Proposed regs. address primary care and health sharing ministries

Yesterday, the IRS released proposed regulations addressing the treatment of certain medical care arrangements under Section 213 of the Internal Revenue Code.

Specifically, Section 213(d) of the Code allows individuals to take an itemized deduction for expenses for medical care, including insurance.

The proposed regulations address direct primary care (DPC) arrangements and health care sharing ministry (HCSM) memberships, and provide the following guidance:

  • Payments for DPC arrangements are expenses for medical care under section 213(d) of the Code. Because these payments are for medical care, an HRA provided by an employer generally may reimburse an employee for DPC arrangement payments.
  •  Payments for membership in a HCSM are expenses for medical care under section 213(d) of the Code. Because these payments are for medical care, an HRA provided by an employer generally may reimburse an employee for HCSM membership payments.

These proposed regulations are in direct response to Executive Order 13877, which directed the Secretary of the Treasury to “propose regulations to treat expenses related to certain types of arrangements as eligible medical expenses.”


Notices address unanticipated changes in expenses because of the COVID-19 pandemic.

The IRS just released guidance to allow temporary changes to Sec. 125 cafeteria plans. These changes extend the claims period for health FSAs and dependent care assistance programs, allow mid-year changes and adjust carryover to reflect inflation.

Notice 2020-29 provides for increased flexibility with respect to mid-year elections made under a § 125 cafeteria plan during calendar year 2020 related to employer-sponsored health coverage, health FSAs, and dependent care assistance programs. The notice also provides increased flexibility with respect to grace periods to apply unused health FSA and dependent care amounts toward expenses incurred through December 31, 2020. It also applies earlier relief for HDHPs to cover expenses related to COVID-19 (and a temporary exemption for telehealth services) retroactively to January 1, 2020. 

Notice 2020-33 increases the $500 limit for unused amounts remaining in a health FSA that may be carried over into the following year by making the carryover amount 20% of the maximum salary reduction amount under § 125(i), which is indexed for inflation. Thus, for 2020, the carryover amount will increase to $550.  Additionally, the notice cross references Notice 2020-29 for guidance on how a § 125 cafeteria plan may be amended to allow prospective health FSA election changes for the 2020 calendar year…providing relief that, among other things, permits employers to amend § 125 cafeteria plans to provide participants flexibility to change health FSA contribution elections.

Note: Individual Coverage HRAs – this guidance also provides clarification regarding reimbursement for premium expenses occurring prior to the beginning of the plan year. 

TASC Governmental Affairs is reviewing these developments and will provide further analysis in the near future.

Guidance and Relief for Employee Benefit Plans Due to COVID-19

Recognizing the impact of the COVID-19 Pandemic, the Dept. of Labor’s (DOL) Employee Benefit Security Administration (EBSA) – in conjunction with Treasury and the IRS – have released a number of documents* announcing the timing extensions for a host of deadlines so that plan participants, beneficiaries and employers have additional time to make critical coverage decisions affecting their benefits during the coronavirus outbreak.

Notice 2020-01 allows for the delay of certain notices, disclosures or other documents due between March 1, 2020, and 60 days after the announced end of the COVID-19 national emergency “if the plan acts in good faith and furnishes the notice, disclosure, or document as soon as practicable under the circumstances.” Such “good faith” efforts include electronic disclosures like emails, text messages, website access, etc.

Meanwhile, the new final regulations broadly extend numerous plan deadlines applicable to participants and beneficiaries of group health plans, benefit plans and pension plans. Specifically:

  • the election period for COBRA continuation coverage;
  • the date for making COBRA premium payments
  • the date that individuals can make a benefits claim (essentially extending the run-out period for reimbursement by health FSAs and HRAs); and
  • the date a plan sponsor/administrator has to provide a COBRA election notice.

The guidance acknowledges the uncertain duration of the COVID-19 pandemic and notes that additional guidance will be provided, if necessary. TASC Governmental Affairs is currently reviewing the new guidance and will provide a full summary and further analysis at a later time.

*EBSA Disaster Relief Notice 2020-01; DOL COVID-19 FAQs; Notification of Relief (final regulations)

ICYMI – some Form 5500 due dates extended

IRS Notice 2020-23 extends the Form 5500 filing deadline for ERISA-covered retirement and welfare plans that have an original or extended filing deadline on or after April 1, 2020, and before July 15, 2020. With this extension, these plans now have until July 15, 2020, to file their Forms 5500.

Plan Year End Original Due Date Normal Extension Request Due Date Relief Due Date
June 30, 2019 N/A April 15, 2020 July 15, 2020
July 31, 2019 N/A May 15, 2020 July 15, 2020
Aug. 31, 2019 N/A June 15, 2020 July 15, 2020
Sept. 30, 2019 April 30, 2020 N/A July 15, 2020
Oct. 31, 2019 May 31, 2020 N/A July 15, 2020
Nov. 30, 2019 June 30, 2020 N/A July 15, 2020

This deadline extension is automatic, which means that plan sponsors do not have to have to call the IRS, file extension forms, or submit other documents to receive this relief. Additional filing extensions must be requested by using Form 5558 by July 15, 2020.

