COVID-19 Frequently Asked Questions

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The disruptions caused by COVID-19, the novel coronavirus, are making many people wonder how their spending accounts are impacted. This guide provides answers to many questions being asked.

We've compiled a list of commonly asked questions from members and employers due to COVID-19. Check back often, as we’ll continue to update this page with the questions/responses as they come in. If you have a specific question that is not addressed, or need more information, please contact our service team.

Members

Here are answers to common questions members are asking regarding COVID-19 and their spending accounts.

Has the IRS expanded the eligible expenses list due to COVID-19?: Yes, medical spending accounts are now allowed to reimburse for over-the-counter (OTC) items. The funds can now be used to purchase OTC medical products and feminine hygiene products without a prescription from a physician. This change occurred on March 27, 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a permanent change to the eligible expenses list, and includes retroactive purchases made after 12/31/2019.

Additionally, personal protective equipment ("PPE") was added to the eligible expenses list effective for purchases dating back to January 1, 2020. This means masks, hand sanitizer and sanitizing wipes are now eligible for reimbursement from HSA, FSA, HRA, and VEBA accounts. This addition was announced March 26, 2021.
Why is my debit card getting declined when I purchase a newly approved eligible expense item? What should I do?: Further now allows for these newly approved eligible expenses and we have made the updates. However, the mechanism that allows medical spending account debit cards to work is dependent on SIGIS, an organization that manages the global transaction approval system for eligible expenses. Their systems should be working, but if there is trouble with a debit card, members should manually submit for reimbursement from their accounts.

Dependent Care Assistance Program (DCAP)

I am not working at this time due to the COVID-19, can I decrease my DCAP election amount as I do not need daycare services right now?

Yes, the COVID situation provides several possible reasons to allow an election change. For example, the IRS allows an election change for:

Reductions in hours
Change in employment status
FMLA leave
Substantial change in employer benefits/cost
Change of cost from the provider
Change of provider resulting in change of cost

For more information on how to make an election change, or to download the qualifying event form, visit our DCAP Elections Change Events page.

My child’s school is closed due to the COVID-19, I still must work though, can I increase my DCAP election?

The election may be increased if the child being unable to attend school results in an increase in daycare expenses. For example, both spouses work during the school year and one does not work when school is out, so they never needed day care until now.

For more information on how to make an election change, or to download the qualifying event form, visit our DCAP Elections Change Events page.

What happens if I get laid off or terminated and my employer terminates my DCAP?

You can still submit claims for expenses through the end of the plan year and you have until the claim’s submission deadline set by your employer to submit them. You can get reimbursed only for the amount you have paid in.

My daycare is currently closed due to COVID-19. Do I still need to provide valid documentation for reimbursement on my DCAP?

The IRS requires appropriate documentation for reimbursement from your DCAP. Unfortunately, we are not be able to process claims until we have appropriate documentation on file.

Medical Flexible Spending Account (FSA)

What happens if I get laid off or terminated and my employer terminates my FSA?: You can still submit claims for expenses up to the termination date of the FSA, and you have until the claim’s submission deadline set by your employer to submit them.; Employers do have the option to allow medical FSA participants who terminate during the 2020 or 2021 plan year to spend down their unused balances for expenses incurred through the end of the plan year in which the termination occurred. Please check with your employer to determine if this spend down option is available to you.
If I go on COBRA, can I still use my FSA?: Yes, if you elect COBRA you are able to continue using your FSA.
I have increased medical expenses due to the COVID-19, can I increase my FSA election amount?: You can increase or decrease the election amount as a "COVID" qualifying event if your employer allows this option.

Health Savings Account (HSA)

When is the HSA contribution deadline for tax year 2020?: The IRS has extended this year’s federal tax return filing deadline from April 15 to May 17. This also applies to Form 1040 and allows Health Savings Account (HSA) holders to make HSA contributions for the 2020 tax year until May 17, 2021. Account holders can also make withdrawals for excess contributions up to this deadline.

Three states affected by the winter storms, Texas, Oklahoma, and Louisiana, were granted an additional extension. Members filing in these states now have until June 15 of this year to make HSA contributions and excess contribution withdrawals for the 2020 tax year.

In addition, the IRS announced an extension to the filing date for 5498s to June 30, 2021.
I am not working at this time due to the COVID-19, can I change my HSA election amount?: Yes, you can update your elections at any time with your employer, for any reason. You can also contribute directly to your HSA if payroll deduction is not an option. This will be an above the line tax deduction when you file your 2020 taxes.
Can I use telehealth services at no cost now due to COVID-19?: Yes, but we recommend checking to make sure your insurance covers it.
I made an excess contribution to my HSA in 2020. Can I avoid the 6% excise tax if I withdraw the excess amount by July 15, 2020?: Yes, if your contributions aren’t made to your HSA through a salary reduction and you don’t take a deduction for the excess contribution when you file your tax return. If you file your return by April 15, 2021, and don’t withdraw those excess contributions by that date, you can still avoid the excise tax if you withdraw the excess (and income on the excess amount) by October 15, 2021.

