Internal Revenue Service (IRS) announcement 2021-7 notifies taxpayers that Personal Protective Equipment (PPE) purchased for the primary purpose of preventing COVID-19 can be treated as an eligible expense under Section 213(d) of the Internal Revenue Code.
Section 213(d) expenses are allowable in conjunction with Flexible Spending Accounts, Health Reimbursement Accounts, Health Savings Accounts and Archer Medical Savings Accounts.
The announcement allows for retroactive eligibility back to Jan. 1, 2020. Employers should decide soon whether they wish to adopt this optional change to their plans.
Employers should work with their FSA or HRA vendor if they wish to amend the plan to allow for PPE reimbursement.
For those plans wishing to allow retroactive eligibility to Jan. 1, 2020, the amendment must be adopted by Dec. 31, 2021.
For those plans amending retroactively after Jan. 1, 2020, the amendment must be adopted no later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective.
Any retroactive amendment must be adopted before Dec. 31, 2022.
Employers should notify their employees if they choose to adopt these changes.
Special note: Merchant systems may not allow point of sale purchases for PPE with debit cards or it may take some time to update systems as we saw with the announcement of OTC drugs and menstrual products last year.
Additionally, if an employer adopts the change back to Jan. 1, 2020, and the run-out period has already closed, the employer must reopen the run-out period to properly administer.