A Health Savings Account can help you save money for out-of pocket medical expenses like doctor visits, dental and vision care and prescriptions.
Benefits of your health account during the coronavirus
Now, as always, the money you’ve set aside in your health accounts can help you manage costs associated with caring for the health of your family. To help you understand the benefits of your health accounts, we want to be sure you’re aware of a few recent changes to how you can use them.
The CARES Act extends to health accounts
Recently enacted legislation for the Coronavirus Aid, Relief and Economic Security (CARES) Act amends the applicable tax code provisions to allow over-the-counter (OTC) drugs as qualified health care expenses without need for a prescription. It further expands the definition of qualified health care expenses to include menstrual care products. This change is applicable to Health Savings Accounts, Flexible Spending Accounts and HRAs (Health Reimbursement Arrangements).
This change is effective for expenses incurred on or after Jan. 1, 2020. While stores may take several months to update their systems accordingly, you can pay at the point of purchase and then seek reimbursement from your health account--just make sure to keep the receipt.
Health plans will pay for testing and potentially more
The law requires health plans to pay for certain expenses related to coronavirus testing. Some health plans may now cover all or a portion of the cost for Telemedicine visits and others have opted to pay for the treatment of coronavirus through the end of 2020. You will need to check with your health plan administrator to determine whether either of these are covered or if you are responsible for all or a portion of costs up to your annual deductible. For the above items that health plans are covering, the IRS has indicated that this will not cause you to lose eligibility for an HSA.
Types of qualified health care expenses you can pay for with your health accounts
- Items you may need if you are sick—a thermometer or cold and flu medications
- Doctor visits, telemedicine, lab tests or other qualified treatments not fully paid for or reimbursed by your health plan
- Deductibles, copays or coinsurance
- Mental health needs
View the qualified health care expense list. Please note that respirators and masks are not currently included on the IRS’s list of qualified health care expenses.
Tax-filing deadline has changed
The IRS has postponed the deadline to file 2019 federal income tax returns to July 15. This also extends the time you have to make an additional contribution to your HSA for 2019 to July 15. The 2019 maximum contribution limits still apply.
Reimbursement for prior qualified health care expenses
Using your tax-advantaged health accounts can help you maximize your buying power for qualified health care expenses -- and help you manage your overall finances. Remember, if you have paid for qualified health care expenses out-of-pocket this year (or prior years for distributions from an HSA), such as monthly prescriptions from the pharmacy, you can reimburse yourself for those expenses now—just make certain that you have the receipts.
Please note, however, that there are no hardship withdrawal allowances through the CARES ACT for HSAs. If you are under age 65, any distributions from your account for non-qualified medical expenses are subject to ordinary income tax, plus an additional 20% tax penalty.
Employment status change
If you have an HSA, its portable—meaning it is yours to keep if you leave your job for any reason. And any unspent balance at the end of the year rolls over to use in the future as there are no “use it or lose it” rules.
If you lose your job and you have an FSA, limited purpose FSA (LPFSA) or an HRA, you may have a limited period of time in which you can submit expenses for reimbursement before forfeiting any unspent funds in your account (subject to any continuation rights you may have under COBRA). Refer to your employer’s plan rules for specifics.
Life event change
If you have a qualifying life event, such as a change in employment status for you, your spouse, or dependent that affects eligibility, a change in cost or coverage, you may be able to make changes to your contribution elections under an FSA, limited purpose FSA (LPFSA) or dependent care flexible spending account (DCFSA) outside of the typical annual enrollment period. In addition, if you contribute to your HSA through payroll deductions, most employer plans permit you to change your election at any time. Refer to your employer’s plan rules for specifics.
We’re here to help. Learn more about how Bank of America is responding to the coronavirus.
The content of this document is our summarization of information from the Coronavirus Aid, Relief and Economic Security (CARES) Act. It should be regarded as general information only and is believed to be accurate as of the posting date but may be subject to change as a result of additional federal regulatory guidance.
Bank of America and its affiliates do not provide legal, tax or accounting advice. You should consult with your legal and/or tax advisors before making any financial decisions.