The IRS released Announcement 2021-7 which newly includes amounts paid for Personal Protective Equipment (PPE) as qualified medical expenses.
Which Types of PPE are eligible?
PPE such as masks, hand sanitizer, and sanitizing wipes are now eligible. The announcement does specify that the primary purpose of the PPE must be to prevent the spread of COVID-19.
Which Plans?
Technically, PPE was added as qualified medical expenses under IRC 213. Practically, this means that they are eligible under health FSAs, HSAs, and HRAs (if the HRA is structured to allow expenses beyond copays, deductibles, etc.).
Effective Date
Plans can be amended retroactively to January 1, 2020. To the extent that plans do not need to be formally amended, claims for PPE expenses would be eligible retroactively as well.
Plan Amendments
The IRS notice outlines that plans (including health FSAs and HRAs) need to be amended if they specifically prohibit reimbursement of PPE. Vita Flex Summary Plan Descriptions (SPDs) reference IRC 213 for eligible expense determinations, so Vita Flex plans will not require a specific amendment. Other plan communication materials currently list PPE as not eligible, so those materials will simply be updated by Vita.
If a non-Vita Flex plan would need to be formally amended, the amendment can be retroactive. Such an amendment must be adopted no later than December 31, 2022 (in most circumstances).
Participant Communication
Employers should communicate the change in PPE eligibility. The Vita Flex participant portal is being updated with a banner to reflect this change in eligibility.
No Double Dipping on Tax Return
If the expense is reimbursed under an account-based plan, it is not deductible for the taxpayer under Section 213 (to the extent that the total medical expenses exceed 7.5% of the taxpayer's adjusted gross income). In other words, no double dipping on the deductible expenses.
