House passes Build Back Better

The $1.7 trillion reconciliation package, a centerpiece of President Biden’s domestic agenda, passed largely along party lines (220-213) just before the Thanksgiving recess.

Several provisions were either left out or modified as Democrats sought to reduce the price tag of the initial $3.5 trillion plan and find consensus within their caucus. Those that were pared back include a proposal to provide 12 weeks of paid family leave.

This new measure would provide as many as four weeks of paid leave for the birth or adoption of a child, to care for a family member with a serious health condition, or for an employee’s own serious health condition that prevents them from working. Eligible workers would be entitled to the benefit within a one-year period, starting in 2024.

States with preexisting paid leave programs would receive grants to cover the equivalent costs of the benefits, and employers would receive grants to cover 90% of their paid leave benefits for as many as four weeks.

Below is a brief overview of other noteworthy policies….

  • Tax Credits: Extends the expanded child tax credit for one year (through 2022) and limits advance payments to those with incomes below $150,000 for joint filers and $75,000 for single filers. It also would make the credit fully refundable after 2022.
  • FMLA: Ends the employer tax credit for paid family and medical leave in 2024 (instead of 2026).
  • Child Care: Provides $100 billion for the first three years of a new child care entitlement program, which would end after 2027. It would cap child care costs at a maximum of 7% of family income, using a sliding scale that would apply to those up to 250% of the state median income.
  • Universal Preschool: Provides more than $18 billion for fiscal years 2022 through 2024 to provide free preschool to all three and four year olds.

While the timing for Senate consideration is still up in the air, changes are almost a certainty as several senators are opposed to various parts of the bill – including the paid leave portion. Regardless, any Senate amendment(s) will cause the package to be sent back to the House for a second vote.

OSHA Issues Vaccine Mandate Guidance for Employers

Private Sector must comply with most aspects by December 5, 2021.

Last week, the Occupational Safety and Health Administration (OSHA) unveiled its Emergency Temporary Standard (ETS) to protect employees of large companies from COVID-19. This ETS, which is expected to apply to more than 80 million workers, will require employer action by December 5, 2021…however, the testing and vaccination requirements will not take effect until January 4, 2022.

Below is a brief summary of the key highlights/points:

Scope The guidance applies to employers with 100 or more employees* except for those who (1) do not report to a workplace where other individuals – such as coworkers or customers – are present (2) work from home, (3) work exclusively outdoors, (4) are covered under the federal contractor rule, or (5) are covered under the healthcare services rule.  

Vax-or-Test Timeline Employees must be fully vaccinated for COVID-19 by January 4, 2022, or be subject to weekly testing. This guidance will remain in effect until withdrawn or superseded by a permanent standard, which must be issued no later than six months after publication of the initial ETS.

Vaccination Requirements Employers must require each vaccinated employee to provide acceptable proof of vaccination status. Acceptable proof of vaccination generally includes: (1) a copy of the COVID-19 vaccination card, (2) a copy of immunization/medical records documenting the vaccination, or (3) employee attestation – but only if unable to produce other proof.  

Testing Each unvaccinated employee must be tested at least every seven days and provide documentation of the most recent test results to the employer.** A permissible test is one that has been approved by the Food and Drug Administration (FDA) and is administered in accordance with the authorized instructions. Over-the-counter self-tests are not permissible unless they are observed or proctored in accordance with the ETS.

The ETS does not require employers to pay for costs associated with COVID-19 testing.

Positive COVID-19 Test Regardless of vaccination status, an employee who tests positive for, or is diagnosed with, COVID-19 must promptly notify their employer. Said employee must be immediately removed from the workplace and may not return until he/she meets the return to work criteria. The ETS does not require employers to provide paid time off to any personnel removed from the workplace due to a positive COVID-19 test or diagnosis.

Paid Time Off Beginning December 5, 2021, large employers must provide paid time off for staff to receive the vaccine and recover from any side effects caused by the vaccine. Specifically, the ETS requires all covered entities to support vaccination by providing employees with a “reasonable” amount time off — including up to four hours at the regular rate of pay — to receive each vaccination dose. They must also provide “reasonable” time and paid sick leave to employees recovering from vaccine side effects.

Interaction with State Laws/Plans The ETS is intended to preempt any State or local requirements that ban or limit an employer from requiring vaccination or testing. In the twenty-two (22) states that maintain their own plans, the state OSHA will be responsible for either adopting the federal standard as written or modifying it to impose stricter requirements.

Penalties It appears that the civil penalty for violation of the ETS may be as high as $13,653 for each affected employee. Citations can carry monetary penalties up to $136,532 in the case of willful or repeat violations.

On November 6, 2021, the US Court of Appeals for the Fifth Circuit temporarily blocked OSHA’s vaccine mandate. The court wrote that the pending lawsuit raised “cause to believe that there are grave statutory and constitutional issues” surrounding the ETS. Thus, the guidance is stayed until further notice…temporarily halting its implementation and enforcement. Although the future of the ETS remains uncertain as the result of current legal challenges, employers should begin laying the groundwork for compliance while keeping a close eye on the ongoing litigation.  

