BASE^® Blog

During the pandemic, many are faced with a new normal.  This new normal could mean working from home or being unemployed, and for schools and daycares it could mean being closed for the foreseeable future.  These changes have greatly impacted employers across the country, as well as the benefits they offer employees.  One benefit that can be cause for questions is the Section 125 Cafeteria Plan - Dependent Care Assistance Plan.

The BASE® Dependent Care Assistance Plan is a benefit that helps employees pay for the necessary care of a qualified dependent while the parent works.  It allows employees to use their tax-free dollars to pay for child day care or elder day care expenses.  This 125 Cafeteria Plan option allows an employee to be reimbursed for their eligible dependent care expenses so that the employee can continue to work, look for work, or attend school full-time.

In order to meet the requirements for DCAP employees must:

• Be gainfully employed
• Have a qualifying dependent
• Use the funds for care and not education
• Incur the cost during the coverage period
• Submit expenses to be substantiated

With the current public health crisis, many employees are unable to meet one, or more, of the requirements that allows them to continue to contribute to their DCAP – being gainfully employed and/or having childcare.  Because of this, employers are now having employees wanting to make changes to their plan.

Employers should always refer to their plan document before making any midyear election changes to determine whether such changes are allowed.  A qualifying event must occur for a change in DCAP election.  Employers are seeing an increase in these qualified events, which include a change in work status (the employee is no longer gainfully employed), the funds for care (the daycare is closed and funds are no longer used), and/or FMLA (which will be reinstated when employee returns from their absence).

With all the varying circumstances employers are facing during this time, it is important for employees to visit with their employer regarding what is allowable.  If election changes are eligible, participants typically have 30 days from the date of the qualifying event to submit their request.  For more information on the BASE® Dependent Care Assistance Plan, call 888.386.9680 or visit the website. 

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On Friday, March 27, 2020, Congress passed the CARES Act (H.R. 748) and the President signed it into law.  The $2 trillion bill is designed to provide economic relief for American citizens and businesses due to the COVID-19 health care emergency that has greatly impacted the U.S. economy.  In addition to the stimulus check and unemployment benefits the bill provides, the legislation also expands how workers can use their health care benefit accounts.

The CARES Act permanently reinstates coverage of OTC (Over-the-Counter) drugs and medicines as eligible for reimbursements from FSAs, HRAs, and HSAs without needing a prescription.  It further expands the definition of qualified OTC items to include menstrual care products, while also expanding telehealth services through HSAs.

OTC with pre-tax funds

When the ACA was signed on January 1, 2011, OTC drugs and medicines required a prescription in order to be an eligible medical expense.  Under the CARES Act, over-the-counter medicines not prescribed by a physician can be reimbursed pre-tax through an FSA, HRA, or HSA.

Menstrual products as eligible expenses

Under the CARES Act, menstrual care products were added as an eligible medical expense.  These products are defined as tampons, pads, liners, cup, sponge, or similar products used with respect to menstruation and can now be reimbursed through an FSA, HRA, or HSA.

HSAs used for telehealth

Telehealth services are already considered an eligible expense with the Health Savings Account (HSA).  However, these expenses could not be covered until the individual met their minimum deductible.  Under the CARES Act, plans may pay for telehealth services before reaching the deductible without impacting the individual’s eligibility for the HSA.  This provision is temporary outlining an end date of December 21, 2021 to help encourage telehealth services during the current public health crisis.

While these changes are effective immediately for expenses incurred on or after January 1, 2020, it is important to note that various businesses in the industry will adhere to their own timeline for updating systems to allow for these new eligible expenses.  BASE® has already moved forward with reimbursing these expenses and is excited about this change and the opportunity to provide affordable access to an expanded list of OTC items via tax advantaged plans.

The CARES Act was signed into law to provide emergency assistance and health care response for everyone affected by the current public health crisis.  For more information on what else the stimulus bill entails and the relief it will provide, click here.

BASE® knows this is a challenging time for all business owners, and we find it promising to see the extended flexibility offered through tax-advantaged benefit plans moving forward. 

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