CARES Act Makes Sweeping Changes to Health and Welfare Benefit Plans

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) went into effect on March 27, 2020, altering some of the rules for employer health and retirement plans.

Group Health Plans

Telehealth services. Under the CARES Act, high-deductible health plans with health savings accounts (HSAs) now cover telehealth services before a plan participant has met the deductible.  Normal cost sharing (e.g., co-pays) under a plan may still be required for telehealth visits.  This temporary provision will end December 31, 2021, unless extended or made permanent by Congress.

Nonprescription drugs and medical products. Health plan participants may also use their HSAs, health reimbursement arrangements (HRAs), or flexible spending accounts (FSAs) to purchase nonprescription drugs and medical products like masks, gloves, etc., as well as menstrual care products.  These changes are permanent and retroactive to purchases made on or after January 1, 2020.

COVID-19 testing.  Cost-sharing for Coronavirus testing has been eliminated for those employees covered by fully insured and self-insured plans.  This includes any services or products provided during a medical visit — in person or via telehealth — to a doctor’s office, emergency room, or urgent care center.  This will continue to be in effect for as long as there is a public health emergency declaration in place as proscribed by federal law.

Retirement Plans

Retirement plan distributions.  The CARES Act provides for hardship withdrawals from qualified retirement plans for participants affected by COVID-19.  Individuals opting to take a Coronavirus-related distribution (CRD) will not be subject to the 10 percent early distribution penalty and may repay the loan over a three-year period.

CRDs cannot exceed $100,000 per participant.  While income taxes on the CRD will still be owed, tax payments may be stretched out over a three-year period and are not subject to annual retirement plan contribution limits.  CRDs apply retroactively to distributions taken on or after January 1, 2020, if a plan participant:

  • Has been diagnosed with COVID-19.
  • Has a spouse or dependent diagnosed with COVID-19.
  • Has suffered adverse financial consequences from being quarantined, furloughed, or laid off, or have had a reduction in work hours or been unable to work due to lack of child care or other factors as determined by the Secretary of the U.S. Treasury.

ERISA Section 518 is being amended to allow the Department of Labor to postpone the deadlines for certain ERISA filings for up to one year during a public health emergency.

Sponsors of single-employer defined benefit pension plans can delay 2020 contributions to January 1, 2021, at which time the delayed contributions will have to be paid with interest.

We help organizations set up the benefits plans that are right for their members, put processes in place to ensure regulatory compliance, and keep benefit plans updated based on changes in laws and regulations. To learn more about the services we offer, call 678-439-6236 today.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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