In its March 26 Announcement 2021-7, the IRS clarified benefit account reimbursements for nonprescription, over-the-counter personal protective equipment (PPE) such as face masks, hand sanitizers, and sanitizing wipes. Purchases of PPE for use by the taxpayer or the taxpayer's dependents for the primary purpose of preventing the spread of coronavirus are eligible for payment or reimbursement under health flexible spending accounts (FSAs), health savings accounts (HSAs), or health reimbursement arrangements (HRAs).
Additionally, the IRS extended the deadline until May 17 to make the 2020 prior-year contributions to HSAs and other individually owned tax-advantaged accounts (see the section below).
Changing Plan Documents
FSAs and HRAs may be amended retroactively to January 1, 2020, or any period beginning after January 1, 2020, as long as the amendment is in place before the end of the calendar year following the year change is effective. No retroactive amendment may be adopted later than December 31, 2022.
HSAs are not employer-sponsored group plans requiring employers to amend a plan document.
Action for Retailers
Pharmacies and retailers must update their software systems to show that PPE products are now eligible for payment through tax-advantaged benefit accounts. Benefit account participants, however, can submit manual claims with appropriate receipts.