Benefits Monthly Minute

2023 Limits for HSAs and Excepted Benefit HRAs | COVID-19 Testing Denial Serves as Basis for ERISA Litigation | Extension of Physical Presence Relief for Spousal Consent | COMPLIANCE ALERT - Cycle 3 Restatement Deadline

The May Monthly Minute highlights the 2023 limits for HSAs and excepted benefit HRAs, litigation grounded in COVID-19 testing coverage denials, and the extended physical presence relief for spousal consent.

2023 Limits for HSAs and Excepted Benefit HRAs

The IRS recently released the 2023 inflation adjusted amounts for HSAs and excepted benefits HRAs in Rev. Proc. 2022-24. For 2023:

  • the 2023 annual limitations on deductions under a high deductible health plan is $3,850 (individual) and $7,750 (family).
  • a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,500 (self-only)/$3,000 (family), and for which the annual out-of-pocket expenses do not exceed $7,500 (self-only)/$15,000 (family).
  • the maximum amount that may be made newly available for the plan year for an excepted benefit HRA is $1,950.

KMK Comment: Plan sponsors will want to clearly announce the new 2023 limits in plan document updates and related participant communications.

COVID-19 Testing Denial Serves as Basis for ERISA Litigation

This month, a New Jersey district court allowed a provider’s ERISA claim for reimbursement against an insurer that refused to cover COVID-19 tests to continue. In the case, Open MRI (on behalf of patient assignors) claimed that it submitted invoices to Cigna for COVID-19 tests administered to Cigna-insured patients, but Cigna declined to pay, contrary to federal mandates under the FFCRA and the CARES Act. In siding with the provider, the Court explained that Congress mandated that health insurance plans cover COVID-19 testing which raised it to the status of a benefit of those plans, and inasmuch as Congress also allows insureds to sue for benefits, it stands to reason that an insured can sue under ERISA when an insurer denies coverage for COVID-19 testing.

KMK Comment: The Court’s decision should serve as a reminder to insurers and claims administrators of the underlying federal coverage requirements for COVID-19 testing. It is important to note that group health plans may see exposure not only to participant and provider litigation, but also in the form governmental audits or inquiries as to the correct processing of COVID-19 testing and vaccines.

Extension of Physical Presence Relief for Spousal Consent

Earlier this month, the IRS announced in Notice 2022-27, a 6-month extension of the temporary relief from the requirement that certain participant elections be witnessed in the physical presence of a plan representative or notary public. As with other benefit-related extensions, this relief is provided in response to the continuing COVID-19 pandemic. The relief extends the physical presence requirement relief from July 1, 2022 through December 31, 2022, and to qualify for the relief, a plan must use an electronic system that satisfies the requirements previously announced in Notice 2021-03.

KMK Comment: This is one of the latest efforts of the IRS to ensure that plan operations continue to run smoothly despite the continued disruption occasioned by the COVID-19 pandemic. Plan administrators should be sure to review the electronic system requirements to ensure that spousal consents under this extended relief are handled appropriately. It is not clear whether this is the final extension, and moreover, whether plans can expect a softening of the rigid pre-pandemic physical presence requirement.

COMPLIANCE ALERT — Cycle 3 Restatement Deadline

The Cycle 3 restatement window for pre-approved defined contribution plans began August 1, 2020 and ends July 31, 2022. Adopting employers should be working with plan providers and legal counsel now to ensure timely restatement.

The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.

Lisa Wintersheimer Michel

John F. Meisenhelder

Antoinette L. Schindel

Kelly E. MacDonald

Rachel M. Pappenfus

KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.

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