  Benefit concierge services raise several unique legal issues in the areas of data privacy, Health Insurance Portability and Accountability Act privacy, the Employee Retirement Income Security Act, and technology, to name a few.  With appropriate legal counsel and planning, many of these issues can be addressed.  This article highlights some of the legal issues that may arise when providing a concierge service.

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Continue Reading Beware Laws Intersecting Benefit Concierge Services

Taxpayers may treat the $6,900 original annual contribution limit for family coverage to health savings accounts (“HSAs”) as the limit for 2018, according to IRS guidance released on April 26, 2018 (press release; IRS Rev. Proc. 2018-27).  Employers that took steps to comply with the reduced limit may need to take action.

As discussed in our earlier blog post, the contribution limit for family coverage to HSAs for 2018 was reduced by $50 from $6,900 to $6,850.  Bowing to pressure from stakeholders who explained to the Treasury Department and IRS that implementing the reduction would impose administrative and financial burdens, the IRS announced that for 2018, taxpayers with family coverage under a high deductible health plan may treat $6,900 as the maximum deductible HSA contribution.

This is welcome relief for employers that had not yet taken steps to comply with the reduced limit.  However, for employers that already informed participants of the change and took steps to modify salary reduction elections or return contributions in excess of the lower limit, this guidance likely triggers additional action.

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Continue Reading Original HSA Family Contribution Limit to Remain in Place for 2018

For taxable years starting after December 31, 2017 and before January 1, 2020, the Tax Cuts and Jobs Act of 2017 adds a new Section 45S to the Internal Revenue Code that provides a tax credit for businesses offering paid family and medical leave (“F&M Leave”).  The IRS recently issued FAQs that begin to answer questions about F&M Leave and how the tax credit will work, but many open questions remain.
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Continue Reading New Paid Family & Medical Leave Tax Credit for Businesses

Long considered to be at the forefront of providing benefits to employees who take family and medical leave, California recently enacted a new law aimed at increasing the benefits paid out to employees who take time off to care for an ill or injured family member or for new child bonding. Meanwhile, San Francisco’s Board…

After years of confusing and sometimes contradictory signals (described in previous posts here and here), the Equal Employment Opportunity Commission has finally proposed a regulation explaining how employment-based wellness programs can satisfy the Americans with Disabilities Act. …
Continue Reading EEOC Proposes New Restrictions for Health Awareness Programs