Can my HDHP offer free coverage for COVID-19 expenses (before the deductible is met) and still remain HSA eligible?

Yes, the IRS has issued guidance in Notice 2020-15 to clarify that coverage of COVID-19 expenses prior to satisfaction of the deductible will not render an otherwise eligible person ineligible for purposes of making HSA contributions.

Can my HDHP offer free telemedicine services (before the deductible is met) and still remain HSA eligible?

While the IRS has not addressed this issue directly, based on Notice 2020-15, it appears that cost-free coverage of telemedicine services prior to satisfaction of a deductible will not impact HSA eligibility so long as the telemedicine services are limited to COVID-19 diagnosis or treatment. If telemedicine services are offered more broadly for all medical services on a cost-free basis prior to satisfaction of a deductible, this may render an employee ineligible to contribute to an HSA.

Is our health plan required to provide free coverage of services related to COVID-19 diagnosis and treatment?

Yes, as it relates to diagnostic testing. On March 14, the House passed H.R. 6201, the Families First Coronavirus Response Act (the Act). The Senate approved that legislation, and President Donald Trump signed it on March 18. Pursuant to Section 6001 of the Act, all group health plans and health insurance issuers offering group or individual health insurance coverage, including grandfathered health plans, must provide coverage for COVID-19 diagnostic testing, including related physician/facility costs, with no cost sharing or prior authorization requirements. This coverage requirement would apply during an “Emergency Period,” as defined under Section 1135(g)(1)(B) of the Social Security Act (“the period during which, there exists … a public health emergency declared by the Secretary pursuant to section 319 of the Public Health Service Act”). The Act sunsets on Dec. 31, 2020. Note that the Act does not impose similar coverage requirements for COVID-19 treatment.

Has Congress passed any additional legislation that impacts the provision of employee benefits in response to COVID-19?

The Families First Coronavirus Response Act includes additional emergency paid sick leave and Family and Medical Leave Act provisions that impact employers with fewer than 500 employees. The House and the Senate are also both working on additional legislation designed to ease the strain on the economy created by the COVID-19 pandemic. It is expected that this additional legislation will address other benefits-related issues. We will update this FAQ as more information becomes available regarding pending legislation.

Does HIPAA prevent me from sharing employee information regarding COVID-19?

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) usually is not implicated in these situations because the employer is not a covered entity subject to HIPAA. It would likely violate HIPAA if an employer obtained health information regarding COVID-19 from the health plan (which is a HIPAA-covered entity). However, it is more likely that such information would come directly from the employee, and if it did, that would not violate HIPAA. It is important to remember, however, that state data protection laws and other laws do protect medical information, so it is still advisable to protect such information.

Are employees who are not injured or ill eligible for short-term disability benefits if they are quarantined for COVID-19-related reasons but have not been diagnosed with COVID-19?

Quarantine, when the employee is otherwise healthy, typically would not trigger short-term disability benefits. An injury or onset of illness is usually necessary to trigger most short-term disability plan benefits. The specific terms of the applicable short-term disability plan should be reviewed to determine whether a given instance of absence from work would qualify for short-term disability benefits. Please note that the employee may be eligible for other paid or nonpaid leave under applicable laws (including pursuant to the Families First Coronavirus Response Act).

Should COBRA be offered to employees who are sent home or cannot work for COVID-19-related reasons?

Generally, COBRA only applies if there is a triggering event (e.g., termination of employment or reduction in hours) that triggers a loss of group health plan coverage. Each employer will have to look at this based on its current plan provisions and leave policies to determine whether this type of situation triggers a COBRA qualifying event. In the current environment, employers may want to exercise some flexibility, but should clearly document changes from their normal procedures and notify third parties who may be impacted by these changes, such as insurance carriers.

May an employee take a hardship withdrawal from his or her 401(k) plan due to financial needs created by the COVID-19 pandemic?

Maybe, depending on the circumstances. First, you need to confirm whether the plan permits hardship withdrawals generally. Second, if the plan does permit hardship withdrawals, you need to determine whether the employee’s situation satisfies the conditions for such a distribution. There are two main conditions that must be satisfied for an employee to take a hardship withdrawal:

• the participant (or, in some cases, the participant’s spouse, child, dependent or primary beneficiary) must have an “immediate and heavy financial need”; and
• the distribution must be necessary to meet that financial need, which generally means that the participant does not have other resources to meet that need (e.g., other available distributions under the plan).

Most plans use “safe harbor” rules to determine if there is an immediate and heavy financial need. At this time, there is no specific safe harbor that would allow any employee to take a hardship withdrawal due to COVID-19. However, there are certain safe harbor financial needs that might be relevant, including:

• expenses for medical care previously incurred by the participant, the participant’s spouse, any of the participant’s dependents or the participant’s primary beneficiary under the plan; or expenses necessary for those persons to obtain medical care (but limited to expenses for medical care that are deductible under Internal Revenue Code § 213); and
• payments necessary to prevent the eviction of the participant from the participant’s principal residence or foreclosure on the mortgage on that residence.

If these needs arose due to the medical or financial impacts of COVID-19, a plan that relies on the safe harbor hardship rules likely could provide a hardship distribution.

For plans that do not utilize the safe harbor rules, a facts-and-circumstances determination would apply to determine whether the employee has an immediate and heavy financial need that cannot be satisfied through other resources. Plan terms always should be reviewed to ensure that the distribution is appropriate.

It is also important to remember that hardship distributions are subject to the same tax rules as other plan distributions and cannot be repaid to the plan like a loan. They may also be subject to a 10% early distribution penalty, unless the participant has reached age 59½ or the hardship distribution is for the purpose of satisfying certain medical expenses.