The CARES Act amends the Families First Act's COVID-19 coverage mandate, under which group health plans and health insurers must provide coverage for FDA-approved "in vitro diagnostic products" for detecting or diagnosing the 2019 Novel Coronavirus (SARS-CoV-2) (Sec. 3201; see Legal Update, COVID-19 Legislation Includes Group Health Plan Coverage Requirements: Coverage for COVID-19 Testing). Specifically, the CARES Act permits coverage for tests:

The CARES Act imposes standards for health plans and insurers in reimbursing health providers for COVID-19 diagnostic testing (Sec. 3202). If a plan or insurer had a negotiated rate with the provider in place before the COVID-19 public health emergency (as declared under the Public Health Service Act (PHSA)), that rate will apply for the duration of the declaration period.

Plans or insurers that do not have a negotiated rate in place must reimburse providers for the cash price of the service, as listed by the provider on a public website. Alternatively, plans or insurers may negotiate a rate with the provider that is less than the cash price. Relatedly, for the duration of the COVID-19 emergency period, providers of COVID-19 testing must publicly disclose their cash price for a COVID-19 test on the provider's website. The CARES Act authorizes HHS to impose civil money penalties of up to $300 per day on providers that do not make public their cash price for COVID-19 testing.

The CARES Act requires group health plans and insurers to cover, without cost-sharing, any "qualifying coronavirus preventive service" under the Affordable Care Act's (ACA's) preventive health services rules (Sec. 3203; see Practice Notes, Preventive Health Services Under the ACA, Other Than Contraceptives and Affordable Care Act (ACA) Overview). This coverage mandate will be imposed by HHS, the Department of Labor (DOL), and the Department of Treasury (collectively, the Departments). A qualifying coronavirus preventive service is defined as an item, service, or immunization intended to prevent or mitigate COVID-19, and that is:

The requirement to cover these qualifying coronavirus preventive services will apply 15 days after the date the recommendation is made regarding the service. Under existing ACA rules, by contrast, plans and insurers must provide coverage for newly added preventive service requirements for plan years beginning on and after the date that is one year after the date the recommendation or guideline is issued (see Practice Note, Preventive Health Services Under the ACA, Other Than Contraceptives: Timing Rules).

Within 180 days of the CARES Act's enactment date (March 27, 2020), HHS must issue guidance addressing the sharing of patients' protected health information (PHI) during the COVID-19 public health emergency (Sec. 3224; see HIPAA Privacy, Security, and Breach Notification Toolkit and Legal Update, HHS Addresses HIPAA Privacy and COVID-19). The guidance will address regulations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and related policies, including those concerning public health emergencies.

A health provider that furnishes treatment for substance use disorders (SUD) may be required to satisfy privacy protections under both 42 C.F.R. Part 2 (Part 2) (which governs federally assisted SUD programs) and HIPAA (as a HIPAA covered entity (CE)) (Sec. 3221; 42 U.S.C. § 290dd-2; see Practice Note, HIPAA Privacy Rule: Entities Subject to Privacy Rule). A health plan's third-party service provider may receive SUD-related individual information, which is regulated by the federal Substance Abuse and Mental Health Services Administration (SAMHSA). For example, such information may result from the claims payment context.

The CARES Act amends the Part 2 rules to be more consistent with the HIPAA Privacy Rule and related protections. For example, once a provider obtains a patient's written consent to use or disclose SUD-related records, the records' content may be used or disclosed by a HIPAA CE or business associate for treatment, payment, and health care operations as permitted under HIPAA's regulations, including its rules governing accountings of disclosures (see Practice Note, HIPAA Privacy and Security (Individual Rights): Right of Accounting and Other Rights). Also, an individual's prior written consent may be given once for all future uses or disclosures for treatment, payment, and health care operations, until the patient revokes the consent in writing. The CARES Act also:

These provisions apply regarding uses and disclosures of information occurring on or after 12 months after the CARES Act's enactment date (March 27, 2020).

The CARES Act includes a provision that impacts high-deductible health plans (HDHPs) and health savings accounts (HSAs) (Sec. 3701; see Practice Note, Defined Contribution Health Plans: Definition of High-Deductible Health Plan (HDHP)). As background, the Internal Revenue Code (Code) permits an individual to deduct contributions to HSAs if, among other requirements, the individual is covered under an HDHP and does not have disqualifying coverage (26 U.S.C. § 223(c)). An HDHP is a health plan that satisfies requirements under Code Section 223, including with regard to minimum deductibles and maximum out-of-pocket expenses (26 U.S.C. § 223).

