Throughout 2020 and 2021 during the COVID-19 pandemic, many people were struggling to use up the resources in their Health & Welfare Plans. To help people use their built-up account balances, the government passed legislation to change how people could access their funds.
Some of these laws are long gone, while others are ending soon and some are lasting indefinitely. In partnership with SHRM-Long Island, we had Alan Pfeffer and Scott Riordan discuss the details of this COVID-19 legislation and how it continues to impact H&W Plans.
This webinar was part of a three-part series, with one more coming up. SHRM credits can be received for attending the webinars live. For the full conversation of Alan and Scott, you can watch the webinar recording here.
This article summarizes their insights.
It’s important to understand which laws were temporary and no longer impact H&W Plans.
This Act allowed for significant flexibility when it came to the extended use of funds in Flexible Spending Accounts (FSAs).
Participants were allowed either a full carryover of health and/or Dependent Care funds or an extension of the grace period from 2 ½ months to 12 months.
These extensions and carryovers allowed people to tap into their dollars for a longer period of time, however, the changes were temporary and are no longer applicable.
This Act contained two major provisions that impacted the FSA and COBRA world. The legislation temporarily increased the dependent care FSA maximum from $5,000 to $10,500 for the 2021 calendar year.
Many businesses offer an off-calendar plan year and found this provision to be complicated if their plan year ran over into 2022. Legislation has been introduced that would permanently increase this maximum contribution, but for the time being, contribution limits are back at pre-pandemic numbers.
COBRA was also affected by ARPA. A 100% subsidy was offered to COBRA-eligible individuals from April 1, 2021, through September 30, 2021. This subsidy is no longer available.
Some legislation was introduced to help people during the pandemic, but its use has since become more permanent.
This major FSA update came out in March 2020 and allowed for over-the-counter medicine and drugs to qualify as eligible expenses for an FSA and Health Savings Account (HSA).
These purchases were eligible before 2011, then made ineligible after the Affordable Care Act, and now they are eligible once more under the Cares Act.
Employers should ensure their FSA Plan Document references the updated version of these plan expenses to include over-the-counter medicine and drugs.
This Notice issued by the IRS is related to the carryover provision for FSAs. Historically, FSAs have been a use-it-or-lose-it benefit. From 2013-2020, a carryover amount of $500 was allowed. With the new Notice, the maximum was increased to $550 and could be indexed with cost-of-living adjustments.
The carryover limit remains adjustable and could be potentially raised. The limit always sits at 20% of the contribution maximum for the year, putting the maximum for 2023 at $610.
Employers do not take on any more risk by adopting the provision, as participants have already funded their accounts.
Some legislation was introduced during the pandemic that is soon coming to an end.
These Notices concerned the timelines tied to benefit plans. When Notice 2020-01 was implemented, the rule said certain timelines would be extended until the end of the national emergency plus an extra 60 days at the end of the outbreak period. The ambiguity of how long this change would last created a lot of stress for many employers and administrators.
More clarity on the timeline changes was offered with Notice 2021-01, which gave the extension an end date: None of the deadlines could be extended more than 12 months. These changes were mandatory for employers.
The White House originally released a statement in January 2023 indicating that the National Emergency will end on May 11, 2023. However, on April 11, 2023, H.J.Res. 7 was executed by President Biden, ending the National Emergency earlier than expected as of April 10, 2023.
The end of the National Emergency plus 60 days constitutes the end of the Outbreak Period, when the normal timelines take effect. As a result, the normal timelines for COBRA elections/payments, as well as FSA/HRA claims filing deadlines will resume on June 9, 2023.
After three years of a National Emergency, deadlines are returning to normal. If you offer a Health FSA and Health Reimbursement Account (HRA), consider communicating the updated plan filing deadlines to your participants. COBRA members should also be informed their extensions are coming to an end.
For more details on H&W Plans or help communicating changes to your participants, contact us.
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