On April 29, 2020, the Internal Revenue Service (IRS), Department of Labor (DOL), and other federal agencies published a final notice providing COVID-19 relief guidance on COBRA extensions. The notice also extended run out periods for health Flexible Spending Account (FSA) and Health Reimbursement Arrangement (HRA) plans.
Learn more about the COVID-19 claims run out extension and what it means for third party administrators, employers and participants.
COVID-19 Claims Run Out Extension
The final notice, now available on the Federal Register, states under Section III:
A. Relief for Plan Participants, Beneficiaries, Qualified Beneficiaries, and Claimants
Subject to the statutory duration limitation in ERISA section 518 and Code section 7508A,7 all group health plans, disability and other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency or such other date announced by the Agencies in a future notification (the ‘‘Outbreak Period’’) 8 for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the following periods and dates—…
…(5) The date within which individuals may file a benefit claim under the plan’s claims procedure pursuant to 29 CFR 2560.503–1
Editor’s Note: The IRS published Notice 2021-58 in October, 2021 to further clarify how to deal with COVID-related COBRA claims.
What does this mean for TPAs?
As of May 5, 2020, the “Outbreak Period” has yet to be finalized. The Outbreak Period = End of National Emergency + 60 days.
For all run-out periods that end on or after March 1, 2020, plans must allow any days that were remaining in the original run out (after March 1) plus the “Outbreak Period” before the claim submission period can close.
Consider these examples:
Example 1: Calendar year plan affected by COVID-19
Jane Participant made a qualified purchase on December 31, 2019 with her FSA but did not submit a claim right away. Her employer’s FSA plan runs on a calendar year (January 1 – December 31) with a run out period that ends March 31. Assuming the Outbreak Period ends on July 1, 2020, Jane has until August 1, 2020 to file her FSA claim for reimbursement.
Example 2: Non-calendar year plan affected by COVID-19
Jane Participant made a qualified purchase on March 1, 2020 with her FSA but did not submit a claim right away. Her employer’s FSA plan runs April 1 – March 31 with a run out period that ends May 31. Assuming the Outbreak Period ends on July 1, 2020, Jane has until August 31, 2020 to file her FSA claim for reimbursement.
Example 3: Run out period NOT affected by COVID-19
Jane Participant makes a qualified purchase on March 1, 2020 with her FSA but does not submit a claim right away. Her employer’s FSA plan runs on a calendar year (January 1 – December 31) with a run out period that ends March 31. Assuming the Outbreak Period ends on July 1, 2020, Jane has until March 31, 2021 to file her FSA claim for reimbursement.
TPAs should prepare for an extended claim filing period and consult their administrative solutions provider if they need assistance. It is also recommended that they talk to their employer clients and participants about the extensions.
Has the IRS addressed FSA Grace Period, Carryover or Use It or Lose It?
On May 12, the IRS published guidance on grace periods for health FSAs, dependent care FSAs, and limited purpose FSAs. Employers may amend their plans to allow an extension for grace periods that end in 2020 or for plan years that end in 2020.
In a separate Notice, FSA carryover has been increased to $550 for plan years beginning in 2020. The “Use It or Lose It” rules remain the same.
Editor’s Note: In February 2021, the IRS issued Notice 2021-15, which gave employers the ability to provide more flexibility in the management of health FSAs and DCAPs. This applies to carryovers, extensions, mid-year elections, etc.
As with all claims, participants should present receipts, prescriptions, and other relevant documents that provide the following information:
- Date of purchase
- Vendor/Service Provider
- Who the purchase was made for
- Description of item or service
- Cost of item or service
Credit card receipts, cancelled checks, and “balance forward” statements are not valid documentation.
If you have questions about the COVID-19 claims run out extension, please contact your Third-Party Administrator or qualified benefits counsel, as appropriate.