On March 30, 2021, the IRS, in its released Announcement 2021-7, notified taxpayers that personal protective equipment (PPE) purchased for the purpose of preventing the spread of COVID-19 are now to be treated as a covered medical care amount under Section 213(d) of the IRS code. This includes masks, hand sanitizer, disposable gloves and sanitizing wipes. Health savings account (HSA) participants can use the funds in their HSA to pay for PPE. Sponsors of flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) may also allow these expenses to be reimbursed from their plans.
Prior to this announcement, most plans generally only covered PPE as a medical expense for FSAs, HRAs or HSA with a letter of medical necessity from a healthcare provider. This was primarily because they were classified as dual-purpose items. Without the letter of medical necessity, purchasing these items while healthy and not near people who have contracted the virus would generally not be covered. And although several rules via the CARES Act and the Consolidated Appropriations Act temporally (and on a voluntary basis) loosened some FSA/Decap requirements for pandemic related situations, PPE was not considered until recently.
This guidance is effective retroactively back to 1/1/20 so any PPE expenses incurred on/after 1/1/20 are eligible. For Diversified FSA clients, we had previously determined that PPE were eligible items, and we have reimbursed claims for PPE accordingly. If your FSA plan document was prepared by Diversified, there is no need for an amendment as all our documents incorporate all Section 213 covered expenses, including any updates automatically.
If you have prepared your own FSA document and/or are not a Diversified FSA client, it is important to note that each FSA plan is unique regarding what qualified expenses will be reimbursed, so consult your Summary Plan Description (SPD) to know which expenses your plan deems eligible. You may need to amend your plan accordingly. Amendments must be adopted no later than the last day of the first calendar year beginning after the end of the plan in which the amendment is effective. Retroactive amendments are not allowed after December 31, 2022.