The following is a high-level overview of the compliance issues for employers to consider when making available abortion-related travel reimbursements for employees.
Abortion and Abortion-Related Travel Reimbursement Requires a Group Health Plan
Reimbursement of Internal Revenue Code §213(d) health expenses creates a group health plan, which triggers the full array of group health plan laws (ERISA, COBRA, HIPAA, ACA, HSA eligibility, §105(h), PCORI, etc.). Therefore, employers should avoid providing reimbursement for any §213(d) any medical expenses outside of the group health plan unless it is part an HRA.
- IRS Publication 502 provides a useful summary of expenses that qualify as §213(d) medical expenses.
Specialty HRAs as a Way to Cover Medical Expenses Not Sufficiently Covered by the Health Plan
Specialty HRAs are designed to cover a specific type of medical expense or combination of expenses that are not adequately covered by the major medical plan. Common examples before the Dobbs decision included specialty HRAs for infertility, gender dysphoria, mental health, autism, or executive physicals. Covered HRA expenses are reimbursed tax-free to employees.
This same specialty HRA approach also is the appropriate way to address abortion-related medical expenses not sufficiently covered by the medical plan.
HRAs are defined contribution, account-based plans that can solve for the group health plan compliance burdens associated with covering these additional employee medical expenses. The HRA is a group health plan subject to ERISA that needs a plan document and SPD. Employers will want to work with a third-party administrator (TPA) to manage the HRA operations and ensure compliance with the multiple group health plan laws that apply.
Abortion-Related Expenses that Qualify as a Medical Expense (Medical Plan or HRA)
Expenses related to a legal abortion qualify as a §213(d) medical expense.
§213(d) also includes as a medical expense any transportation costs (including meals and lodging) that are primarily for and essential to medical care. §213(d) includes costs associated with transportation to a new region or within the region, such as airfare, rental cars, Uber/Lyft, buses, trains, taxis, etc. that are used to go to and from the point of medical treatment. For using a car to travel to obtain medical care, the IRS sets annually a mileage rate that qualifies. Beginning July 2022, the medical standard mileage rate is 22 cents per mile.
With respect to lodging, expenses such as hotel costs of up to $50/night/individual, or up to $100/night if traveling with a companion, are §213(d) medical costs if they:
- Are incurred primarily for and essential to medical care;
- The medical care is provided by a physician in a licensed hospital or a medical care facility related to, or the equivalent of, a licensed hospital; and
- There is no significant element of personal pleasure, recreation, or vacation.
Meal expenses while away from home undergoing treatment are §213(d) medical expenses where provided at a hospital or similar medical institution where the individual is receiving medical care.
Employers should first determine whether the major medical plan will cover all or a portion of the medical expenses employees may occur related to the need to travel to seek abortion services. Any medical costs not covered or not sufficiently covered by the medical plan can be reimbursed by the employer on a tax-free basis through a specialty HRA.
Non-Medical Abortion-Related Expense Reimbursement (Taxable)
HRAs can reimburse only §213(d) medical expenses. However, many employers wish to provide abortion-related transportation/lodging/meal expenses more broadly than what qualifies as a medical expense.
Employer reimbursement of non-medical abortion-related expenses will have to be reimbursed outside the HRA as taxable income to the employee. That may include lodging expenses in excess of $50 (or $100 with a companion) per night, mileage reimbursement in excess of 22 cents per mile, meal expenses not incurred at a medical institution, or any other form of compensation provided to employees to assist in the abortion procedure/travel process that does not qualify as medical.
These non-medical expenses can be processed as a simple taxable payroll reimbursement, or included as part of a broader Lifestyle Spending Account (LSA) arrangement.
Potential Civil and Criminal Liability Related to Employer-Provided Abortion-Related Travel Assistance
There has been speculation about the possibility of civil or criminal liability related to employer offerings to assist employees in traveling to seek abortion procedures. While it is likely that ERISA preemption will prevent employers from being subject to some or all this potential liability, the area is currently uncertain as the area of law develops. We encourage employers concerned about this issue to seek legal advice from counsel.
More Details on the Compliance Considerations Related to Abortion-Related Assistance
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