January 19, 2021

Volume XI, Number 19

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January 18, 2021

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IRS Loosens HSA Rules for Coronavirus

On March 11, 2020, the IRS issued Notice 2020-15, to address an important coronavirus issue for high-deductible health plans that are coordinated with health savings accounts (“HSAs”).  The guidance paves the way for health plans to waive or reduce deductibles for any “medical care services and items purchased relating to testing for and treatment of COVID-19,” without affecting eligibility to make HSA contributions.

In general, employees may make and receive contributions to HSAs only if they are enrolled in a “high deductible” health plan.  With limited exceptions, covering medical expenses before the minimum deductible is reached would make employees ineligible to make or receive HSA contributions, and would subject employees who have made HSA contributions to an excise tax.  The HSA rules generally have an exception for “preventive” care, but not for services and items purchased to treat a disease.

The new guidance expands the scope of the “preventive” care exception, but is limited to testing and treatment of COVID-19.  Treatments for other conditions and diseases remain subject to the minimum deductible rules.

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© 2020 Proskauer Rose LLP. National Law Review, Volume X, Number 71
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About this Author

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.

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202-416-5840
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