Health plan coverage or reimbursement

IRS Announcement 2021-7 clarifies that health plan sponsors can choose to cover COVID-19-related PPE and permit reimbursement of expenses for such equipment from account-based plans such as:

• Health flexible spending arrangements (health FSAs)
• Health reimbursement arrangements (HRAs)

As a medical expense under the tax code, individuals may also seek reimbursement for COVID-19-related PPE from health savings accounts.

Plan amendments are required

Sponsors of group health plans that wish to cover COVID-19-related PPE or permit reimbursement from health FSAs or HRAs may amend their plan documents to cover or reimburse expenses incurred since January 1, 2020.

The amendment deadline is the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. For example, a calendar-year plan that will cover PPE as far back as January 1, 2020 would need to be amended by December 31, 2021. A retroactive amendment cannot be adopted after December 31, 2022.

Action items

Plan sponsors should determine what types of COVID-19-related PPE their health plans, FSAs and HRAs will cover and amend plans accordingly. Plan sponsors that do not amend the plan documents right away will need to operate their plan consistent with the intended amendment.

In addition, plan sponsors should prepare to answer questions from participants about those expenses.