Health Reimbursement Arrangement (HRA)

What happens if I get laid off or terminated and my employer terminates my HRA?: You can still submit claims for expenses up to the termination date of the HRA, and you have until the claim’s submission deadline set by your employer to submit them. If you go on COBRA for your insurance, your HRA will continue with it.

Groups

COVID Relief Bill (Consolidated Appropriations Act, 2021)

The COVID Relief Bill, signed into law on December 27, 2020, has impacts to flexible spending accounts (FSAs) and dependent care assistance plans (DCAPs). Following are answers to some of the more commonly asked questions about the regulation and the implications for you.

Carryover

Is there a tax impact to individuals with a DCAP if they exceed $5,000 in a year?: Possibly. While the law did not speak to this issue, the thought is that a carryover amount that causes a person to exceed $5,000 in the next plan year would cause the individual to potentially have to pay income tax on the amount exceeding $5,000. This interpretation stems from the existing rule with the DCAP grace period.
How much can be carried over from 2021 to 2022?: All unused funds.
Is there an impact to HSA eligibility if we offer a carryover?: There would be no impact related to a DCAP carryover, but a general FSA would present a problem, as paying general medical expenses would cause an individual to lose HSA eligibility. The way to preserve HSA eligibility would be to limit the FSA to vision and dental expenses (known as a limited purpose FSA).
May an employee who did not elect an FSA or DCAP be allowed a carryover?: This would not be prohibited by the rules but a plan may require a person to elect an FSA in the new plan year in order to carryover funds or even limit the carryover to be used by a specified time (such as one year).

Grace Period

May we drop the grace period for a carryover?: At this time, Further is not allowing switching plan features.
Is there an impact to HSA eligibility if we offer a grace period?: There would be no impact related to a DCAP grace period, but a general FSA would present a problem as paying general medical expenses would cause an individual to lose HSA eligibility. The way to preserve HSA eligibility would be to limit the FSA to vision and dental expenses (known as a limited purpose FSA). Note that implementing a limited purpose FSA (LPFSA) in a grace period would require all individuals to have an LPFSA.

Election Changes

Do employees need a reason, to make the election change?

No, the employee may change their election for any reason unless limited by the employer.

If they change their election to $0, can they get their contributions paid refunded?

No. Election changes are prospective – or going forward only. There can be no refunds of already contributed amounts.

Can the employer limit how many times an employee changes their election?

Yes, the employer could place administrative limits on election changes. These limits could include, but are not limited to:

A quantity limit
Date range limit
Reason for the change
Limit the type of change

May individuals who declined to enroll in a DCAP or FSA newly enroll under this rule?

Yes, this is possible, but the plan may restrict this option.

Plan Amendments

Is a plan amendment required?: Yes, plans must adopt these features and document them through an amendment to their plan document.
When do we have to have the amendment completed?: A plan must amend their plan by no later than the last day of the first calendar year, beginning after the end of the plan year in which the amendment is effective (ex. CY 2021 must be amended by 12/31/22.)
Should we wait to communicate the changes to employees/participants until after we receive the amendment?: No, plans should communicate the changes they are going to adopt as soon as possible to allow participants to take advantage of the changes.

Additional Group-Related COVID FAQs

Here are answers to common questions groups and employers have been asking since the pandemic began.

What were the runout extension changes that were announced in February 2021?

On February 26, 2021, the Department of Labor (DOL) released guidance on the duration of the spending account changes provided in earlier disaster relief efforts. In summary, the guidance indicates the end of the runout period will be extended by one year.

For example:

If the 2019 runout period would have ended March 31, 2020, the plan can require 2019 claims to be filed by March 31, 2021.
If the 2020 runout period would have ended March 31, 2021, the plan can require 2020 claims to be filed by March 31, 2022.
And, assuming the emergency has not terminated before, if 2021 run out period would have ended March 31, 2022, then the plan can require 2021 claims to be filed by March 31, 2023

Please note, the same principle would apply to non-calendar year runout periods for plans that have an earlier claims submission for mid-year terminations.

What does the CARES Act entail?

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. As part of this legislation, section 3702 allows HRA/FSA/HSAs to be used to purchase over-the-counter medical products and feminine hygiene products without a prescription from a physician. In addition, the law creates a safe harbor that allows a high deductible health plan to cover any telehealth service without a deductible requirement for plan years beginning on or before December 31, 2021. Check with your health plan or employer to see if the plan will be covering these costs.

How does the new rule issued by the DOL impact health spending and savings accounts?

On April 28, 2020, the Department of Labor issued a rule that extends many deadlines under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue code. This rule impacts group health plans, disability and other welfare plans, pension plans, and participants and beneficiaries of these plans during the COVID-19 national emergency. This includes extending deadlines for FSA, HRA, and VEBA for employees filing claims for benefits and initial disposition of claims. TRA, DCAP and HSA deadlines have not been impacted by this rule.

Have there been any changes to allow election changes, grace period extensions or rollovers due to COVID-19?

