Compliance Issues Associated with Employer-Provided Abortion Travel Benefits

Jul 18, 2022

Since the U.S. Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization, individual states may now ban abortion services entirely or place very tight restrictions on them. The Court’s ruling has prompted some employers to consider how they might assist employees who wish to continue to access lawful abortion services even if they live in a state that bans such services. Some employers have responded by offering to cover employees’ travel expenses should they need to leave their residential state to obtain abortion services.

The Current State of Abortion Travel Benefits

To be clear, an employer’s coverage of employee travel costs relating to abortion services is not required. In fact, the practice has only been taken up by a relatively small group of employers. The Society for Human Resource Management (SHRM) surveyed more than 1,000 employers shortly after the Dobbs ruling was released, and only about five percent of those surveyed said they planned to provide travel expense assistance for employees seeking abortions. At this early post-Dobbs stage, employers who are contemplating the addition of such a benefit for employees are faced with a veritable minefield of legal issues.

An employer’s decision to offer travel expense assistance to obtain abortion services implicates many issues that are beyond the scope of the information presented here, including the potential public relations impact on this divisive issue.  Those employers who have resolved to provide a travel benefit, however, are taking a few different approaches to supporting employees seeking out-of-state abortion services. About 10 percent of employers surveyed by SHRM said they would consider increasing employer contributions to employee health savings accounts; others have added the benefit to a group health plan; and some are treating it as an expense reimbursement.

Each approach has its own set of legal rules and risks that employers must consider.

Health Benefit Plan Expansion vs. Alternative Options

Deciding to integrate abortion travel benefits into an existing group health plan may be the simplest option for some employers. Covering such expenses under an insured or self-insured group health plan can mitigate employee privacy concerns because such plans are subject to HIPAA and are typically administered by an insurance carrier or third-party administrator.  It can spare an employee from having to disclose very personal, sensitive information to someone within the employer’s organization.  It also spares the employer the challenges and risks associated with trying to protect such information once it is received.    

There are also some drawbacks to covering travel expenses under a group health insurance plan. For example, only employees enrolled in the organization’s health plan could take advantage of those benefits.  Part-time and low-wage workers who might benefit most from this travel benefit are more likely to not be enrolled in an employer’s group health plan.

As of right now, approximately ten states have passed laws prohibiting insured group health plans from covering abortion services.  Employers in such states may have an argument that such laws are preempted by ERISA, which generally restricts the right of states to regulate ERISA plans.  Employers in such states could be facing an expensive litigation battle over the benefits offered under their group health plan.

Reimbursing Medical Expenses Through FSA/HRA/HSA Accounts

Many employers already offer employees pre-tax arrangements for covering eligible medical expenses.  These include Flexible Spending Accounts (FSA), Health Reimbursement Accounts (HRA), and Health Savings Accounts (HSA).  These accounts enable employees to spend pre-tax dollars to cover eligible medical expenses. Employees generally can use money contributed to these accounts by themselves or by their employer to cover abortion-related travel to the extent such expenses qualify as medical care under the Internal Revenue Code.  If done properly, such benefits are not taxable under current federal law and under most state laws. To the extent these accounts are administered by a third party, an employer would be insulated from dealing with sensitive employee information. See further discussion, below, about the tax treatment of such expenses.

Other Reimbursement Arrangements

It is also possible to provide abortion travel benefits without integrating them into a health insurance plan or a pre-tax ERISA account, as noted above. This can be done by a reimbursement to employees after they travel and incur costs to obtain an abortion in another state, or even advancing those costs ahead of time. Including a cap on these costs may be wise.  Some employers have also opted to provide employees with a lump sum payment to cover their travel costs. However, that kind of policy creates a risk of inadvertently creating a separate group health plan and potentially running afoul of the above-mentioned laws. Employers also need to consider the tax implications of travel reimbursement arrangements for both itself and its employees.

Tax Laws

Providing abortion travel benefits can affect a recipient employee’s taxable income. Medical expenses may be excluded from taxable income, and some reimbursements for travel and lodging expenses associated with obtaining an abortion can thus be excludable, too. Under Section 213(d) of the Internal Revenue Code, “transportation primarily for and essential to medical care” may be nontaxable. That means if an employee travels for the primary purpose of obtaining an abortion, the funds an employer provides to assist them is likely not taxable income at least under federal law. If an employer provides benefits for the employee’s spouse or another support person to accompany them while travelling to obtain an abortion, those funds can also be non-taxable.

There are some limitations to this, however. For example, reimbursements for meals while travelling are not tax-free. Additionally, hotel reimbursements for medical travel can only be tax-free up to $50 per person per night. So, while employers are free to design reimbursement arrangements for abortion travel expenses, it is also important to know what should and should not be taxed. This is especially important if the employer is administering the benefit itself.

Differing State Laws and Litigation

As noted above, there could be key differences from one state to the next in the laws that affect employers’ ability to provide travel benefits for abortion services.   In the aftermath of the Dobbs decision, some states seem prepared to treat employer-supported travel benefits for abortion services as a form of “aiding and abetting” an unlawful abortion. While these laws are expected to be challenged in court, they remain noteworthy because they could expose employers to liability.

FMLA Leave

Employers may also be concerned whether they have a legal responsibility to allow their employees leave to obtain an abortion. The U.S. Department of Labor hasn’t released any definitive guidance on whether the Family and Medical Leave Act (FMLA) applies in such a situation. However, it seems likely that the answer is yes.

FMLA regulations clarify that complications caused by pregnancy can be considered “serious health conditions” and thus entitle employees to FMLA leave. Similarly, courts have interpreted the FMLA to provide leave for miscarriages. Finally, elective surgeries can also be serious health conditions and warrant FMLA leave. Based on that logic, it’s likely that obtaining an abortion would also be covered by the FMLA. And where an abortion amounts to a serious health condition, employers may find that FMLA is requested by their employees who need to provide mental or physical care for a spouse, child or parent.

Lastly, it’s important to note that even if your state prohibits or restricts abortion, your employees may still have rights under the FMLA. Federal workplace laws still apply.

If you are considering offering your employees abortion travel benefits and have any related questions, please do not hesitate to contact any of our attorneys. At K|W|W, your workforce is our priority.

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