News Alert: ECFC Proposes Legislation on Behalf of CDHPs During COVID-19 Pandemic
Published on March 26th, 2020
Edited. This article first published on March 20, 2020.
As Congress works to pass additional legislation regarding COVID-19, the Employers Council on Flexible Compensation (ECFC) is lobbying for a number of measures related to consumer-directed health plans (CDHPs). Here, we highlight a few of the proposed pieces of legislation. You can read the full ECFC letter to Sen. Charles E. Grassley (R-IA), Chairman of the Senate Finance Committee here.
COBRA Premium Assistance
As business operations feel the impact of COVID-19, some employees risk losing their health coverage as a result of being laid off from their jobs or receiving reduced hours of employment. These individuals are entitled to continue their health plan coverage under COBRA. The ECFC is asking Congress to consider providing financial assistance to help with COBRA premium costs. A similar tax credit was implemented after the recession in the American Recovery and Reinvestment Act of 2009.
FSA Carryover Limits
The ECFC proposes that Congress increase the amount of carryover dollars for flexible spending accounts (FSAs) to $2,750 from the current amount of $500. The increased amount is equal to the 2020 annual FSA contribution limit. The ECFC proposes this change due to the uncertainty in the healthcare market and the current inability of some people to receive healthcare services if they are unrelated to COVID-19. With a higher amount of carryover dollars, people who must put off certain treatments and qualified medical expenses during the pandemic can use their FSA funds once the pandemic passes.
In order to use their FSA, health reimbursement account (HRA) or health savings account (HSA) dollars to pay for over-the-counter (OTC) drugs, people currently must receive a prescription from their doctor. Given that visiting the doctor’s office at this time puts people at unnecessary risk to COVID-19, the ECFC is asking Congress to remove the requirement to see a doctor for a prescription.
Expansion of HSA Access
Currently, for people to make tax-deductible contributions to an HSA, they must have a qualified high-deductible health plan (HDHP), and those who eligible for Medicare are not eligible to contribute to an HSA. The ECFC believes Congress should lift these prohibitions during the pandemic to give people as many resources as possible to pay for their healthcare using pre-tax dollars.
We will follow along with these proposed measures and provide updates as they occur.
Dependent Care Assistance Limits
Childcare has become a major concern for people during the COVID-19 crisis, whether their children’s school or daycare has been closed or they must continue to work away from the home. The ECFC recommends increasing the annual limit on contributions to a dependent care FSAs from $5,000 to $10,000 to help workers pay a larger portion of their childcare costs on a tax-free basis. The Improving Child Care Act for Working Families (H.R. 6047), introduced in the House of Representatives, includes this increase. The ECFC also notes that an increased contribution limit is long overdue. The $5,000 limit was set more than 20 years ago and has not been adjusted for inflation. With the current stress families are facing, this change will provide much-needed relief while also aligning more realistically with today’s childcare costs.
Additional Alegeus insight: Based on the broad application of the cost-change events in the regulations to dependent care FSAs, plan sponsors and administrators will likely allow dependent care contribution adjustments that result from changes in the cost of care (such as a fee change, provider changes, or changes in hours of care). Therefore, participants whose daycare provider has closed due to COVID-19 and who are no longer incurring any daycare expenses, in most cases will be able to change their election amount.
Where can I get my COVID-related regulatory/compliance questions answered?
Watch a replay of our recent webinar, COVID-19: Ask the Regulatory/Compliance Expert, featuring attorney Jason Lacey. We cover a number of topics related to COVID-19 and consumer-directed healthcare – from eligibility of COVID-19 expenses to the possibility of extending runout deadlines.