The guidance does not extend the filing deadline for 2019 Form 5500 filings for plans with a December end date, which are still due on July 31, 2020. Employers with such calendar year plans should be prepared to comply with their reporting requirement – or request an extension – by July 31, 2020.

Note: IRS Rev. Proc. 2018-58 provides that any postponement of the Form 5500 filing due date by the IRS (under §7508A) will also be permitted by the Department of Labor and Pension Benefit Guaranty Corporation for similarly situated plan administrators.

Not our first rodeo

Global pandemic = qualifying event

The Coronavirus (COVID-19) has caused upheaval in many aspects of everyday life, including the effect it has had on employee benefits…particularly pre-tax accounts. The question is, can employers/employees make benefit changes because of COVID-19? It depends on who you ask, but here’s a few things you need to know about TASC and our position.

TASC Participates in the Process. In addition to monitoring the thousands of pieces of legislation and regulations that are drafted every session, our Government Affairs team (which consists of both in-house and contract lobbyists) has spent years on the Hill developing relationships with key government stakeholders. It’s this direct “pipeline” into DC that leaves us confident as to our sight line toward these issues.

TASC is a Pioneer. Had we listened every time the naysayers challenged us, then sole proprietors, farmers and small businesses would have been denied from saving billions in tax dollars through the adoption of health reimbursement arrangements (AgriPlan/BizPlan).

TASC is Pro-Client and Pro-Participant. For more than 40 years, we have been a leader, an innovator, and a partner of employers committed to ensuring the health, wealth and well-being of our customers, employees and community. This philosophy falls in line with the spirit and intent of both the Families First and CARES Acts by providing relief to help employers/employees in the face of economic hardships due to COVID-19.

Generally, TASC will back this qualifying event determination by providing an Audit Guarantee to all enrolled employers and participants. The final decision in all Plan issues remain with the employer; those uncomfortable with this agile mindset are welcome to opt for the more conservative approach.

One thing is clear – TASC doesn’t react, TASC responds!

DC Debrief

IRS issues HDHP / HSA guidance; House votes to repeal Cadillac tax

The IRS rolled out new rules that could have major implications for people who have chronic diseases, but are also on the hook for thousands of dollars in medical bills. Notice 2019-45 expands the list of preventive care benefits that can be provided by a high deductible health plan (HDHP), on a no-deductible or low-deductible basis, without any adverse effect on HSA eligibility.

In general, “preventive” care does not include treatment for existing illnesses or conditions. Under the current HDHP/HSA rules, treatments of a non-preventive nature that are covered or reimbursed by a health plan without first satisfying HDHP conditions would generally disqualify a covered individual from HSA contribution eligibility.

However, the Administration now acknowledges that the cost barriers for care have resulted in some individuals who are diagnosed with certain chronic conditions failing to seek or utilize effective and necessary care that would prevent exacerbation of the chronic condition. Thus, these regulations are aimed at encouraging individuals to take more responsibility for their health care spending and become better health care consumers.

According to the notice, for services to be covered by an HDHP pre-deductible, they should be “low-cost” and demonstrate a high-impact. In addition, there must be strong evidence that the absence of the service will result in the condition worsening or the development of another serious medical issue. Those services and items, along with the conditions for which they must be prescribed to qualify as preventive care, are listed in an appendix to the guidance. The list includes 14 medical services or items for individuals with 11 specified chronic conditions (such as diabetes and high blood pressure).

While this new guidance is effective immediately, Treasury and HHS will periodically review the list to determine whether additional services or items should be added or removed. This exercise is expected to occur every five to ten years in an effort to promote stability and avoid confusion by participants in, or sponsors or providers of, HDHP arrangements.

Full text:


House Democrats and Republicans joined together in a rare show of unity last week, voting overwhelmingly (419-6) to repeal the ACA’s “Cadillac” tax on high cost health plans.

Delayed repeatedly by Congress, the tax would slap a 40% levy on the value of employer-provided health benefits that exceed $11,200 for individual coverage and $30,100 for family policies beginning in 2022. The idea was to reduce soaring health-care costs by discouraging employers from offering such generous plans.

Insurers and employers (like TASC) oppose the tax because they’d be the ones most exposed to its bite…shifting more costs to policyholders/employees as a result. About 160 million Americans are covered by workplace plans, still the largest source of coverage.

The House vote was aided by a new expedited procedure designed to force votes on measures that have wide bipartisan support (i.e. two-thirds majority). The 350+ cosponsors of HR 748 – titled the Middle Class Health Benefits Tax Repeal Act – not only include conservative Republicans, but members of the progressive wing of the Democratic Party as well…many of whom have championed replacing the current employer-based system with a “Medicare for All’ structure.

It’s unclear whether the Senate will tackle repeal, although a companion bill sponsored by Sen. Mike Rounds (R-SD) has collected 42 cosponsors.

