CARES Act: Employee Benefits Issues 


The below information contains a summary of the CARES Act: Sections 2202, 2203, 2206, 3201, 3202, 3203, 3701, and 3702.

Retirement Plan Provisions

  • Retirement plan distributions up to $100,000 permitted without a 10% tax penalty for individuals impacted by the coronavirus, if taken between January 1, 2020 and December 31, 2020. Income taxes may be spread ratably over a three-year period, and a mechanism is provided to permit the individuals to recontribute the distributions.
  • Temporary increase in the amount of loans that an individual impacted by the coronavirus may take from retirement plans without being taxed. The increased limit is the lesser of $100,000 or 100% of the individual’s vested account balance. Applies to loans taken within 180 days of enactment.
  • One-year extension permitted on any payments due in 2020 under any retirement plan loan currently outstanding prior to the date of enactment of the Act without the loan becoming taxable.
  • Waiver of required minimum distributions (RMDs) during 2020 from a defined contribution retirement plan (such as a 401(k) plan or IRA) for individuals who would otherwise have to begin taking RMDs in 2020. Also, 2020 is disregarded in applying the requirement for certain beneficiaries to receive their full retirement plan benefits within five years after the participant’s death.
  • Expansion of educational assistance plans to allow employer payments in 2020 of employee student loans interest or principal to be tax free, subject to the $5,250 maximum, nondiscrimination requirements, and other limits applicable to these plans.

Health Plan Provisions

  • Requires group health plans and health insurance issuers to cover certain COVID-19 diagnosis tests that a state has authorized or for which the developer has requested, or intends to request, emergency use authorization from the FDA.
  • Requires group health plans and health insurance issuers to pay providers for COVID-19 testing either by applying: (i) any negotiated rate established prior to the COVID-19 public health emergency (or negotiated after the emergency so long as the rate is less than the provider’s cash price), or (ii) if no negotiated rate applies, the provider’s cash price for the testing, which must be published on a website available to the public.
  • Group health plans and health plan issuers are required to cover, without any applicable cost sharing, any item, service, or immunization intended to prevent or mitigate the coronavirus disease, so long as it receives proper recommendation from the applicable governmental COVID-19 task force or advisory committee.
  • Through December 31, 2021, any group health plan that covers telehealth or other remote care services without imposing any applicable cost sharing or deductibles will not violate rules for high deductible health plans, even if those telehealth services do not relate to the treatment or diagnosis of COVID-19.
  • The prohibition on using HSA funds to purchase over-the-counter medicine or drugs without a prescription is removed.
  • Menstrual products can now be classified as medical expenses and thus can be paid for using HSAs, Health FSAs, Archer MSAs, or HRAs.

Calfee invites you to visit our COVID-19 Resource Center containing First Alerts to help guide you through the challenges faced by individuals and organizations as a result of the novel coronavirus outbreak. We are committed to helping you meet the diverse and complex challenges and navigate the disruptions caused by this pandemic. Please check the COVID-19 Resource Center regularly for the latest updates, or subscribe to receive the most up-to-date Alerts sent directly to your email inbox. Please whitelist and to ensure these emails make it past your spam filters and into your inbox.

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