This is the Compliance category of the Broad REach Benefits blog. At Broad Reach Benefits, we focus on employers that have between 30 and 500 benefit eligible employees. We’re employee benefit specialists, not a big box brokerage firm or payroll company with a sales force peddling policies.
Some employers may want to be selective and treat employees differently for purposes of group health plan benefits. For example, employers may consider implementing the following plan designs:
-A health plan “carve-out” that insures only select groups of employees (for example, a management carve-out);
– Different levels of benefits for groups of employees; or
– Varied employer contribution rates based on employee group.
In general, employers may treat employees differently, as long as they are not violating federal rules that prohibit discrimination in favor of highly compensated employees. These rules currently apply to self-insured health plans and arrangements that allow employees to pay their premiums on a pre-tax basis. The nondiscrimination requirements for fully insured health plans have been delayed indefinitely.
Employers should also confirm that any health plan rules do not violate other federal laws that prohibit discrimination. In addition, employers with insured plans should confirm that carve-out designs comply with any minimum participation rules imposed by the carrier.
Health Plan Design—General Rules
In general, a health plan will not have problems passing any applicable nondiscrimination test when the employer treats all of its employees the same for purposes of health plan coverage (for example, all employees are eligible for the health plan, and the plan’s eligibility rules and benefits are the same for all employees). However, treating employees differently may make it more difficult for a health plan to pass the applicable nondiscrimination tests. Examples of plan designs that may cause problems with nondiscrimination testing include:
- Only certain groups of employees are eligible to participate in the health plan (for example, only salaried or management employees);
- The health plan has different employment requirements for plan eligibility (for example, […]
Congress has passed, and President Biden has signed, the American Rescue Plan Act, 2021 (ARPA), the third COVID-19 stimulus bill. This new $1.9 trillion stimulus package includes several health and welfare benefits-related provisions relevant to employers and plan sponsors, as summarized below.
FFCRA Paid Leave Extended and Enhanced
While COVID-19 vaccines are starting to become more readily available, the pandemic continues. In recognition, Congress extended through September 30, 2021, the refundable payroll tax credits for emergency paid sick leave (EPSL) and extended family and medical leave (E-FMLA), which were enacted pursuant to the Families First Coronavirus Response Act. As with the extension through March 31, 2021 under the second stimulus package (the Consolidated Appropriations Act, 2021), only the tax credits are extended, which means compliance with the EPSL or E-FMLA requirements is voluntary for employers after December 31, 2020.
The ARPA expands FFCRA leave in several ways for employers who choose to offer it from April 1, 2021 through September 30, 2021:
- The 10-day limit for EPSL resets as of April 1, 2021. Employees were previously limited to 80 hours from April 1, 2020 through March 31, 2021.
- Paid leave continues to be limited to $511 per day ($5,110 total) for an employee’s own illness or quarantine (paid at the employee’s regular rate), and $200 per day ($2,000 total) for leave to care for others (paid at two-thirds of the employee’s regular rate).
- A new “trigger” is added under both the EPSL and E-FMLA provisions. Employees qualify for leave if they are:
- seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, and the employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis;
IRS Provides Guidance on FSA Relief Authorized in the Consolidated Appropriations Act, Grants Other Cafeteria Plan Relief
We are just weeks shy of the one-year anniversary of the President’s declaration of the COVID-19 National Emergency, and the COVID-19 National and Public Health Emergencies are still in effect. As a result of the long-term impact of the pandemic, many employees faced forfeiting their unused health FSA and dependent care assistance program (DCAP) funds at the end of the 2020 plan year.
As a result, and as we previously reported, a second stimulus relief bill (the Consolidated Appropriated Act, 2021) was signed into law on December 27, 2020, which provided much-needed relief for health FSAs and DCAPs. On February 18, 2021, the IRS released Notice 2021-15, which provides additional guidance related to the relief in the stimulus bill as well as further relief for cafeteria plans and HRAs. The guidance and relief are summarized in more detail below.
IRS Guidance Related to the Second Stimulus Bill (CAA, 2021)
Health FSA and DCAP Carryovers – The stimulus bill authorized employers offering a DCAP or health FSA to allow participants to carry over all unused DCAP and health FSA contributions or benefits remaining at the end of the 2020 plan year to the 2021 plan year. Notice 2021-15 clarifies that:
- Employers may require employees to make an election in the 2021 or 2022 plan year to access the carryover from the previous plan year.
- The carryover relief applies to all health FSAs, including limited purpose health FSAs.
- If an employee uses the mid-year election change relief discussed elsewhere in this alert to prospectively elect to participate in the health FSA mid-year, the employee can access the full amount of their carryover from 2020 retroactive to January 1, 2021.
- Employers can restrict the amount employees can carryover, i.e., […]
The Department of Labor (DOL) has released Notice 2021-01, which clarifies the end date for the relief provided in April 2020 under Notice 2020-01. Per the latest guidance, individuals (and plans) are granted relief based on their own fact-specific timeframes and, therefore, may still take advantage of the relief beyond February 28, 2021 until the earlier of (a) 1 year from the date they were first eligible for relief, or (b) 60 days after the announced end of the COVID-19 National Emergency.
