The Employee Benefits & Executive Compensation attorneys at Chamberlain Hrdlicka represent public companies, large and closely-held private companies, tax-exempt organizations, and the fiduciaries who oversee those entities' employee benefit plans. We understand incentives in the workplace, and we stand ready with an integrated approach to help you deal with them.
From qualified retirement plans, to executive compensation, to fiduciary advice, to health and welfare programs, to mergers and acquisitions, to ERISA litigation, our broad experience helps companies answer questions in these areas of the law. A background in tax, securities, and fiduciary matters is our foundation. A common theme runs through our work in these areas: we specialize in representing employers in protecting their interests and maximizing tax advantages. We understand the work that goes into creating and maintaining incentives in the workplace, and we have the technical skills to help keep a company's employee benefit plans operating at peak efficiency.
At Chamberlain Hrdlicka, we stand with company Boards of Directors, Compensation Committees, and the HR teams that serve those directors and committees, as they seek to provide a stable, productive environment for company executives and workers.
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Announcement 2021-7 from the Internal Revenue Service (IRS) notifies taxpayers that amounts paid for personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of the Coronavirus Disease 2019 (COVID-19 PPE) are treated as amounts paid for medical care under § 213(d) of the Internal Revenue Code (Code). Therefore, amounts paid by an individual taxpayer for COVID-19 PPE for use by the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent(s) that are not compensated for by insurance or otherwise are deductible under Code § 213(a) provided that the taxpayer’s total medical expenses exceed 7.5 percent of adjusted gross income.
Because these amounts are expenses for medical care under § 213(d) of the Code, the amounts are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs). However, if an amount is paid or reimbursed under a health FSA, Archer MSA, HRA, HSA or any other health plan, it is not deductible under Code § 213.
Certain welfare health plans, including group health plans, health FSAs and HRAs, under the terms of which expenses for COVID-19 PPE may not be reimbursed, may be amended pursuant to this announcement to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after January 1, 2020, and such an amendment will not be treated as causing a failure of any reimbursement to be excludable from income under Code § 105(b) or as causing a Code § 125 cafeteria plan to fail to meet the requirements of Code § 125. These health plans may be amended pursuant to Announcement 2021-7 if the amendment is adopted not later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, no amendment with retroactive effect is adopted after December 31, 2022, and the plan is operated consistent with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date the amendment is adopted.
This Announcement 2021-7 permits employers to help their employees save taxes. If the employee has high medical expenses, their costs for COVID-19 PPE can be deducted on their personal return under Code § 213. However, if the employees do not have high medical expenses (more than 7.5% of adjusted gross income), the employer can help by amending their welfare plans to allow employees to use their welfare plans to use pre-tax dollars to pay for COVID-19 PPE. The cost to employers is low, however, plan document amendments are required. Contact our attorneys to discuss our suggestions.
Joshua Sutin helps clients unravel complex legal and business issues related to employee benefit plans, tax-exempt organizations, and business tax planning. He counsels both businesses and not-for-profit organizations on the ...