The Internal Revenue Service has issued guidance (Notice 2020-15) that allows sponsors of high deductible health plans (“HDHPs”) to reimburse up to the full cost of medical care services and items for testing and treatment of COVID-19 before plan participants meet the plan’s minimum statutory deductible. Accordingly, participants in a HDHP that waives
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.
Changes to cost of living adjustments for health savings accounts (“HSAs”) by the Tax Cuts & Jobs Act of 2017 (the “Act”) caused a $50 decrease in the contribution limit for family coverage to HSAs for 2018. The limit was reduced from $6,900 to $6,850 (original limit here; revised limit here).
This affects only 2018 contributions for employees with family coverage who have exceeded or made elections that will exceed the original HSA contribution limit for 2018.
The Equal Employment Opportunity Commission (“EEOC”) has requested that the United States District Court of Minnesota stop Honeywell from implementing a wellness program that would provide financial incentives for undergoing biometric screenings. The EEOC is challenging Honeywell’s program on grounds that it would violate the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). The EEOC’s request is a surprising development because, as recently as last year, the EEOC stated that it has not taken a position on whether and to what extent providing a financial reward to participate in a wellness program violates the ADA. In addition, EEOC staff have not previously given any public indication that providing incentives to spouses for participating in a wellness program violates GINA. Consequently, many employers provide financial rewards to encourage participation in wellness programs up to the limits permitted by the Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Affordable Care Act (“ACA”). Employers that offer financial rewards (or impose financial penalties) for participation in wellness programs that request medical information or involve medical examinations should take note of this development.
Update: On November 3, 2014, the District Court judge denied the EEOC’s request.
The IRS issued a notice on October 31 modifying the long-standing “use-or-lose” rule that applies to health flexible spending arrangements (“Health FSAs”). The new rule permits participants to apply up to $500 of unused Health FSA contributions to pay for expenses incurred in the next plan year, if the employer amends its Health FSA to permit such carryovers. Although plan sponsors are not required to offer the carryover, for the first time in 30 years, they have the option to do so.
Participants in Health FSAs may contribute up to $2,500 per year (indexed) to a Health FSA on a pre-tax basis to pay for medical expenses not otherwise covered by an employer’s health plan. Health FSAs come at a price, however — generally, unused amounts contributed to a Health FSAs must be forfeited at the end of the year and cannot be carried over to a future year or cashed out. The IRS modified this rule in 2005, permitting plans to adopt a “grace period” that allows a participant to use contributions made in one year to pay for medical expenses incurred during the first 2 ½ months of the next year.
In response to public comments, and in particular the concern that the forfeiture requirement was discouraging lower paid employees from making Health FSA contributions, the IRS has now added another option for employers — they may amend their Health FSA plans to permit employees to carry over $500 in contributions from year 1 to pay year 2 medical expenses. Employers are not required to permit carryovers, and may specify a carryover amount of less than $500.