Five Fast Facts About Reproductive Health Benefits

Employers are increasingly looking to offer employees assistance in starting and adding to their families, which in a growing number of cases involves dealing with infertility treatments and other reproductive health issues.   Below are five fast facts about this trending employment benefit.

1. Reproductive health benefits are increasingly in demand.  According to a survey by the International Foundation of Employee Benefit Plans, summarized here, 24% of employers surveyed covered the cost of in vitro fertilization benefits in 2020, up from 13% in 2016.  Similar or greater increases in coverage were seen across other categories, including fertility medications, visits with genetic counselors and surrogacy advisors, genetic testing, non-IVF fertility treatments, and egg harvesting and freezing services (coverage of which jumped from 2% in 2016 to 10% in 2020). 
2. Only some reproductive health benefits are likely to qualify as medical expenses under a health FSA or HRA.  Such expenses must be incurred “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body [of the employee, the employee’s spouse, or the employee’s dependent.]”  IRS Publication 502, Medical and Dental expenses, mentions only in vitro fertilization, including temporary storage of eggs or sperm, and surgery to reverse procedures to prevent conception, as qualifying medical expenses.  With regard to other reproductive health measures, such as surrogacy expenses, egg donation and the like, we have only private letter rulings or other IRS guidance that is specific to the taxpayers who seek an opinion and may not be relied upon by other tax payers.  As a consequence, a comprehensive reproductive health benefit plan may have to comprise a blend of pre-tax and after-tax benefits.
3. State laws may apply, especially with regard to surrogacy benefits.  Some states, including New York, prohibit certain types of gestational surrogacy contracts, whereas other states permit them subject to certain conditions.  This article provides a survey of state laws as of early 2020.  Employers with operations in multiple states will want to proceed cautiously in designing their reproductive health benefits so as not to offer benefits that are prohibited or restricted under state laws.
4. A number of vendors have cropped up in this space as a consequence of the complexity around the federal tax and state law issues.  Services they offer include integration with insurance carriers, care navigation, and coaching. Some of the leading reproductive health benefit vendors include the following:
   • ARC Fertility:  www.arcfertility.com
   • Carrot:  www.get-carrot.com
   • Kindbody:  www.kindbody.com
   • Ovia Health:  www.oviahealth.com
   • Progyny:  www.progyny.com
   • Maven Clinic: www.mavenclinic.com
   • WIN Fertility: www.winfertility.com
5. Retirement plans are getting into the game.  Effective as of last year, the SECURE Act permits 401(k) plans to offer “qualified birth or adoption distributions” of up to $5,000 person, to cover expenses incurred in childbirth or adoption, that are subject to income taxes but exempt from the 10% early distribution tax under Code Section 72(t).  More information on these distributions can be found in our earlier post on this topic.  Adding this distribution feature can help support an employer’s overall reproductive health benefit offerings.

The above information is a brief summary of legal developments that is provided for general guidance only and does not create an attorney-client relationship between the author and the reader. Readers are encouraged to seek individualized legal advice in regard to any particular factual situation. © 2022 Christine P. Roberts, all rights reserved.

Photo credit:  Garret Jackson, Unsplash