On March 26, 2021, the IRS announced that amounts paid for personal protective equipment ("PPE") for the primary purpose of preventing the spread of COVID-19 are treated as amounts paid for medical care under Code Section 213(d). PPE includes masks, hand sanitizer, and sanitizing wipes. Amounts paid by a taxpayer for PPE for use by the taxpayer, the taxpayer's spouse, or the taxpayer's dependents are deductible under Code Section 213(a) if the taxpayer's total medical expenses exceed 7.5% of adjusted gross income and the taxpayer is not compensated by insurance or otherwise for those amounts.
PPE expenses also may may be paid from or reimbursed under health FSAs, Archer medical savings accounts, HRAs, or HSAs. If a group health plan's terms do not permit such reimbursement, then the group health plan may be amended retroactive to January 1, 2020, to provide for such reimbursement without losing tax favorable status under Code Section 105(b) or impacting the qualification of a cafeteria plan under Code Section 125. The amendment must be adopted no later than the last day of the 1st calendar year beginning after the end of the plan year in which the amendment is effective. Retroactive amendments may not be adopted after December 31, 2022, and the group health plan must be operated consistent with the amendment's terms beginning on the amendment's effective date.
Plan sponsors should review their existing plan documentation and practices to determine whether a retroactive amendment or operational change relating to PPE reimbursement is necessary. We recommend that any such change is communicated to participants as soon as practicable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
