The Senate passed the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) late yesterday, on March 25, 2020. The House is expected to pass the CARES Act on Friday, March 27, with the president stating that he would sign the bill quickly thereafter. The purpose of this client alert is to summarize the prospective changes in the law relating to benefits, retirement plans and health plans, with the idea that deeper dive alerts will follow in the near future, including discussion on the impact on employment tax and executive compensation. Earlier today, Hunton Andrews Kurth also published a client alert that provides a summary of tax provisions related to the CARES Act.


  1. Increases the alternatives with respect to distributions and loans from qualified retirement plans, similar to what was previously provided within prior hurricane relief.
  2. Temporarily waives the minimum required distributions for 2020 calendar year for defined contribution qualified retirement plans and IRAs.
  3. Expands Code Section 127 “educational assistance” exclusion from gross income if an employer makes student loan repayments on behalf of employees.
  4. Allows sponsors of defined benefit plans to delay making minimum funding contributions (including quarterly contributions) until January 1, 2021. However, the amount of contributions paid on January 1, 2021, will have to include accrued interest due to the delayed payment.
  5. Expanded the Families First Coronavirus Response Act’s requirements that health plans cover all costs pertaining to testing for COVID-19 to include costs for preventative care and other testing.
  6. Provides that sponsors of high-deductible health plans may cover telemedicine and other remote services for HSA-eligible participants with no deductible.
  7. Provides that all over-the-counter medications and drugs are eligible for reimbursement and coverage under HSAs, Archer MSAs, flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).



Retirement Plan Coronavirus Distribution Option

Consistent with previous disaster-related relief, the CARES Act waives the 10 percent tax on early distributions (typically distributions made before age 59½, but there are many exceptions) for “coronavirus-related distributions” up to $100,000 from qualified retirement accounts made during the 2020 calendar year. In addition, taxation on such distributions can be spread out ratably over three years, and the distributee may recontribute these funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.

A “coronavirus-related distribution” is a distribution made to an individual during the 2020 calendar year: (1) who is diagnosed with the virus SARS-CoV-2 or with the coronavirus disease COVID-19 by a test approved by the CDC; (2) whose spouse or dependent is diagnosed with SARS-CoV-2 or COVID-19 by such test; or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19, closing or reducing hours of a business owned or operated by the individual due to SARS-CoV-2 or COVID-19, or other factors as determined by the secretary of the Treasury. The administrator of a qualified plan can rely on the employee’s certification that he or she meets the requirement to receive a “coronavirus-related distribution.”

Increased Loan Amounts from Certain Defined Contribution Plans

In addition, qualified retirement plan participants can request a loan from their retirement plan up to the lesser of $100,000 or 100 percent of their vested account balance and the commencement for repayment of the loan can be delayed up to year after the loan is made. The typical five-year maximum repayment period for non-principal residence loans is also extended to begin a year after the loan is made. This provision applies for loans taken within 180 days from the passage of the CARES Act.

Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and IRAs

The CARES Act amends Code Section 401(a)(9) to temporarily waive, for the 2020 calendar year, the required minimum distribution rules for certain defined contribution plans and IRAs. Meaning, individuals who would otherwise be required to withdraw funds (and incur taxation) from such retirement accounts during the 2020 calendar year pursuant to the required minimum distribution rules are not required to take such distribution or, if they do, they can elect to make a tax-free rollover of such amounts. This provision is the same as the waiver of required minimum distributions that occurred in 2009.

Deadline to Adopt an Amendment to Implement Retirement Plan Provisions

Any required amendments to qualified retirement plans to implement the provisions applicable to retirement plans are delayed until December 31, 2022, (for calendar year plans) and December 31, 2024, for governmental plans.

Temporary Delay in Pension Plans’ Having to Make 2020 Minimum Required Contributions

The CARES Act allows pension plans that have to make any 2020 minimum required contributions (including quarterly contributions) to delay those payments until January 1, 2021. If the sponsor decides to delay these payments until 2021, the contributions will accrue interest (at the plan’s effective interest rate) from the original due date to the delayed deposit date. If a plan sponsor delays these contributions, it could drop the plan’s AFTAP to below certain thresholds and trigger Code Section 436 restrictions, such as limitations on lump-sum payments and benefit accruals. To avoid triggering Code Section 436 restrictions, the CARES Act provides that a plan sponsor can elect to treat the plan’s AFTAP as of December 31, 2019, to the entire 2020 calendar year. However, it does not address the requirement that a failure to make a minimum required contribution triggers a PBGC reportable event (unless a waiver applies to the plan sponsor) and also requires notification to plan participants that the plan sponsor failed to make a minimum contribution. Hopefully, the PBGC and IRS will provide guidance on these issues.

