July 4, 2022

Volume XII, Number 185

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July 01, 2022

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Congress Reopens Door For HSA With No-Deductible Telehealth, But With a Hole

Effective April 1, 2022, high-deductible health plans can once again offer first-dollar coverage for telehealth and other remote services without making participants ineligible for health savings account (“HSA”) contributions.  The relief runs only through the end of 2022, and the regular high-deductible health plan requirements generally apply for the months of January through March 2022.  (But there is no gap if the plan’s current plan year started before January 1, 2022.)

By way of background, to be eligible to make or receive contributions to an HSA, an individual must be covered by a high-deductible health plan.  Subject to limited exceptions, coverage under a health plan before the minimum deductible is satisfied would make plan participants ineligible to make or receive HSA contributions.  If contributions are made while a participant is ineligible, the contributions would have to be included in the participant’s income (i.e., subject to income tax) and the contributions would be subject to a 10% additional tax.

Section 223 of the Internal Revenue Code includes exceptions to the minimum deductible requirement for preventive care, employee assistance programs, and certain other “permitted insurance.”   The 2020 CARES Act (Coronavirus Aid, Relief, and Economic Security Act) added an exception for telehealth and other remote services, but that exception applied only from enactment of the CARES Act through the last plan year that started before January 1, 2022.

The Consolidated Appropriations Act of 2022 (signed into law on March 15th) restores the exception for telehealth and other remote services, but only for the period from April 1 through December 31, 2022.  This means that if a plan’s year started at any time from January 1, 2022 through March 31, 2022, and the plan did not impose the minimum deductible for telehealth or other remote services from the start of the plan year through March 31, 2022, the plan would not be a high-deductible health plan for that period.  Consequently, participants covered by the plan would be ineligible to make or receive HSA contributions for that period.

Plan sponsors who were expecting the telehealth exception to be restored back to January 1st should consult with counsel on practical ways to ensure that participants retain their eligibility for HSA contributions.

© 2022 Proskauer Rose LLP. National Law Review, Volume XII, Number 81
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About this Author

Jonathan M. Weiss Litigation Attorney Proskauer Rose Los Angeles, CA
Partner

Jonathan Weiss is a partner in the Litigation Department. Jonathan represents both plaintiffs and defendants in a wide range of high-stakes litigation, including antitrust, class action, financial services, securities and other complex commercial litigation. Jonathan has won multiple noteworthy jury verdicts, including the fourth largest jury award in the history of the State of Arizona (over $110 million), and has significant appellate experience briefing and arguing appeals in both state and federal courts across the nation.

Jonathan has been recognized as a “Rising Star” by...

310-284-4524
Seth Safra, Proskauer Law Firm, Employee Benefits, Executive Compensation and ERISA Litigation Attorney
Partner

Seth Safra is a partner in the Employee Benefits & Executive Compensation Group, where he counsels clients on all aspects of employee benefits and executive compensation.

Seth advises clients on ERISA and other related laws with respect to the design and administration of qualified and non-qualitied retirement plans, including defined contribution (including 401(k) and ESOPs) and cash balance plans. In addition, Seth counsels clients on their health & welfare plans, including advising on issues related to health care reform.

...
202-416-5840
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