Key provisions of the CARES Act for employee benefits

The CARES Act – Key Provisions Affecting Employee Benefit Plans

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES) Act. It delivers $2 trillion in fiscal stimulus to the economy including preferred loans to small businesses, capital for distressed industries, direct cash payments to many Americans, unemployment insurance enhancements, as well as various provisions affecting employee benefit plans.  The article will focus on the key employee benefit provisions of the CARES Act.


Expanded COVID-19 Testing

The recently enacted Families First Coronavirus Response Act (FFCRA) requires group health plans and insurers to provide coverage of certain diagnostic COVID-19 testing and related services without cost-sharing and without preauthorization.  The CARES Act expands on these provisions in the following ways:

  • Requires that all testing for COVID-19 must be covered without cost-sharing. In addition to tests approved by the FDA, this includes tests for which:
    • the developer has requested, or intends to request, an emergency use authorization from the FDA,
    • tests developed in and authorized by a state that has notified the Secretary of Health and Human Services (HHS) of its intention to review tests intended to diagnose COVID-19, or
    • other tests that the HHS Secretary determines are appropriate;
  • Requires a group health plan or insurer to reimburse providers for such testing at either (1) the negotiated rate with such provider agreed on prior to the COVID-19 pandemic or (2) if no such negotiated rate exists (i.e. out-of-network providers), at a rate not greater than the cash price, which must be posted publicly by the provider.


Required Coverage of COVID-19 Vaccines and Other Preventive Treatments

If a COVID-19 vaccine, immunization, etc. are developed, the Act mandates coverage without employee cost-sharing for such preventive services.  To qualify for this treatment, the preventive item or service must meet certain criteria as defined by the U.S. Preventive Services Task Force and/or the Advisory Committee on Immunization Practices.


Expanded Coverage of Telehealth Services by HDHPs

The Act includes a safe harbor allowing a high deductible health plan (HDHP) to cover telehealth or other remote care services, with no cost-sharing, prior to the participant’s satisfaction of the plan deductible.  This ensures the participant will maintain Health Savings Account eligibility.  This safe harbor is only for plan years beginning on or before December 31, 2021.


Expanded Use of HSAs, FSAs, and HRAs

Eliminating a prohibition from the Affordable Care Act, HSAs, FSAs, and HRAs can now be used to purchase over the counter medications without a prescription (previously allowed only if prescribed drugs or insulin).  Further, the act mandates that menstrual care products will be treated as qualified medical expenses and can also be purchased using an HSA, FSA, or HRA. These provisions are effective for expenses incurred and amounts paid after December 31, 2019.


Amendments to the FFCRA

The CARES Act makes several minor changes and clarifications to the FFCRA:

  • Under the FFCRA, emergency paid FMLA leave is generally available to employees who have been employed for 30 days or more. The CARES Act modifies this rule, stating that employees laid off on or after March 1, 2020, that are then rehired by the employer can be eligible for paid family leave.   The employee must have been employed for at least 30 of the prior 60 days.  This effectively means that a rehired employee could be eligible for this paid leave immediately upon rehire.
  • Per the FFCRA, employers are eligible to receive reimbursement for paid sick leave and family leave through tax credits, thus creating cash-flow concerns. To address this, The CARES Act created a process where employers can request an advance of anticipated tax credits. Further guidance on the specifics of this process is forthcoming from the IRS.
  • The CARES Act provides funding to federal contractors for reimbursement of paid leave given to certain contract workers if they are unable to work or telework due to COVID-19.
  • The CARES Act clarifies that the monetary caps for emergency paid sick leave and emergency FMLA leave under the FFCRA apply “for each employee”. (i.e. $511 per day per employee, etc.)


Advisor - Michael Godwin

Michael Godwin

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