At the start of the pandemic, more than 70 million Americans with flexible spending accounts (FSA) and health savings accounts (HSA) assumed that personal protective equipment (PPE) was FSA eligible — but were met with shock when they learned that masks, hand sanitizer, and sanitizing wipes were deemed ineligible for reimbursement.
During the long fight against COVID-19, these essentials have been proven necessary and effective COVID-19 protection by medical officials, which is why the Internal Revenue Service (IRS) made masks, hand sanitizers, and hand sanitizing wipes eligible for FSA/HSA spending (Announcement 2021-7). But before you re-up on your PPE, you'll want to learn these 3 important things:
1. Now is the time to enroll in an FSA/HSA
If you have an FSA or HSA, you realize its value now more than ever. In 2020, over-the-counter medicines and feminine care products were made eligible for FSA/HSA reimbursement, the addition of COVID-19 protection products like masks, hand sanitizer, and hand sanitizing wipes expanded the pool of eligibility to cover even more essential health products. FSA/HSA users can now factor these important health essentials into their yearly contributions.
2. This is a permanent eligibility change
The IRS laid out in their guidance that there is no time limit or window of eligibility for these products and simply "as long as the costs for these items are to help prevent the spread of COVID-19." But we recommend that FSA/HSA holders check with their HR department or benefits provider to make sure that these expenses will be eligible with their plans — for instance, some types of FSAs, such as dependent care FSAs (DCFSAs) or limited care FSAs (LCFSAs). When it comes to big, structural changes to benefits plans, it's always best to err on the side of caution and chat with your HR representative.
3. You may be able to file retroactively for past expenses
One of the more interesting provisions of the IRS Announcement 2021-7 was "...to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after January 1, 2020." That sounds great considering all the virus preparedness products we all have been buying!
But there's an important caveat: claims for masks, hand sanitizer, and sanitizing wipes can only be filed retroactively if your employer amends their FSA/HSA plans to allow this. So as you're checking in with your HR rep or benefits administrator, this is a good question to keep in mind.
There's still more info to come and questions for the IRS to answer. The IRS will have to outline requirements for essential features to make these products eligible. For instance, how much the alcohol concentration must be for a hand sanitizer to be eligible? Will this cover face shields? What about sanitizing sprays? These are all big questions we'll be aiming to solve as we roll out this new category of products, and as soon as we have answers, you'll be the first to know.
What's next for FSA and HSA expansion?
These last few years have been busy for FSA and HSA users! From over-the-counter medicines and feminine care products being made FSA/HSA eligible thanks to the CARES Act, to PPE eligibility — lawmakers realized just how important tax-free healthcare accounts are for the health and wellbeing of everyday Americans. Now that PPE and COVID-19 protection products are eligible, what’s next?
Vitamins and supplements
Currently, we’re advocating for making vitamins and supplements FSA eligible for the 70 million plus Americans who rely on these accounts. Most vitamins and other dietary supplements are notably absent from FSA eligibility. Vitamins have long been a top-requested eligibility category from customers of FSAstore.com and 77% of U.S. adults take vitamins and supplements. Unfortunately to date, only prenatal vitamins and glucosamine have been recognized by the industry as qualified, eligible products. We call on Congress and the IRS to correct this massive gap in FSA eligibility. You can help — sign our petition to make vitamins and other dietary supplements FSA eligible!