*For a single corporate entity with multiple locations, all U.S. employees are counted for purposes of the 100-employee threshold. Part-time employees and those not covered by the ETS (i.e. remote workers) count toward the company total; independent contractors do not. Once at or above the threshold, an employer will remain covered even if it drops below 100 employees.

**An unvaccinated employee who typically works remotely – or has been away from the workplace for a week or longer – must be tested within seven days before returning to work.

Charitable Giving News 

The Everyday Philanthropist Act has been re-introduced for consideration during the 117th Congress (2021-22). Sponsored by House Ways & Means Committee members Tom Suozzi (D-NY) and Vern Buchanan (R-FL), this bi-partisan legislation (H.R. 4585) aims to revolutionize employee giving and incentivize every American to become an Everyday Philanthropist.

Historically, only a small percentage of Americans – those who itemize their tax returns – are eligible to take their charitable donations as tax deductions…a strategy that has overwhelmingly benefited the wealthiest in our country. The Everyday Philanthropist Act would afford a similar opportunity for ALL working Americans through the creation of a Flexible Giving Account, which provides businesses with an easy way to encourage employee giving. This bill is also essential for charitable organizations across the country who rely on giving to do their good work. 

Recently enacted provisions establishing a “partial/universal” above the line deduction extends and modifies the maximum amount that individuals are permitted to write-off, whether they itemize or not. While we applaud this forward movement in charitable reform legislation, our country needs a long term, fiscally sound and compliant friendly solution for all. 

The Everyday Philanthropist Act would revolutionize employee giving through empowering employees of all tax brackets to give to the charity of their choice, reducing the employer’s payroll taxes and cultivating a movement of shared responsibility between employers and employees. 

*The Coronavirus Aid, Relief & Economic Security (CARES) Act encouraged Americans to contribute to charitable organizations by permitting a $300 deduction of cash contributions for 2020 [Public Law 116-136]; The Consolidated Appropriations Act continued the $300 deduction through 2021 and clarified the allowance for married couples filing jointly [Public Law 116-260].

Treasury releases much anticipated COBRA direction

Yesterday, the IRS issued Notice 2021-31, which provides guidance needed to implement the temporary COBRA subsidy provisions included in the recently enacted $1.9 trillion COVID relief/stimulus package.

The American Rescue Plan contained a 100% federal subsidy to reduce employer sponsored health care premiums for workers eligible for COBRA – due to an involuntary termination of employment or reduction in hours – between April 1, 2021 and September 30, 2021.  The new law also adds a corresponding tax credit for the entities that maintain group health plans.

Notice 2021-31 furnishes substantial information regarding the calculation of the credit, the eligibility of individuals, the premium assistance period, and other information vital to employers, plan administrators, and health insurers.

Gov. Affairs is in the process of reviewing this new round of FAQs…TASC will provide a summary of the top compliance and implementation issues in the near future.

Notice 2021-31: https://www.irs.gov/pub/irs-drop/n-21-31.pdf

IRS talks dependent care assistance programs

Just released – today’s compliance news addresses the taxation of dependent care benefits made available during the 2021 and 2022 tax years due to the application of either the carryover or the extension of a claims period made available under the Consolidated Appropriations Act (CAA)*.

The guidance seems to clarify that if these dependent care benefits would have been excluded from income if used during the taxable year ending in 2020 (or 2021 if applicable), these benefits will remain excludible from gross income and are not considered wages of the employee for 2021 and 2022. Additionally, the notice states that these amounts will not be taken into account for purposes of the application of the limits under Section 129 to the other dependent care benefits made available for the taxable years ending in 2021 and 2022**.

Governmental Affairs is reviewing these developments…clients should be on the lookout for additional communications from TASC in the near future.

Notice 2021-26: https://www.irs.gov/pub/irs-drop/n-21-26.pdf

*Public Law 116-260

**This is a change from how the Section 129 exclusion has been applied to grace period amounts prior to the CAA; previously, reimbursements of dependent care benefits in excess of the $5,000 statutory amount were taxable to recipients.

Shot in the arm

New tax credit prods businesses on employee vaccination

President Biden recently called on businesses to do more to boost the inoculation effort in the U.S. and encouraged employers to take advantage of a tax credit for providing paid time off to workers receiving their pandemic shots.

As a result, Treasury and the IRS published additional details of tax provisions available under the American Rescue Plan* to help small businesses…including providing paid leave for employees receiving COVID-19 vaccinations. Available to eligible employers – those with fewer than 500 employees – that pay sick and family leave for absences from April 1 through Sept. 30, 2021, the vaccination credit covers 100% of daily wages per employee (up to $511).

*The American Rescue Plan allows small and midsize employers to claim refundable tax credits that reimburse them for the cost of providing paid sick and family leave to their employees due to COVID-19. Self-employed individuals are eligible for similar tax credits.

