Health Care Spending Rules Relax Further under CARES Act by Adam Cohen, CPA

Posted on July 09, 2020 by Adam Cohen

The IRS recently issued new guidance providing individuals with more flexibility to use their employer-sponsored health-benefit plans, including Health Savings Accounts (HSAs) and Flexible Spending Arrangements (FSAs), to cover the unique medical and dependent-care expenses required during the COVID-19 pandemic.

Under the CARES Act, high-deductible health plans (HDHP) may temporarily cover telehealth and other remote-health care services without a deductible or with a deductible below the minimum annual deductible otherwise required by law. In addition, the delivery of these remote health services are included temporarily as categories of coverage that are disregarded for the purpose of determining whether an individual with an HDHP and other health plan coverage is eligible to make tax-favored contributions to his or her HSA. Consequently, an otherwise eligible individual with coverage under an HDHP may still contribute to an HSA despite receiving coverage for telehealth and other remote care services before satisfying the HDHP deductible, or despite receiving coverage for these services outside the HDHP. These amended rules apply to services individuals receive on or after Jan. 1, 2020, under plans that begin on or before Dec. 31, 2021.

In addition, employees covered under tax-advantaged HSAs, Archer MSAs, Health FSAs, and HRAs may now be reimbursed for a broader list of “qualified medical expenses” paid after Dec. 31, 2019, including over-the-counter products and medications that do not require a prescription as well as “menstrual care products,” such as tampons, pads and liners. Taxpayers should save receipts for all qualifying medical purchases to submit claims for reimbursements and for their own personal records.

The COVID-19 health crisis has created a broad range of new challenges for businesses and their workers. Employers should stay abreast of the various relief measures that the government continues to roll out and communicate to their employees those opportunities that extend assistance to their individual workers. For example, the IRS permits employers to amend their Section 125 cafeteria plans to allow employees to make mid-year elections to receive or revoke the benefits of these plans, change to a different plan, and/or carryover more unused FSA dollars from 2020 to next year.


About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or