Both the SECURE Act, passed in December 2019, and the CARES Act, passed in March 2020, have affected significant changes for both Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). While the SECURE Act provided the most comprehensive retirement reform package in over a decade and its provisions are permanent changes, the CARES Act specifically addresses unique challenges and considerations during the COVID-19 crisis.
CORONAVIRUS RELATED DISTRIBUTIONS (CRDs) Qualified individuals include those diagnosed with COVID-19, those whose spouse or dependent is diagnosed with COVID-19, or those who experience adverse financial consequences due to any of the following related to COVID-19, such as being quarantined, furloughed, or laid off; having work hours reduced; or being unable to work because of lack of child care.
CRDs repaid within a three-year period will be considered to have met the 60-day rollover requirement. These withdrawals will be taxed over a three-year period, unless the individual elects otherwise. Please consult a tax advisor.
TESTING & TREATMENT FOR COVID-19 (TELEHEALTH & REMOTE CARE SERVICES) Health insurance plans can pay for telehealth and remote care services, even if the deductible has not yet been met, and will not affect high deductible health plan (HDHP) eligibility for HSA purposes. This is effective for plan years beginning on or before December 31, 2021.
Group health plans must provide coverage for diagnostic testing for COVID-19 with no cost sharing and no prior authorizations – until the Secretary of Health and Human Services determines the public health emergency has expired.
NEW QUALIFIED MEDICAL EXPENSES Certain over-the-counter medicines and products no longer require a prescription to be considered qualified medical expenses; the CARES Act definition specifically includes over-the-counter menstrual care products. See IRS Publication 502 for a complete list of qualified medical expenses for HSA purposes.
OVERVIEW OF SECURE ACT UPDATES AFFECTING IRAs
Increase in RMD age from 70.5 TO 72
Contributions allowed to Traditional IRA past age 70.5: This was effective beginning with tax year 2020. Earned compensation remains a requirement to make an IRA contribution.
New exemption from the 10% early distribution penalty: This is for expenses up to $5,000 related to the birth or adoption of a child.