American Rescue Plan preview

Democrats release stimulus bill text

We’re beginning to see what in the $1.9 trillion COVID package as Congress enters a three-week dash to the finish line.

A quick scan of the 591-page proposal reveals a few key provisions that may be of interest to TASC Clients and Participants…

  • COBRA Subsidies – would allow workers who are eligible for COBRA due to involuntary termination or reduction in hours to receive coverage under their employment-based health plan with a premium reduction of 85 percent through September 30, 2021.
  • Dependent Care – would increase the dependent care FSA cap from $5,000 to $10,500 in 2021.

House leadership has teed up the legislation for a floor vote on Friday or Saturday, which will then punt the action over to the Senate as early as next week. The White House hopes to have it signed into law by March 14 when supplemental federal unemployment benefits are set to expire.

Expect TASC Gov. Affairs to provide a detailed breakdown upon final passage.

Happy New Year!

As 2021 begins, rest assured that TASC (and UBA) has you covered.

Last month, Congress passed and the President signed the Consolidated Appropriations Act – a significant government funding bill which provides appropriations for the federal government as well as economic stimulus provisions due to the ongoing COVID-19 pandemic.

Given the Act’s length and complexity, this post addresses key employee benefit and charitable giving provisions but is not comprehensive in scope. TASC Governmental Affairs continues to assess Public Law 116-260 and its impact on your employee benefit accounts.

Flexible Savings Accounts. Due to the unforeseeable circumstances brought about by the Coronavirus, many have expressed concerns that employees may face forfeiting substantial amounts of benefit funds, have an inability to anticipate future expenses, etc. Thankfully, the year-end spending/relief package includes a number of special rules for health and dependent care FSAs including:

  • Carryover of unused funds (unlimited) from the 2020 to the 2021 plan year.
  • Carryover of unused funds (unlimited) from the 2021 to the 2022 plan year.
  • A 12-month grace period at the end of the 2020 and/or 2021 plan years during which all unused amounts from the prior year will be available.
  • Modification of election amounts for the 2021 plan year.
  • An opportunity for employees – who cease participation in a health FSA during calendar year 2020 or 2021 – the opportunity to receive reimbursements from unused benefits or contributions through the end of that plan year.
  • Dependent care FSA participants whose qualifying child turned age 13 during the national health emergency may continue to receive reimbursements for expenses for the remainder of the plan year…and, the following plan year until the child turns age 14 (to the extent a balance remains).

Note: There is no rush to make plan decisions or amendments; the bill text allows for plenty of time to apply the changes listed above. Please watch for a follow-up communication from TASC soon that will offer more detailed information and requirements specific to your FSA benefits.

Student loan repayment. The Act extends the ability of employers to provide a tax advantaged student loan repayment benefit to their employees – up to an annual cap of $5,250 – by five years (making it available until January 1, 2026).

Partial Universal Charitable Deduction. The Act extends and modifies the non-itemizer charitable deduction for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing a joint return.

As a customer of TASC and Universal Benefit Account® – you’re covered. With over 45 years of experience in the industry, TASC knows how new legislation impacts employee benefits and the complexities involved in making timely changes in response. Universal Benefit Account was developed for situations exactly like this; as a highly configurable platform, it can easily be modified to support you, your employees and your benefits.

TASC will do the work so you can take full advantage of the new law!

ALERT: Temporary changes to FSAs part of COVID relief bill

The provision provides further flexibility for taxpayers to rollover unused amounts in their health and dependent care FSAs from 2020 to 2021 and from 2021 to 2022…while also permitting employers to allow employees to make a 2021 mid-year change in contribution amounts.

Developing story; further analysis of the $900 billion stimulus package to follow.

Qualified transportation plan rules offer flexibility

Employers may wish to revisit their plan docs and make adjustments

This week, the IRS released an information letter (responding to an inquiry from a Member of Congress) in which the agency addresses options for minimizing benefit losses by participants who are no longer commuting, are commuting less frequently, or have changed their method of commuting due to the COVID-19 pandemic.

While the letter cautions that the regulations do not allow a refund of qualified transportation fringe benefits, it goes on to explain that:

• an employee is not precluded from rolling over unused transit benefit amounts to subsequent periods for future commuting expenses – so long as the participant has made a valid salary reduction election; and

• an employee may apply unused transit benefit amounts to another qualified transportation fringe benefit – to the extent that the other benefit is offered under the plan and the maximum monthly amount ($270 for 2020) for that benefit is not exceeded.

Note: An information letter provides general statements of well-defined law without applying them to a specific set of facts. They are furnished by the IRS in response to requests for general information by taxpayers, by Congress (on behalf of constituents), or by Congress (on their own behalf).

2021 EMPLOYEE BENEFIT PLAN LIMITS

The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the contribution and benefit limits for various employer-sponsored plans for 2021. Nearly all the dollar limits currently in effect for 2020 will remain the same, with only a few amounts experiencing minor increases for 2021.

The table below compares the dollar limits for certain employee benefit programs for 2020 and 2021.

RETIREMENT PLAN LIMITS20202021
401(k), 403(b) & 457(b) contributions$19,500$19,500
Catch-up contributions (age 50+)$6,500$6,500
Defined contribution plan (annual contributions)$57,000$58,000
    
HEALTH AND WELFARE PLAN LIMITS   
Health FSA salary reduction$2,750$2,750
Health FSA carryover$500$550
    
Dependent Care FSA – married filing jointly or single parent$5,000$5,000
Dependent Care FSA – married filing separately$2,500$2,500
    
Excepted Benefit HRA$1,800$1,800
Qualified Small Employer HRA (QSEHRA) – self only $5,250$5,300
Qualified Small Employer HRA (QSEHRA) – family$10,600$10,700
    
HDHP: max. annual out-of-pocket (self only)$6,900$7,000
HDHP: max. annual out-of-pocket (family)$13,800$14,000
HDHP: min. annual deductible (self only)$1,400$1,400
HDHP: min. annual deductible (family)$2,800$2,800
    
HSA: annual contributions (self only)$3,550$3,600
HSA: annual contributions (family)$7,100$7,200
HSA: catch-up contributions (age 55+)$1,000$1,000
    
Qualified Transit and Parking – monthly$270$270

Details on these and other cost-of-living adjustments can be found in IRS Revenue Procedure 2020-45 and IRS Notice 2020-79.

Proposed regs. address primary care and health sharing ministries

Yesterday, the IRS released proposed regulations addressing the treatment of certain medical care arrangements under Section 213 of the Internal Revenue Code.

Specifically, Section 213(d) of the Code allows individuals to take an itemized deduction for expenses for medical care, including insurance.

The proposed regulations address direct primary care (DPC) arrangements and health care sharing ministry (HCSM) memberships, and provide the following guidance:

  • Payments for DPC arrangements are expenses for medical care under section 213(d) of the Code. Because these payments are for medical care, an HRA provided by an employer generally may reimburse an employee for DPC arrangement payments.
  •  Payments for membership in a HCSM are expenses for medical care under section 213(d) of the Code. Because these payments are for medical care, an HRA provided by an employer generally may reimburse an employee for HCSM membership payments.

These proposed regulations are in direct response to Executive Order 13877, which directed the Secretary of the Treasury to “propose regulations to treat expenses related to certain types of arrangements as eligible medical expenses.”

PPP Flexibility Act heads to President’s desk

In rare show of bipartisanship, Congress overwhelmingly supports relief effort

On Wednesday, the Senate cleared legislation to modify and ease restrictions on the emergency small business loans intended to avert mass layoffs during the COVID-19 pandemic. Included as part of the $2.2 trillion CARES Act* enacted back in March, the popular Paycheck Protection Program (PPP)** has approved more than $510 billion in loans to date despite a rocky roll out.

In recognition that the Coronavirus has kept businesses sidelined longer than expected, H.R 7010 aims to address concerns surrounding a handful of burdensome rules under the program. The key aspects likely to help ease fears among many businesses are:

  1. Currently, a business must spend the PPP money in eight weeks and keep all staff employed for the government to fully forgive the loan. The new bill proposes an extension to 24 weeks from receipt of the loan or Dec. 31, 2020 (whichever is earlier) to use the proceeds.
  2. Greater flexibility in expenditures by lowering the amount spent on payroll in order to qualify for full loan forgiveness to 60% (instead of the original 75% benchmark)…leaving 40% for non-payroll costs like rent, utilities, etc.
  3. Borrowers whose loans are forgiven would be eligible for the deferral of the employer’s portion of Social Security taxes provided by the CARES Act.
  4. Workforce reductions will no longer necessarily result in a proportional reduction of loan forgiveness. An employer may be exempt from the associated loan forgiveness reduction if they a) rehire terminated employees; b) hire similarly qualified employees for unfilled positions before Dec. 31, 2020; or c) have an inability to return to pre-COVID levels due to compliance with health and safety standards.
  5. Finally, the forgiveness rules are further relaxed with a provision stretching the amount of time employers have to repay their debt. A minimum five-year maturity now replaces the original restrictions that limited the term to two years.

*Coronavirus Aid, Relief, and Economic Security Act

* *Provides companies with forgivable loans that act like grants as long as the majority of the funds are used pay employees

BREAKING NEWS – FSA Relief

Notices address unanticipated changes in expenses because of the COVID-19 pandemic.

The IRS just released guidance to allow temporary changes to Sec. 125 cafeteria plans. These changes extend the claims period for health FSAs and dependent care assistance programs, allow mid-year changes and adjust carryover to reflect inflation.

Notice 2020-29 provides for increased flexibility with respect to mid-year elections made under a § 125 cafeteria plan during calendar year 2020 related to employer-sponsored health coverage, health FSAs, and dependent care assistance programs. The notice also provides increased flexibility with respect to grace periods to apply unused health FSA and dependent care amounts toward expenses incurred through December 31, 2020. It also applies earlier relief for HDHPs to cover expenses related to COVID-19 (and a temporary exemption for telehealth services) retroactively to January 1, 2020. 

Notice 2020-33 increases the $500 limit for unused amounts remaining in a health FSA that may be carried over into the following year by making the carryover amount 20% of the maximum salary reduction amount under § 125(i), which is indexed for inflation. Thus, for 2020, the carryover amount will increase to $550.  Additionally, the notice cross references Notice 2020-29 for guidance on how a § 125 cafeteria plan may be amended to allow prospective health FSA election changes for the 2020 calendar year…providing relief that, among other things, permits employers to amend § 125 cafeteria plans to provide participants flexibility to change health FSA contribution elections.

Note: Individual Coverage HRAs – this guidance also provides clarification regarding reimbursement for premium expenses occurring prior to the beginning of the plan year. 

TASC Governmental Affairs is reviewing these developments and will provide further analysis in the near future.

Guidance and Relief for Employee Benefit Plans Due to COVID-19

Recognizing the impact of the COVID-19 Pandemic, the Dept. of Labor’s (DOL) Employee Benefit Security Administration (EBSA) – in conjunction with Treasury and the IRS – have released a number of documents* announcing the timing extensions for a host of deadlines so that plan participants, beneficiaries and employers have additional time to make critical coverage decisions affecting their benefits during the coronavirus outbreak.

Notice 2020-01 allows for the delay of certain notices, disclosures or other documents due between March 1, 2020, and 60 days after the announced end of the COVID-19 national emergency “if the plan acts in good faith and furnishes the notice, disclosure, or document as soon as practicable under the circumstances.” Such “good faith” efforts include electronic disclosures like emails, text messages, website access, etc.

Meanwhile, the new final regulations broadly extend numerous plan deadlines applicable to participants and beneficiaries of group health plans, benefit plans and pension plans. Specifically:

  • the election period for COBRA continuation coverage;
  • the date for making COBRA premium payments
  • the date that individuals can make a benefits claim (essentially extending the run-out period for reimbursement by health FSAs and HRAs); and
  • the date a plan sponsor/administrator has to provide a COBRA election notice.

The guidance acknowledges the uncertain duration of the COVID-19 pandemic and notes that additional guidance will be provided, if necessary. TASC Governmental Affairs is currently reviewing the new guidance and will provide a full summary and further analysis at a later time.

*EBSA Disaster Relief Notice 2020-01; DOL COVID-19 FAQs; Notification of Relief (final regulations)

ICYMI – some Form 5500 due dates extended

IRS Notice 2020-23 extends the Form 5500 filing deadline for ERISA-covered retirement and welfare plans that have an original or extended filing deadline on or after April 1, 2020, and before July 15, 2020. With this extension, these plans now have until July 15, 2020, to file their Forms 5500.

Plan Year End Original Due Date Normal Extension Request Due Date Relief Due Date
June 30, 2019 N/A April 15, 2020 July 15, 2020
July 31, 2019 N/A May 15, 2020 July 15, 2020
Aug. 31, 2019 N/A June 15, 2020 July 15, 2020
Sept. 30, 2019 April 30, 2020 N/A July 15, 2020
Oct. 31, 2019 May 31, 2020 N/A July 15, 2020
Nov. 30, 2019 June 30, 2020 N/A July 15, 2020

This deadline extension is automatic, which means that plan sponsors do not have to have to call the IRS, file extension forms, or submit other documents to receive this relief. Additional filing extensions must be requested by using Form 5558 by July 15, 2020.

The guidance does not extend the filing deadline for 2019 Form 5500 filings for plans with a December end date, which are still due on July 31, 2020. Employers with such calendar year plans should be prepared to comply with their reporting requirement – or request an extension – by July 31, 2020.

Note: IRS Rev. Proc. 2018-58 provides that any postponement of the Form 5500 filing due date by the IRS (under §7508A) will also be permitted by the Department of Labor and Pension Benefit Guaranty Corporation for similarly situated plan administrators.