The CARES Act amends the Code's HSA rules to provide that a plan that does not have a deductible for telehealth and other remote care services may still be treated as an HDHP (26 U.S.C. § 223(c)(2)). This provision applies as of the CARES Act's enactment date (March 27, 2020) and extends through plan years beginning on or before December 31, 2021.

For more information, see Legal Update, IRS Addresses Coverage for COVID-19 Testing and Treatment in HSA/HDHP Guidance.

An HSA is a trust created to pay for an individual's "qualified medical expenses." Before the ACA, the IRS permitted reimbursement of amounts for medicines or drugs available without a prescription to alleviate or treat personal injuries or sickness. Under the ACA, however, qualified medical expenses include amounts paid for medicine or drugs only if such medicine or drugs are prescribed (determined without regard to whether the medicine or drug is available without a prescription) or insulin (see Practice Note, Defined Contribution Health Plans: Overview: HSA Reimbursement Restrictions Under the ACA).

The CARES Act removes the ACA provision under which over-the-counter (OTC) drugs are qualified medical expenses only if they are prescription drugs or insulin (Sec. 3702). In addition, the CARES Act:

Parallel amendments also make this change applicable to:

The CARES Act adds a provision regarding student loans to the Code's rules governing educational assistance programs (Sec. 2206; 26 U.S.C. § 127; see Practice Note, Educational Assistance Programs and Fringe Benefits Toolkit). The Code contains an exclusion from employee gross income for amounts paid or expenses incurred by an employer for certain types of "educational assistance" that are provided as part of an educational assistance program.

The CARES Act expands the definition of educational assistance under Code Section 127 to include an employer's payment, whether to an employee or a lender, of principal or interest on any qualified education loan (as defined under Code Section 221(d)(1)) incurred by the employee for the employee's education (26 U.S.C. § 221(d)(1)). The Code's educational assistance program rules establish a maximum annual exclusion of $5,250 (see Practice Note, Fringe Benefits: Educational Assistance Programs: Maximum Exclusion Allowed). This provision applies to payments made after the CARES Act's enactment date (March 27, 2020) and before January 1, 2021.

The Families First Act requires certain employers to provide paid sick leave (under the Emergency Paid Sick Leave Act (EPSLA)) and expands the Family and Medical Leave Act (FMLA) (under the Emergency Paid Family and Medical Leave Expansion Act (EFMLA)) for COVID-19 related absences (Sec. 3606; see Article, Expert Q&A: COVID-19 and Employment). The Families First Act also provides for tax credits relating to the paid sick leave and family leave wages, which are intended to fully reimburse employers for the cost of providing paid leave related to COVID-19 to employees (see Legal Update, IRS Addresses Payroll Tax Credits for Leave Under COVID-19 Legislation). The IRS has indicated that employers will be allowed to claim the refundable tax credits for qualified sick leave wages and qualified family leave wages paid for the period from April 1, 2020 to December 31, 2020 (Notice 2020-21).

The CARES Act amends the Families First Act's EPSL and EFMLA requirements to permit the tax credits for these provisions to be advanced up to applicable limits that are:

The IRS will waive Code penalties for an employer's failure to deposit Social Security taxes ("old age, survivors, and disability" (OASDI) taxes) or Railroad Retirement Act taxes if the failure was in anticipation of the Families First Act's payroll tax credits (26 U.S.C. §§ 3111(a) and 3221(a)) (see Practice Note, Payroll (FICA) Taxes).

The CARES Act allows coronavirus-related distributions of up to $100,000 from qualified retirement plans. The distributions are exempt from the 10% early-withdrawal tax under Code Section 72(t) (26 U.S.C. § 72(t)). (Sec. 2202(a).)

The CARES Act increases the maximum retirement plan loan amount for loans made to affected participants during the 180-day period beginning on March 27, 2020 (the Act's enactment date). (Sec. 2202(b)(1).) Participants are eligible for the increased loan if they meet the same requirements as for the coronavirus-related distribution (see Coronavirus-Related Distribution Defined).

