Face masks FSA, HSA, and HRA eligible retroactively back to January 1, 2020
A new IRS Notice just made COVID-related personal protective equipment (PPE) like hand sanitizer and face masks FSA (flexible spending accounts) and HSA (health savings accounts) eligible, along with some HRAs (health reimbursement accounts)—depending on plan design.
The new notice allows FSA, HSA, and some HRA plans to reimburse claims for COVID-19 protective gear purchased after January 1, 2020. Plan amendments are not necessary for this change (unless the plan explicitly excluded such items, which would be unusual).
This means you can stock up on face masks and hand sanitizer tax-free! And if you have receipts for past covid-related PPE purchases since January 2020, you can submit those for reimbursement as well.
In a time when every little bit helps, this new rule offers additional financial support by covering products that keep us safe and healthy, and are now required in almost every state.
The 2020 CARES ACT made allowances for FSAs, HSAs, and HRAs to cover over-the-counter (OTC) medicines and feminine care products like tampons, but until now face masks and other COVID-related PPEs have not been covered.
An FSA helps you pay for things you likely already pay for, but now you get to do it tax-free. Federal, state, and FICA taxes lower your take-home pay by 30% or more, leaving the remaining 70% for your living expenses. When you use an FSA, you set aside money before it is taxed, so you spend the entire 100% of your earned income. This means you save up to 30% on your out-of-pocket healthcare expenses when you use your FSA. Individuals can contribute up to $2,750 to their healthcare FSA accounts, resulting in a potential $800+ savings on healthcare expenses.
A box of 200 sanitizing wipes plus 200 disposable face masks costs about $60 on Amazon. For people using those items multiple times a day, you can easily imagine a 12-month supply could cost upwards of $800. Assuming a 30% tax savings, you could put $240 back in your pocket just on those two items alone using your FSA.
It’s also important to note that IRS Notice 2020-29 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the Act), recently enacted as Division EE of the Consolidated Appropriations Act, 2021 (CAA) made it possible to elect an FSA at any time during the year (as long as your company elected the amendment for your plan) and gave employees more time to spend FSA dollars with a 12-month grace period or unrestricted carryover.
If you elected an FSA tomorrow you would have ample time to spend your FSA dollars and take advantage of up to 30% tax savings on OTC and feminine care products, as well as face masks and other PPEs, not to mention 32,000 other things (see full list of eligible items) you can spend your FSA on. Check out 50 of our top ways to spend your remaining FSA dollars.
In addition to the recent COVID-related PPE allowance, the 2021 American Rescue Plan Act (ARPA) has provided additional support with 100% COBRA subsidies for terminated employees and an increase in the maximum contribution you can make to your Day Care FSA—from $5,500 to $10,500 (as long as your company elected the amendment for your plan). Get all the details here.
Check out our COVID-19 resource hub for the latest on how all the recent stimulus bills and IRS notices impact your benefits. We are fully committed to supporting your benefit experience during this time of rapid change.