Fact sheet: https://www.irs.gov/newsroom/employer-tax-credits-for-employee-paid-leave-due-to-covid-19

DOL issues COBRA Subsidy Notices & FAQs

Agency was tasked with providing additional guidance per the American Rescue Plan

Earlier today, the Employee Benefits Security Administration release the following information via it’s website (https://www.dol.gov/COBRA-subsidy):

  • Model General Notice and Election Notice
  • Model Notice in Connection with Extended Election Period
  • Model Alternative Notice
  • Model Notice of Expiration of Premium Assistance
  • Summary of COBRA Premium Assistance Provisions
  • COBRA Premium Assistance FAQs
  • General COBRA FAQs for Employers / Workers

COBRA clients should be on the lookout for additional communications from TASC in the near future.

One year later

Biden marks anniversary of global pandemic

Last week, President Biden capped the first major legislative victory of his administration by signing off on a sweeping $1.9 trillion COVID package meant to infuse a host of economic relief measures into the economy. But the American Rescue Plan (Public law 117-2) is more than stimulus payments and jobless benefits, it also includes a litany of provisions with direct implications for employee benefit plan sponsors. The enactment – which comes exactly twelve months after the virus was a declared a health emergency – brings the total price tag of pandemic related spending to about $5.4 trillion since last March.

Key employee benefit policy provisions are summarized below.

Dependent Care FSAs

The Act increases the annual employee contribution limit of a dependent care FSA from $5,000 to $10,500 for 2021. An employer may amend its cafeteria plan retroactively in order to adopt this increased limit, as long as the plan is amended by the end of the plan year.

Keep in mind, this is compatible with the temporary changes allowed under the Consolidated Appropriations Act* that created unprecedented benefits for employees with dependent care expenses (i.e. unlimited carryover, midyear election changes/new enrollment, increased dependent age limit, etc.).

COBRA Subsidies

The Act provides up to six months of free COBRA coverage for “Assistance Eligible Individuals,” a special COBRA enrollment/coverage period, and new notice obligations as described below.

The COBRA subsidy is equal to 100% of COBRA premiums for eligible coverage and is available from April 1, 2021 to September 30, 2021.

An Assistance Eligible Individual (AEI) is defined as someone who: a) lost medical coverage under a group health plan due to their/their family member’s involuntary termination of employment or a reduction of hours; and b) is already enrolled in COBRA coverage on April 1, 2021 or enrolls in COBRA coverage during the Special Enrollment Period.

The Act provides an AEI who is not enrolled in COBRA as of April 1, 2021 a second window of time to enroll in order to take advantage of the subsidy. This includes AEIs who never made a COBRA election or who made an election but later dropped COBRA. The Special Enrollment Period runs for 60 days after the individual receives notice. An AEI who enrolls in COBRA during the Special Enrollment Period will have coverage from April through September or through what would have been the end of their typical COBRA coverage period.

Employers are required to provide a notice describing the availability of the subsidy and the Special Enrollment Period to AEIs by May 31, 2021. The Dept. of Labor must develop a model notice template that can used for this purpose within the next 30 days. Additionally, a notice of subsidy expiration must be sent between 15-45 days before the end of the period. Again, the federal government is tasked with publishing a model notice sometime within the next six weeks.

In most cases, the employer will be reimbursed the total COBRA premium – including administrative fees – by claiming a credit against Medicare payroll taxes. It is anticipated that the IRS will provide additional guidance on exactly who can/how to claim the credit in upcoming weeks.

Paid Sick and Family Leave

The American Rescue Plan extends (through September 30, 2021) tax credits for employer-provided paid sick and paid family leave, which were originally established under the Families First Coronavirus Response Act.**

What’s more, leave can now be taken: (1) when an employee is obtaining a COVID vaccination; (2) when an employee is suffering or recovering from side effects related to the COVID vaccination; and (3) when an employee is seeking or waiting the results of a COVID test.

Emergency Paid Sick Leave

Starting April 1, 2021, the Act re-sets the limit on the tax credit available for Emergency Paid Sick Leave (EPSL). Employers may voluntarily provide employees up to 80 hours of EPSL in the period from April through September 2021, in addition to any EPSL provided earlier, and still be eligible for the corresponding tax credit.

*Public Law 116-260

**Public Law 116-127

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THIS JUST IN…

The Treasury Department announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021 to May 17, 2021. The IRS will be providing formal guidance in the coming days.

COVID legislation clears final congressional hurdle

On Wednesday, the House voted to approve the Senate’s amended version of the American Rescue Plan, sending the $1.9 trillion COVID relief/stimulus package to President Biden’s desk.

The measure temporarily subsidizes 100% of COBRA premiums, increases the dependent care FSA cap and extends employer tax credits for paid sick and paid family leave.

Gov. Affairs continues to work through the legislation to determine the full impact on TASC Clients and Participants. Watch for additional communication following the president’s bill signing ceremony tomorrow.