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.

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.

President signs spending bill to avoid government shutdown

This week Congress passed a bipartisan appropriations package that will keep the federal government running through the next year. Folded into the sweeping legislation is a full, and permanent, repeal of the Affordable Care Act’s (ACA) Cadillac Tax. The nearly $1.4 trillion, two-part spending deal was signed by President Donald Trump just before the midnight Friday deadline.

Delayed repeatedly by Congress, the Cadillac Tax would have slapped a 40% levy on the value of employer-provided health benefits that exceed $11,200 for individual coverage and $30,100 for family policies. The idea was to reduce soaring health-care costs by discouraging employers from offering such generous plans.

Repeal of the tax – which had been postponed until 2022 – is projected to cost the federal government nearly $200 billion over 10 years, according to the Congressional Budget Office (CBO).

This positive development is welcome news, and caps off years of efforts by a broad range of stakeholders…including TASC, ECFC and the American Benefits Council.

Other policy changes incorporated into the year-end Continuing Resolution:

  1. The ACA’s medical device tax and so-called HIT tax on health insurance premiums were also repealed.
  2. Reauthorized funding for the Patient-Centered Outcomes Research Institute (PCORI) for another 10 years, thus requiring self-insured group health plans and health insurers to continue to pay fees to fund this institute until 2029. Under the ACA, these fees were originally set to sunset as of September 30, 2019.
  3. Relief from a tax reform provision that applied to tax exempt entities. Per the Tax Cuts and Jobs Act of 2017, tax-exempt entities were required to pay an unrelated business income tax (UBIT) on any qualified transportation fringe benefit provided to employees for which employers are not permitted to take a deduction.