COVID-19 relief package clears Senate hurdle

Earlier today, the Senate passed the Families First Coronavirus Response Act (HR 6201) by an overwhelming margin of 90-8. The package, also known as “phase two,” now heads to President Trump’s desk.

It’s important to point out that the legislation has been amended to modify / scale back key aspects of the FMLA and sick leave provisions. The revised bill text now provides as follows:

FMLA

Under the original bill, employers (with fewer than 500 EEs) were to provide up to 12 weeks of FMLA leave to an eligible employee for “a qualifying need related to a public health emergency.”  This “qualifying need” has now been limited to instances where an employee is unable to work – or telework – due to the need to care for a child if the child’s school or place of child care has been closed or the child care provider is unavailable, due to a public health emergency.

The original bill also provided for an initial 14 days of unpaid leave; however, in the amended version this number is reduced to 10 days.  As before, this first segment days of can be unpaid…and an employee can opt to substitute accrued vacation, personal, or sick leave.

The remaining FMLA leave must be paid at two-thirds of the employee’s regular rate, for the number of hours the employee would otherwise be scheduled to work. Notably though, this new iteration limits the amount of required pay for leave to no more than $200 per day and $10,000 total.

Sick Leave

Under the new language, employers (with fewer than 500 EEs) would be required to provide paid sick time to an employee who is unable to work – or telework – because:

  1. the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  2. the employee has been advised by a health care provider to self-quarantine because of COVID-19;
  3. the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
  4. the employee is caring for an individual subject to quarantine or isolation;
  5. the employee is caring for a son or daughter whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 precautions; or
  6. the employee is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

The amendment limits an employer’s requirement of paid leave to $511 per day ($5,110 total) where leave is taken for reasons 1, 2, and 3 noted above (generally, an employee’s own illness or quarantine); and $200 per day ($2,000 total) where leave is taken for reasons 4, 5, or 6 (care for others or school closures).

Effective Date

The bill would take effect 15 days after enactment, and sunset on December 31, 2020.

Note: Small businesses (fewer than 50 EEs) are exempt if the required leave would jeopardize the viability of their business.

House passes Families First Coronavirus Response Act

Below is a high level summary of the emergency supplemental bill that passed the House late last week by a vote of 363-40. Speaker Pelosi, Leader McCarthy and Treasury Secretary Mnuchin spent the majority of Monday working through some “technical corrections” before sending the bill across the Capitol. Word now is that the Senate could take up the multi-billion dollar package as early as today.

Summary of HR 6201 – Families First Coronavirus Response Act (as passed by the House)

Paid Sick Leave: establishes a program to provide sick and quarantined workers with two weeks of emergency paid leave, including tax incentives to employers to provide additional sick days to their employees, and provides $1 billion in grant funding to help states manage and expand their unemployment insurance programs during the COVID-19 pandemic.

  • Sick Leave:
    • Requires all employers to grant full-time employees seven days of sick pay and an additional 14 days during the event of any public health emergency (including the current COVID-19 crisis). (Part-time employees are entitled to the typical number of hours that they work in a typical two-week period.)
    • Requires employees to be paid at two-thirds of the employee’s regular rate to care for a family member for such purposes or to care for a child whose school has closed, or if child care is unavailable, due to the coronavirus.
  • FMLA:
    • Provides employees of employers with fewer than 500 employees and government employers, who have been on the job for at least 30 days with the right take up to 12 weeks of job-protected leave under FMLA. After the two weeks of paid leave, employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay.
  • Tax Incentives:
    • Establishes optional tax credits for employers for qualified sick leave wages and family medical leave wages and extends similar tax credits for these lost wages to individuals who are self-employed. The tax credits are available for wages paid during the period that begins within 15 days of enactment and ends Dec. 31, 2020.
    • Allows employers to receive a tax credit for wages they are required to pay under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act (as provided for under the bill). The tax credit is optional.
    • Self-employed individuals would also receive a tax credit for sick leave and family medical leave, to be credited against their income tax.
  • Unemployment Insurance:
    • $1.0 billion in 2020 for emergency grants to states for activities related to processing and paying unemployment insurance (UI) benefits

Coverage: requires private health plans to cover diagnostic testing for COVID-19 at no cost to consumers.