On May 12, 2020, the IRS issued additional guidance for health savings accounts (HSAs), flexible spending account (FSAs), and Dependent Care (DCAPs) products due to COVID-19. This includes raising the FSA rollover amount to $550, effective for the 2020 plan year. The mid-year election changes and grace period extension are up to the employers to offer and are not mandatory, and employers may set limits on the frequency and timing if offering these election change options. If election or grace period changes are made, they require a plan amendment be adopted by December 31, 2021. See the COVID Relief Bill information above for more detailed information on election changes, grace period extensions, and rollovers. ccv

Can my employees start using telehealth for free as part of the CARES Act legislation change?

It is up to the health insurance company or the sponsor of a self-insured plan to determine whether they will change their plan design and use this safe harbor. While many health plans have begun to offer telehealth at no cost, check with your health plan to verify coverage.

Is a furloughed employee still eligible for a spending account like a DCAP, FSA, or HSA?

Eligibility for benefit coverage is determined by the benefit plan documents. Often, plan documents will provide that coverage is not lost if the furlough is paid. Often an unpaid furlough will lead to a loss of coverage unless the leave is protected such as is the case in FMLA leave.

Can a furloughed employee continue to submit claims for reimbursements?

If employees are still covered during furlough, then medical FSA claims can still be submitted for reimbursement. They can also submit claims if they lost coverage and are on COBRA or a runout.

Do we need to update our plan documents if we want employees to be able to use their spending accounts to purchase over the counter medicines and feminine care products?

We advise you check your benefit plan document and review what it defines as an eligible medical expense. If the language is broad, then no amendment should be needed (e.g., if it says it covers all section 213(d) expenses). You should review your plan documents with your benefits counsel to determine if an amendment is necessary.

Dependent Care Assistance Program (DCAP)

Have their been changes to the contribution limits?: On March 11, 2021, the America Rescue Plan Act of 2021 (ARPA) was signed into law. This law increases the maximum amount that may be excluded from an employee’s gross income in 2021 under a dependent care assistance program (DCAP).

The maximum amounts increased from $5,000 to $10,500 for married parents filing taxes jointly or for single parents, and from $2,500 to $5,250 for married parents filing separately per calendar year. Please note that these limits apply to the 2021 tax year, and that non-calendar year plan participants should take this into consideration when making annual elections.
My employee’s child’s school is closed due to the COVID-19, and the employee still must work, can they increase their DCAP election?: The election may be increased if the child being unable to attend school results in an increase in daycare expenses. For example, both spouses work during the school year and one does not work when school is out, so they never needed day care until now.

For more information on how to make an election change, or to download the qualifying event form, visit our DCAP Elections Change Events page.
What happens if an employee is laid off or terminated and we terminate their DCAP?: The employee can submit claims for expenses incurred through the end of the plan year and has until the claims submission deadline to submit them. The employee may be reimbursed only for the amount they have paid in.

Medical Flexible Spending Account (FSA)

My employee is not working at this time due to the COVID-19, can they decrease their FSA election amount?

Yes, the COVID situation provides several possible reasons to allow an election change. For example, the IRS allows an election change for:

Reductions in hours that causes loss in coverage
Change in status
FMLA leave
Substantial change in employer benefits/cost

For more information about making an election change, or for the Qualifying Event Notification Form, visit the FSA Election Change Events page.

My employee has increased medical expenses due to the COVID-19, can they increase the FSA election amount?

The member can increase or decrease the election amount as a "COVID" qualifying event.

What happens if we terminate an employee’s FSA due to layoff or termination of employment?

Employees can still submit claims for expenses up to the termination date of the FSA and will have until the claims submission deadline to submit them. If the employee goes on COBRA for insurance, the employee is also able to go on COBRA for the FSA if they continue to pay into the FSA on a post-tax basis, or if they choose to allow a pretax deductions from their last paycheck; however, they are not required to go on the FSA COBRA plan. Those are two separate plans.

Employers have the option for plans to allow medical FSA participants who terminate during the 2020 or 2021 plan year to spend down their unused balances for expenses incurred through the end of the plan year in which the termination occurred.

Health Savings Account (HSA)

My employees are not working at this time due to the COVID-19, can they change HSA election amounts?: Yes, employees can update elections at any time with you. Employees can also contribute directly to their HSA if payroll deduction is not an option. This will be an above the line tax deduction when they file their 2020 taxes.
Can an employee use their HSA to pay their health insurance premium?: An employee can use their HSA to pay their health insurance premium, as long as they are receiving unemployment benefits. This would apply even if the employer continues to cover a portion of the health insurance premium.

Health Reimbursement Account (HRA)

What happens if we terminate an employee’s HRA due to layoff or termination of employment?: Your employees can still submit claims for expenses up to the termination date of the HRA and has until the claims submission deadline to submit them. If the employee goes on COBRA for insurance, the HRA continues with it.

This content is for informational purposes only, you should not construe this information as legal, tax, investment, or financial. Please consult your legal or tax advisor to review the specifics of your situation.