In order to make tax-deductible contributions to a health savings account, an individual must be covered under a high deductible health plan and have no disqualifying health coverage.
High deductible health plans are required to have a minimum annual deductible and a maximum out-of-pocket expense limit.
In a notice issued today, Notice 2020-15, the Internal Revenue Service (“IRS”) stated that “due to the unprecedented public health emergency posed by COVID-19,” an individual would not lose their ability to make tax-deductible health savings account contributions because they are covered under a plan that otherwise qualifies as a high deductible health plan that provides for the payment or reimbursement of expenses (including expenses for care and the purchase of items) “related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible.”
The practical effect of the IRS Notice is that, if a health plan agrees to pay COVID-19 testing or treatment expenses under a high deductible health plan, without requiring individuals covered under the plan to have first met the annual minimum deductible, participants in the plan will not lose their eligibility to make deductible health savings account contributions.
In light of indications that health insurers may be willing to waive deductibles and co-pays for COVID-19 expenses, the Notice comes as timely and welcome news.