  • Insurance Coverage:
    • Requires private health plans, Medicare Advantage Plans, TRICARE, veterans plans, federal workers’ health plans, and the Indian Health Service to cover, at no cost to the patient, the COVID-19 diagnostic test, and a provider, urgent care center, or emergency room visit in order to receive testing.
    • Permits states to extend Medicaid eligibility to their uninsured populations for the purpose of COVID-19 diagnostic testing.
    • State costs for medical and administrative costs would be matched by the federal government under the bill.
    • Appropriates $1 billion for HHS’ Public Health and Social Services Emergency Fund for diagnostic testing to be administered to the uninsured.
  • Federal Medical Assistance Percentages (FMAP):
    • Increases by 6.2% during the COVID-19 emergency the FMAP matching assistance the federal government provides to states during the emergency.
  • Respirators:
    • The measure also requires personal respiratory protective devices to be covered under the PREP Act during the COVID-19 emergency. The emergency declaration for respirators will expire on Oct. 1, 2024. Note: The Public Readiness and Emergency Preparedness (PREP) Act permits HHS to issue a declaration that provides immunity from tort liability for claims of loss caused by countermeasures (i.e. vaccines, drugs and products) against diseases or other threats of public health emergencies.

Food Assistance: appropriates $1.2 billion to the USDA and HHS to provide additional nutrition assistance to affected areas and populations, including low-income seniors and their caregivers, local food banks, pregnant and postpartum women, and students who lose access to school lunch programs as a result of COVID-19-related school closures. It also grants states additional flexibility in providing nutrition aid under Supplemental Nutrition Assistance Program (SNAP) and the Child Nutrition Program.

  • Authorizes the USDA to provide additional nutrition assistance to families with children who are eligible but unable to receive free or reduced-priced meals because their schools are closed for more than five days due to the COVID-19 emergency.
  • Authorizes USDA to provide additional funds to state agencies to make emergency allotments to households participating in SNAP.
  • Appropriates $500 million to the Supplemental Nutrition Program for Women, Infants, and Children (WIC).
  • Appropriates $400 million through FY 2021 to the USDA Commodity Assistance Program for emergency food assistance, which helps USDA purchase and provide foods to elderly and low-income individuals.
  • Provides $250 million to HHS for the Senior Nutrition Program.

Stay tuned; TASC Gov. Affairs will provide additional updates as developments warrant.

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.

DC Debrief

IRS issues HDHP / HSA guidance; House votes to repeal Cadillac tax

The IRS rolled out new rules that could have major implications for people who have chronic diseases, but are also on the hook for thousands of dollars in medical bills. Notice 2019-45 expands the list of preventive care benefits that can be provided by a high deductible health plan (HDHP), on a no-deductible or low-deductible basis, without any adverse effect on HSA eligibility.

In general, “preventive” care does not include treatment for existing illnesses or conditions. Under the current HDHP/HSA rules, treatments of a non-preventive nature that are covered or reimbursed by a health plan without first satisfying HDHP conditions would generally disqualify a covered individual from HSA contribution eligibility.

However, the Administration now acknowledges that the cost barriers for care have resulted in some individuals who are diagnosed with certain chronic conditions failing to seek or utilize effective and necessary care that would prevent exacerbation of the chronic condition. Thus, these regulations are aimed at encouraging individuals to take more responsibility for their health care spending and become better health care consumers.

According to the notice, for services to be covered by an HDHP pre-deductible, they should be “low-cost” and demonstrate a high-impact. In addition, there must be strong evidence that the absence of the service will result in the condition worsening or the development of another serious medical issue. Those services and items, along with the conditions for which they must be prescribed to qualify as preventive care, are listed in an appendix to the guidance. The list includes 14 medical services or items for individuals with 11 specified chronic conditions (such as diabetes and high blood pressure).