Temporary Expansion of Educational Assistance Tax Exclusions to Include Employer Payments of Student Loans

The CARES Act expands the exclusion from gross income of employer-provided “educational assistance” (that meets the requirements of Code Section 127) of up to $5,250 to include student loan payments made on behalf of the employee by the employer. The employer can make the loan repayment directly to the employee or lender and includes both principal and/or interest on any qualified education loan (as defined in Code Section 221(d)(9)) incurred by the employee for education of the employee. Only loan repayments made after the enactment of the CARES Act through December 31, 2020, qualify for the potential exclusion under Code Section 127. Also, the employee cannot take the typical tax deduction that is allowed on student loan interest payments if the loan repayment is financed by the employer.

Expansion of Required Coverage of COVID-19 Testing Without Cost Sharing

The CARES Act amends the Families First Coronavirus Response Act (the Families First Act) to expand out the types of COVID-19 testing covered by that law. The Families First Act required every group health plan and health insurance issuer (including group or individual health insurance and both grandfathered and non-grandfathered plans) to cover all costs for services and items related to COVID-19 testing with no cost-sharing requirements (including deductibles, copayments and/or coinsurance), prior authorization requirements or other medical management requirements. The costs covered by the Families First Act included (a) in vitro diagnostic products for the detection of SARS-CoV-2 or the diagnosis of the virus that causes COVID-19 that are approved, cleared or authorized under Section 510(k), 513, 515 or 564 of the Federal Food, Drug, and Cosmetic Act (the FFDCA) and the administration of such in vitro diagnostic products, and (b) office visits (in-person or via telemedicine), urgent care center visits and emergency room visits related to such testing (including the evaluation of the need for testing).

The CARES Act expands the types of testing required to be covered to include the products described in (a) above, plus the following:

  • testing products for which the developer has requested or intends to request emergency authorization under the FFDCA (unless the emergency use authorization has been denied or the developer doesn’t submit such request within a reasonable timeframe);
  • testing products that are developed in and authorized by a state that has notified the secretary of HHS of its intention to review tests intended to diagnose COVID-19; and
  • other tests that the secretary of HHS determines appropriate in guidance.

Limit on Reimbursement Rates and Pricing for COVID-19 Diagnostic Testing

The CARES Act requires providers of diagnostic tests to make the cash price for their products publicly available on their websites. It also requires that group health plans and health insurance issuers covering the required COVID-19 testing reimburse the test providers at either (a) rates negotiated between the parties prior to the public health emergency, if any, or (b) if there are no such previously negotiated rates, the publicly listed cash price or a lower rate negotiated between the plan/issuer and the provider. Providers that do not comply with the payment rules are subject to penalties of up to $300 per day for the period of noncompliance.

Plans Must Cover Preventive Care Related to COVID-19

The CARES Act requires group health plans and health insurance issuers offering group or individual health insurance to cover any “qualifying coronavirus preventive service” without cost sharing. A “qualifying coronavirus preventive service” is an item, service or immunization that is intended to prevent or mitigate COVID-19 and that is either (a) an evidence-based item or service that has in effect a rating of ‘‘A’’ or ‘‘B’’ in the current recommendations of the United States Preventive Services Task Force, or (b) an immunization that has in effect a recommendation from the Advisory Committee on Immunization Practices of the CDC with respect to the individual involved. The coverage requirement takes effect 15 business days after the relevant recommendation is made.

HSA-Qualified Plans May Waive Deductibles for Telemedicine

The CARES Act provides that sponsors of high-deductible health plans may cover telemedicine and other remote services for HSA-eligible participants with no deductible, and that doing so will not disqualify plan participants from making HSA contributions. The rule applies for all plan years beginning before December 31, 2021.

Over-the-Counter Medications and Menstrual Care Products May be Reimbursed Through HSAs, Archer MSAs, FSAs and HRAs

Since 2011, reimbursement or payment for over-the-counter medications from HSAs, Archer MSAs, flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) has been limited to expenses for insulin or medications prescribed by a doctor. Section 3702 removes this restriction so that all medicines and drugs can be treated as medical expenses for these purposes. In addition, amounts paid for menstrual care products will qualify as medical expenses for purposes of reimbursement from HSAs, Archer MSAs, FSAs and HRAs. These changes apply for expenses incurred and purchases made after December 31, 2019.

Our employee benefits and executive compensation attorneys listed below are ready to assist you in understanding and implementing any of the above changes.