How the CARES Act affects your tax-advantaged accounts

July 17, 2020

Learn how the Coronavirus Aid, Relief, and Economic Security (CARES) Act affects tax-advantaged accounts, including flexible spending and health savings accounts through the Board of Pensions.

In response to the COVID-19 pandemic, Congress passed the CARES Act (Coronavirus Aid, Relief, and Economic Security) Act to provide relief to those affected.

If you have a flexible spending account (FSA) or health savings account (HSA), here’s how the CARES Act may affect you.

  • Over-the-counter drugs allowed through FSAs and HSAs. As a result of the CARES Act, you no longer need a prescription to purchase over-the-counter medicine through your FSA or HSA, and you can buy other items, such as feminine hygiene products, with your FSA or HSA funds. This applies to purchases dating back to January 1, 2020. So, if you have purchased any of these items since the beginning of the year, you can file for reimbursement from your FSA. You can also file for reimbursement from your HSA, as long as you had your current HSA on January 1.
  • FSAs change in annual election. Current IRS rules — in effect before and since the CARES Act — support certain changes to your FSA elections mid-year. If, as a result of the pandemic, you are not working or working fewer hours, you no longer need daycare, if your healthcare situation or your care provider/costs change, these qualify as permissible reasons, under IRS rules, to change your FSA elections or stop contributing to an FSA mid-year, as long as your employer allows the change. You can change only contributions that go into your account after you submit a qualified election change. In other words, you can’t get a refund on contributions already made to your account before the change.

For more information, read the following from Further, the Board’s partner in administering tax-advantaged accounts:

And, be sure to visit the Further/Board of Pensions Learning site for periodic updates.