While this new guidance is effective immediately, Treasury and HHS will periodically review the list to determine whether additional services or items should be added or removed. This exercise is expected to occur every five to ten years in an effort to promote stability and avoid confusion by participants in, or sponsors or providers of, HDHP arrangements.

Full text:  https://www.irs.gov/pub/irs-drop/n-19-45.pdf

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House Democrats and Republicans joined together in a rare show of unity last week, voting overwhelmingly (419-6) to repeal the ACA’s “Cadillac” tax on high cost health plans.

Delayed repeatedly by Congress, the tax would slap a 40% levy on the value of employer-provided health benefits that exceed $11,200 for individual coverage and $30,100 for family policies beginning in 2022. The idea was to reduce soaring health-care costs by discouraging employers from offering such generous plans.

Insurers and employers (like TASC) oppose the tax because they’d be the ones most exposed to its bite…shifting more costs to policyholders/employees as a result. About 160 million Americans are covered by workplace plans, still the largest source of coverage.

The House vote was aided by a new expedited procedure designed to force votes on measures that have wide bipartisan support (i.e. two-thirds majority). The 350+ cosponsors of HR 748 – titled the Middle Class Health Benefits Tax Repeal Act – not only include conservative Republicans, but members of the progressive wing of the Democratic Party as well…many of whom have championed replacing the current employer-based system with a “Medicare for All’ structure.

It’s unclear whether the Senate will tackle repeal, although a companion bill sponsored by Sen. Mike Rounds (R-SD) has collected 42 cosponsors.

White House seeks changes to HSA and FSA rules

In an Executive Order issued just before the Fourth of July holiday, President Trump directed several agencies to address a number of health care related matters through the rule making process (i.e. forthcoming regulations). Section #6 of the Executive Order is of particular interest to TASC since it takes aim at HSAs, health FSAs and medical expenses in general.

Health Savings Accounts

Within 120 days of the Executive Order, Treasury is directed “to expand the ability of patients to select high-deductible health plans that can be used alongside a HSA, and that cover low-cost preventive care (before the deductible) for medical care that helps maintain health status for individuals with chronic conditions.”

Health Flexible Spending Accounts

Within 180 days of the Executive Order, Treasury is directed “to increase the amount of funds that can carryover (currently $500) without penalty at the end of the year.”

Eligible Medical Expenses

Within 180 days of the Executive Order, Treasury is directed to propose rules to expand the definition of Section 213(d) ”to treat expenses related to certain types of arrangements, including direct primary care arrangements and healthcare sharing ministries, as eligible medical expenses.”

It’s important to note that the guidance issued must be permitted under current law, so Treasury may not have the authority to issue provisions as broad as is contemplated by the Executive Order.

Stay tuned!

Trump Administration Expands Use of HRAs to Individual Coverage

Today’s long awaited – and much anticipated – guidance is in response to the President’s October 2017 Executive Order meant to provide Americans (especially employees of small businesses) with more options for financing their healthcare needs.

If finalized, the proposed rule is to be effective for plan years beginning on/after January 1, 2020.

Developing story; more to follow.

Tax Reform puts the brakes on Section 132

 Tax Cuts & Jobs Act makes changes to transportation fringe benefits

Recently, additional clarification was released via IRS Publication 15-B that confirms the following:

  • Effective January 1, 2018, an employer may no longer take a tax deduction for the transit or parking benefit. This is regardless of whether the benefit is provided by the employer, through a reimbursement arrangement, or through a compensation reduction agreement.
  • Participants are not affected and may continue to make pre-tax contributions to the transit or parking benefit.
  • If an employer’s administration fees are itemized, the employer may not deduct the fees strictly for the transportation benefit; however, administration fees that are “all inclusive” (i.e. included with other benefits) may continue to be deducted. Please review your invoice for administration services.

