New IRS guidance on COVID-19 related PPE expenses
On March 26, 2021, the IRS released Announcement 2021-7, which provides that amounts paid for personal protective equipment for the primary purpose of preventing the spread of COVID-19 are treated as amounts paid for medical care under Section 213(d) of the Internal Revenue Code. This means that amounts paid for things such as masks, hand sanitizer and sanitizing wipes may be:
- eligible to be paid or reimbursed under a health FSA, HSA, or HRA, if the plan terms allow, or
- claimed as an itemized deduction on a taxpayer’s income tax return provided that (a) the amounts are not reimbursed by insurance or otherwise, and (b) the taxpayer’s total medical expenses exceed 7.5% of the taxpayer’s adjusted gross income.
This guidance also provides that a health FSA, HSA or HRA that does not currently allow for reimbursement of COVID-19 related PPE expenses may be amended to allow for reimbursement of such expenses incurred on or after January 1, 2020. Accordingly, employers who sponsor a health FSA, HSA or HRA may want to review their cafeteria plan or other relevant plan documents to determine if an amendment is needed. Plans may be amended retroactively as long as the amendment is adopted no later than the last day of the first calendar year beginning after the plan year in which the amendment is effective, no retroactive amendment is adopted after December 31, 2022, and the plan is operated consistent with the terms of the amendment.