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The Advantages for Health Saving Accounts (HSAs): Employees find balance between health and wealth
The Advantages fo Health Saving Accounts (HSAs): Employees find balance between health and wealth
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We have prepared responses to frequently asked questions from employers as they navigate the benefits landscape during the COVID-19 pandemic. The guidance reflects Alight’s decades of experience helping clients navigate through natural disasters, including hurricanes, wildfires and flooding.
As a reminder, Alight is not a law firm and does not give legal or tax advice. This information is not a substitute for legal advice applicable to an employer’s specific situations and plans. We suggest employers consult with their legal counsel for guidance. Additionally, employers with fully-insured plans and/or employers participating in an exchange should also discuss any plan changes with their insurance carriers and/or exchange consultant.
Can employers allow participants to change their enrollment elections during this COVID-19 pandemic (e.g., add coverage, drop coverage, change plan options)?
Yes, if an employer’s existing mid-year status change rules permit this type of change. Some common mid-year status change rules that might apply during this crisis:
Employee starts unpaid LOA, resulting in loss of eligibility
Change in employee work schedule, resulting in loss of employee benefit coverage
Change in spouse or dependent work schedule, resulting in loss of benefit coverage in another employer's plan (e.g., participant waived coverage under employer’s plan and is now losing eligibility under a spouse’s plan)
Reduction in hours under certain conditions as specified by IRS Notice 2014-55
If an employer’s current mid-year status change rules would not permit a change in coverage, employers should work with their legal counsel to determine what provisional changes are required to allow changes.
Have there been any new regulatory announcements or guidance that would allow participants to make additional changes to their benefits?
At this time, there has not been any new guidance or announced exceptions to the current mid-year status change rules such as Section 125 allowable changes and required HIPAA Special Enrollments. Alight will continue to monitor the situation and provide additional information if and when it becomes available.
Can participants change their Dependent Care flexible spending account (FSA) elections if they are no longer using their childcare providers (e.g., day care centers closed)?
Existing rules permit election changes when there is a change in cost of coverage and/or a change in provider. Also, IRS officials have informally commented (Harry Beker, IRS, Office of Chief Counsel, Aug. 17, 2001, ECFC Annual Symposium) that a dependent care FSA election change may be permitted if a child is switched from a paid provider to free care or no care. Alight’s interpretation is that closure of a day care center regardless of whether a child is switched to another day care center or other paid provider, would constitute a change in provider and/or a change in cost, permitting an election change under the existing rules.
Should employers that require documentation as part of their Qualified Status Change processing make any special allowances?
During this COVID-19 pandemic, employers may want to consider suspending any documentation requirements for quicker processing of enrollment changes, and because it might be difficult for participants to obtain the documentation needed during this time.
What happens if a participant’s paycheck can no longer cover their benefit deductions?
Employers should review their mid-year change in status rules to determine if any can be used to allow participants to drop coverage as needed. Employers should talk to their legal counsel about any other actions they may consider to immediately respond to the COVID-19 crisis, such as suspending deductions. While there may be additional flexibility granted at some point in the future, as of now, the elections and any mid-year changes should be handled under the existing rules.
Can employers extend benefit enrollment windows for new hires, COBRA, retirement, etc.?
Yes, employers can choose to be more generous with the election period, as long as they treat everyone consistently. Employers with fully insured plans should discuss this approach with their carriers. If an employer uses an exchange, they should discuss the change with their exchange consultant.
Can employers give a longer grace period to participants to pay their bills?
Yes, often employers can choose to provide a longer period of time for participants to pay their bills. Employers considering this extension should act quickly so that billing periods can be adjusted before any coverage is dropped.
Can employers stop billing participants for a period of time?
Yes, in many circumstances, employers can choose to not bill participants for coverage, essentially providing free coverage during a particular period. Employers considering this approach should act quickly so that coverage periods can be adjusted before the next billing cycle.
If the participant’s cost of coverage significantly increases, is that considered a COBRA qualifying event?
No, a “significant increase in cost” is not a COBRA qualifying event. However, some employers have asked this question specifically related to employees who may not be able to pay for benefits due to a reduction in hours. A reduction of hours may be a qualifying event, which would be handled in the same way as under normal circumstances. Employers should assess their ability to provide any additional relief under the existing rules with their legal counsel.
Has the deadline for 2019 plan year HC FSA claim reimbursements been extended for those impacted by COVID-19?
No, there are no changes to the current rules at this time. Alight will continue to monitor the situation and provide additional information if and when it becomes available.
Are there exceptions to what items are eligible for healthcare FSA reimbursement, such as hand sanitizer and face masks?
No, there are no exceptions to the rules at this time. Alight will continue to monitor the situation and provide additional information if and when it becomes available.
Now that a lot of employers have implemented a work from home policy, can an employer suspend the commuter benefits orders?
Employers should check with their commuter benefit vendor. The ability to suspend orders may depend on timing.
Since many colleges and universities have either closed or moved to online learning, if those institutions also reduce tuition, how will that impact participants who have already been reimbursed prior to the start of the semester/quarter?
We will need to wait to see how the colleges and universities handle tuition to understand impact to participants and the employer’s plan.
Can a dependent verification audit timeframe be extended?
Yes, employers can choose to extend any audit windows.
With all the school closings, what are some considerations for the full-time student (FTS) status requirements for plan eligibility for plans not subject to ACA (e.g., stand-alone dental, retiree)?
While this is an employer decision, employers may want to consider maintaining the dependents as FTSs and not drop coverage while the COVID-19 national emergency continues. It might be difficult for participants to obtain the documentation needed during this time as many government offices are closed.