Two other related provisions of note…

  • The qualified bicycle commuter benefit has been suspended as of January 1, 2018 (and continues until 2026). As such, bicycle benefit expenses are not excludable from a Participant’s income and are to be taxed as wages during this period. Unlike the expenses for transit and parking, the bicycle expenses may continue to be deducted by the employer.
  • Tax-exempt entities may have to pay an unrelated business income tax (UBIT) on any qualified transportation fringe benefit provided to employees for which employers are no longer permitted to take a deduction (i.e. parking and transit). As a result, those affected employers may simply decide to provide the benefit in the form of taxable wages going forward.

Since Participant’s may continue to receive the tax-free benefit, TASC’s administration of existing transit/parking plans does not change. Employers are urged to work with their tax professional(s) to review any potential reporting obligations.

Congress kicks the can down the road

Cadillac Tax delayed (again); repeal effort maintains strong bipartisan support

On Monday, President Trump signed legislation that will fund the government for another three weeks, thereby ending the three-day government shutdown. The bill includes a provision which delays the effective date of the excise tax on high-cost employer-sponsored health plans for two additional years, until 2022.

Originally included as part of the Affordable Care Act, the tax was an attempt to discourage workers from over-consuming healthcare. The belief/rationale was that many were buying unnecessarily expensive plans; however, opponents argued that the 40% rate on employers offering those plans was too punitive. Initially set to take effect in 2018, it was then postponed until 2020.

The move to delay implementation of the Cadillac Tax yet again is viewed as crucial for maintaining strong employee benefits, because companies typically make health plan decisions well in advance (i.e. 18 to 24 months). This reprieve allows employers to  maintain the health coverage working families want and need.

TASC continues to believe that full repeal is the only real solution to this onerous tax, and looks forward to working with the Trump Administration and Congressional leaders…so employers aren’t forced to choose between paying the tax or reducing benefits.

Christmas Comes Early for GOP

Lawmakers give final approval to Tax Cuts & Jobs Act conference committee report

The Republican led Congress celebrated passage of the biggest rewrite of the U.S. tax code in decades on Wednesday. President Trump will soon affix his signature to the $1.5 trillion overhaul that is expected to have broad and far reaching implications for both individual and corporate finances….making good on his promise to deliver tax cuts before the holidays.

Key provisions affecting employee benefits are summarized below (changes are effective January 1, 2018 unless otherwise noted).

Fringe Benefit Provisions

Dependent Care – No change to current law.                                                             Note: Under the House proposal, employer-provided dependent care assistance would no longer have been tax exempt; meaning dependent care FSAs would have been eliminated.

Transportation – Repeals employer deduction for any qualified transportation fringe benefit. Employers may not deduct any expense incurred in providing, paying or reimbursing employee commuting expenses. These benefits will continue to be tax exempt for employees.

Bicycle Commuting – Qualified bicycle commuting expenses will no longer be tax exempt to employees effective for tax years between 2017 and 2026 (provision sunsets after 2025).

Health-related Provisions

Individual Mandate – Repealed; reduces the penalty for not purchasing insurance coverage to zero. Effective beginning in 2019.

Medical Expense Deduction – For 2017 and 2018, the deduction threshold will be reduced from 10% to 7.5% (of AGI). For 2019 and beyond, the threshold returns to 10%.

Archer MSAs – No change to current law.                                                                  Note: Under the House proposal, these tax deductible contributions would have been prohibited.

Earlier versions of tax reform would have eliminated or placed a cap on the tax exclusion for employer-provided health care, but – due in part to the efforts of entities like TASC – those proposals were never included in the legislation ultimately considered by the House and Senate. On the flip side, some of our other (pro-active) priorities, like the establishment of Flexible Giving Accounts and repeal of the Cadillac Tax were also left on the cutting room floor. While unfortunate, we will continue to press Congress to address these important issue in 2018.

HAPPY HOLIDAYS!