White House seeks changes to HSA and FSA rules

In an Executive Order issued just before the Fourth of July holiday, President Trump directed several agencies to address a number of health care related matters through the rule making process (i.e. forthcoming regulations). Section #6 of the Executive Order is of particular interest to TASC since it takes aim at HSAs, health FSAs and medical expenses in general.

Health Savings Accounts

Within 120 days of the Executive Order, Treasury is directed “to expand the ability of patients to select high-deductible health plans that can be used alongside a HSA, and that cover low-cost preventive care (before the deductible) for medical care that helps maintain health status for individuals with chronic conditions.”

Health Flexible Spending Accounts

Within 180 days of the Executive Order, Treasury is directed “to increase the amount of funds that can carryover (currently $500) without penalty at the end of the year.”

Eligible Medical Expenses

Within 180 days of the Executive Order, Treasury is directed to propose rules to expand the definition of Section 213(d) ”to treat expenses related to certain types of arrangements, including direct primary care arrangements and healthcare sharing ministries, as eligible medical expenses.”

It’s important to note that the guidance issued must be permitted under current law, so Treasury may not have the authority to issue provisions as broad as is contemplated by the Executive Order.

Stay tuned!

Trump Administration Expands Use of HRAs to Individual Coverage

Today’s long awaited – and much anticipated – guidance is in response to the President’s October 2017 Executive Order meant to provide Americans (especially employees of small businesses) with more options for financing their healthcare needs.

If finalized, the proposed rule is to be effective for plan years beginning on/after January 1, 2020.

Developing story; more to follow.

Tax Reform puts the brakes on Section 132

 Tax Cuts & Jobs Act makes changes to transportation fringe benefits

Recently, additional clarification was released via IRS Publication 15-B that confirms the following:

  • Effective January 1, 2018, an employer may no longer take a tax deduction for the transit or parking benefit. This is regardless of whether the benefit is provided by the employer, through a reimbursement arrangement, or through a compensation reduction agreement.
  • Participants are not affected and may continue to make pre-tax contributions to the transit or parking benefit.
  • If an employer’s administration fees are itemized, the employer may not deduct the fees strictly for the transportation benefit; however, administration fees that are “all inclusive” (i.e. included with other benefits) may continue to be deducted. Please review your invoice for administration services.

Two other related provisions of note…

  • The qualified bicycle commuter benefit has been suspended as of January 1, 2018 (and continues until 2026). As such, bicycle benefit expenses are not excludable from a Participant’s income and are to be taxed as wages during this period. Unlike the expenses for transit and parking, the bicycle expenses may continue to be deducted by the employer.
  • Tax-exempt entities may have to pay an unrelated business income tax (UBIT) on any qualified transportation fringe benefit provided to employees for which employers are no longer permitted to take a deduction (i.e. parking and transit). As a result, those affected employers may simply decide to provide the benefit in the form of taxable wages going forward.

Since Participant’s may continue to receive the tax-free benefit, TASC’s administration of existing transit/parking plans does not change. Employers are urged to work with their tax professional(s) to review any potential reporting obligations.

Christmas Comes Early for GOP

Lawmakers give final approval to Tax Cuts & Jobs Act conference committee report

The Republican led Congress celebrated passage of the biggest rewrite of the U.S. tax code in decades on Wednesday. President Trump will soon affix his signature to the $1.5 trillion overhaul that is expected to have broad and far reaching implications for both individual and corporate finances….making good on his promise to deliver tax cuts before the holidays.

Key provisions affecting employee benefits are summarized below (changes are effective January 1, 2018 unless otherwise noted).

Fringe Benefit Provisions

Dependent Care – No change to current law.                                                             Note: Under the House proposal, employer-provided dependent care assistance would no longer have been tax exempt; meaning dependent care FSAs would have been eliminated.

Transportation – Repeals employer deduction for any qualified transportation fringe benefit. Employers may not deduct any expense incurred in providing, paying or reimbursing employee commuting expenses. These benefits will continue to be tax exempt for employees.

Bicycle Commuting – Qualified bicycle commuting expenses will no longer be tax exempt to employees effective for tax years between 2017 and 2026 (provision sunsets after 2025).

Health-related Provisions

Individual Mandate – Repealed; reduces the penalty for not purchasing insurance coverage to zero. Effective beginning in 2019.

Medical Expense Deduction – For 2017 and 2018, the deduction threshold will be reduced from 10% to 7.5% (of AGI). For 2019 and beyond, the threshold returns to 10%.

Archer MSAs – No change to current law.                                                                  Note: Under the House proposal, these tax deductible contributions would have been prohibited.

Earlier versions of tax reform would have eliminated or placed a cap on the tax exclusion for employer-provided health care, but – due in part to the efforts of entities like TASC – those proposals were never included in the legislation ultimately considered by the House and Senate. On the flip side, some of our other (pro-active) priorities, like the establishment of Flexible Giving Accounts and repeal of the Cadillac Tax were also left on the cutting room floor. While unfortunate, we will continue to press Congress to address these important issue in 2018.