Eligible participants can take a loan that is the lesser of:

For more information on plan loans, see Practice Note, Qualified Retirement Plan Loans.

Plan amendments for the coronavirus-related distribution and plan loan changes are due the last day of the first plan year beginning on or after January 1, 2022 (unless the Treasury Secretary provides a later date), as long as the plan operates as if the amendment is in effect. For governmental plans, the due date is the last day of the first plan year beginning on or after January 1, 2024. (Sec. 2202(c).)

The CARES Act amends Code Section 401(a)(9) (26 U.S.C. § 401(a)(9)) by waiving the required minimum distribution (RMD) requirements for the 2020 calendar year for:

(Sec. 2203(a) (amending Code § 401(a)(9) (26 U.S.C. § 401(a)(9)).)

The RMD waiver does not apply to defined benefit plans.

Plan amendments for the RMD waiver are not due until the end of the plan year beginning on or after January 1, 2022 (January 1, 2024 for governmental plans), as long as the plan operates as if the amendment is in effect.

For more information on RMDs, see Practice Note, Required Minimum Distributions from Retirement Plans.

The deadline for making minimum required contributions, including quarterly contributions, for single-employer defined benefit plans during the 2020 calendar year is postponed to January 1, 2021. Interest, at the plan's effective rate of interest, will be added to the amount of each required contribution calculated between the original due date and the payment date. (Sec. 3608(a).)

The CARES Act also provides that plan sponsor may elect to treat the plan's adjusted funding target attainment percentage (AFTAP) for the last plan year ending before January 1, 2020 (December 31, 2019 for calendar-year plans) as the AFTAP for plan years that include 2020. (Sec. 3608(b).)

Subtitle A of Title IV, the Coronavirus Economic Stabilization Act of 2020, directs the Treasury Department to provide up to $500 billion in loans, loan guarantees, and other investments for eligible businesses, states, and municipalities that incurred losses as a result of the COVID-19 outbreak, including:

The Secretary of the Treasury must publish application procedures and requirements for the direct loans contemplated in the first three bullets above within ten days of the CARES Act's enactment.

The duration of any loan or loan guarantee provided under Title IV will be as short as practicable and no longer than five years. A company borrowing under Title IV must:

Companies borrowing under Title IV are also subject to certain restrictions during the term of the loan and for 12 months after the date the loan is no longer outstanding (the Loan Restriction Period), including, among other things:

The limitations on executive compensation for companies receiving loans under this section are:

For example, if an officer of a company borrowing under Title IV received $4 million in total compensation in 2019, then the officer may receive total compensation of at most $3.5 million ($3 million plus half of the $1 million the officer received in excess of $3 million in 2019) during any 12-month period in the company's Loan Restriction Period.

The Coronavirus Economic Stabilization Act of 2020 also directs the Treasury Department to seek to use some of the $454 billion for the Federal Reserve Board programs to implement a program for loans to mid-sized businesses (defined as businesses with between 500 and 10,000 employees), including non-profit organizations. Companies borrowing under this program will receive loans with annualized interest rates no greater than two percent and no payment of principal or interest will be due for at least six months after the loan is made. To receive a loan, a company must certify, among other things, that the company:

Subtitle B of Title IV, the Air Carrier Worker Support provisions, directs the Treasury Department to provide financial grants to certain companies to be used for wages, salaries, and benefits of aviation workers, including:

An eligible air carrier or contractor could receive a grant in an amount equal to the wages, salaries, benefits, and other compensation paid to the air carrier's or contractor's employees (other than corporate officers) during the period from April 1, 2019 through September 30, 2019.

The Secretary of the Treasury must publish streamlined and expedited procedures no more than five days after the CARES Act's enactment for air carriers and related contractors to submit requests for financial assistance and the Secretary of the Treasury shall make initial payments to approved air carriers and related contractors no later than ten days after the CARES Act's enactment.

Eligible companies or contractors receiving grants under Title IV are restricted from:

Title IV also places limitations on the executive compensation companies receiving grants may pay during the period from March 24, 2020 through March 24, 2022 (the Grant Restriction Period). A company or contractor receiving a grant must agree that:

Total compensation is defined as salary, bonuses, awards of stock, and other financial benefits provided by the company or contractor to an officer or employee.

The CARES Act establishes: