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

————————————————————————————————————————–

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.

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.