Benefit Plan FAQs on COVID-19 – Part 2

COVID-19 and Leave-Sharing Plans

In these difficult times, some employees may want to donate some of their accrued paid-time off, vacation, or leave to help other employees take leave to recover from COVID-19 or to care for family members with COVID-19.  This can be accomplished through a “Leave-Sharing Plan” set up by their employer.

Under normal tax rules, the leave donation would have to be treated as an assignment of income that is taxable to the employee donating the leave.  However, the IRS allows such a donation to be made on a tax-free basis if it is done pursuant to a Leave-Sharing Plan that meets IRS requirements for a “Medical Leave-Sharing Plan” or a “Major Disaster Leave-Sharing Plan.”  Note that in both types of plans, the employee who receives the donated leave will be taxed on the pay for the donated leave.

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Benefit Plan FAQs on COVID-19

IRS Guidance Related to Coronavirus Testing/Treatment for HDHPs/HSAs

Last week, the IRS issued guidance confirming that high-deductible health plans with health savings accounts can provide coronavirus testing and treatment at no cost to participants without affecting eligibility for health savings accounts.  Without this guidance, any non-preventive services provided to such participants before meeting their plan deductible would have disqualified the participants from health savings account eligibility.  This guidance is welcome, as employers attempt to remove obstacles to testing and treatment for coronavirus.

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