As background, in April 2020 the DOL announced that certain deadlines under ERISA were suspended starting March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency or such other date determined by the agencies (the “Outbreak Period”). The following deadlines applicable to participants and beneficiaries are tolled (paused) during the Outbreak Period:
- The 30-day period (or 60-day period, if applicable) to request a HIPAA special enrollment;
- The 60-day period for electing COBRA continuation coverage;
- The date/deadline for making COBRA premium payments;
- The deadline for individuals to notify the plan of a COBRA qualifying event or determination of disability;
- The deadline within which employees can file a benefit claim, or a claimant can appeal an adverse benefit determination, under the group health plan or disability plan claims procedures described in the plan;
- The deadline for claimants to file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination; and
- The deadline for a claimant to file information to perfect a request for external review upon finding that the request was not complete.
Certain deadlines impacting employers/plan sponsors were also extended, such as the deadline to provide a COBRA election […]
On October 26, 2020, the Internal Revenue Service (IRS) released Revenue Procedure 2020-45, which maintains the health flexible spending account (FSA) salary reduction contribution limit from 2020, which is $2,750, for plan years beginning in 2021. Thus, for health FSAs with a carryover feature, the maximum carryover amount is $550 (20% of the $2,750 salary reduction limit) for plan years beginning or ending in 2021. The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain sections of the Internal Revenue Code.
Qualified Commuter Parking and Mass Transit Pass Monthly Limit
For 2021, the monthly limits for qualified parking and mass transit are $270 each (which remain the same from 2020).
Adoption Assistance Tax Credit Increase
For 2021, the credit allowed for adoption of a child is $14,440 (up $100 from 2020). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $216,660 (up $2,140 from 2020) and is completely phased out for taxpayers with modified adjusted gross income of $256,660 or more (up $2,140 from 2020).
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Increase
For 2021, reimbursements under a QSEHRA cannot exceed $5,300 (single) / $10,700 (family), an increase of $50 (single) / $100 (family) from 2020.
Reminder: 2021 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits
Earlier this year, the IRS announced the inflation adjusted amounts for HSAs and high deductible health plans (HDHPs).
|2021 (single/family)||2020 (single/family)|
|Annual HSA Contribution Limit||$3,600 / $7,200||$3,550 / $7,100|
|Minimum Annual HDHP Deductible||$1,400 / $2,800||$1,400 / $2,800|
|Maximum Out-of-Pocket for HDHP||$7,000 / $14,000||$6,900 / $13,800|
The ACA’s out-of-pocket limits for in-network essential health benefits have also increased for 2021. Note that all non-grandfathered group […]
IRS Extends Deadline for Furnishing Form 1095-C to Employees, Extends Good-Faith Transition Relief for the Final Time
The Internal Revenue Service (IRS) has released Notice 2020-76, which extends the deadline for furnishing 2020 Forms 1095-B and 1095-C to individuals from January 31, 2021 to March 2, 2021. The Notice also provides penalty relief for good-faith reporting errors and suspends the requirement to issue Form 1095-B to individuals, under certain conditions.
The due date for filing the forms with the IRS was not extended and remains March 1, 2021 (March 31, 2021 if filed electronically).
The regulations allow employers to request a 30-day extension to furnish statements to individuals by sending a letter to the IRS with certain information, including the reason for delay; however, because the Notice’s extension of time to furnish the forms is as generous as the 30-day extension contained in the instructions, the IRS will not formally respond to requests for an extension of time to furnish 2020 forms to individuals. Employers may obtain an automatic 30-day extension for filing with the IRS by filing Form 8809 on or before the due date. An additional 30-day extension is available under certain hardship conditions. The Notice encourages employers who cannot meet the extended due dates to furnish and file as soon as possible and advises that the IRS will take such furnishing and filing into consideration when considering whether to abate penalties for reasonable cause.
Relief from Furnishing Form 1095-B to Individuals
Due to the individual mandate penalty being reduced to zero starting in 2019, an individual does not need the information on Form 1095-B in order to complete his or her federal tax return. Therefore, the IRS is granting penalty relief for employers who fail to furnish a Form 1095-B to individuals, provided that the reporting entity:
- Posts a notice […]
On September 11, 2020, the U.S. Department of Labor (“DOL”) released a temporary rule updating certain FFCRA regulations. The temporary rule is scheduled to be published on September 16, 2020 and will be effective immediately through the expiration of the FFCRA’s paid leave provisions on December 31, 2020.
The temporary rule updates FFCRA regulations issued in April 2020 in response to a recent federal District Court decision which found four portions of the initial regulations invalid: provisions related to whether the FFCRA applies if employers do not have work available for employees; the timing for which employees must request the need for leave; the definition of health care provider; and the availability of intermittent leave.
While many anticipated that the DOL would appeal the decision, the DOL elected to reaffirm and clarify its position on some of these issues, while choosing to revise or update others. Thus, while the court’s order was limited to companies operating in New York (or potentially only those in the Southern District of New York), the DOL’s revisions to the regulations apply to all employers subject to the FFCRA (inside and outside New York).
The District Court’s order and the updated regulations are discussed in more detail below.
New York Federal District Court Decision
Soon after the FFCRA regulations were implemented, the State of New York sued the DOL in the United Stated District Court for the Southern District of New York claiming the DOL exceeded its authority when it implemented several provisions of the FFCRA regulations. The District Court agreed in part and, in August, the court issued an order invalidating several portions of the FFCRA regulations.
- Work Availability Requirement – The original regulations limited the availability of emergency paid sick […]
IRS Releases Updated Form 720 Used For PCORI Fee Payments
As we recently reported, on June 8, 2020, the IRS released the applicable PCORI fee for plan years ending between October 1, 2019 and September 30, 2020. As we indicated in that alert, an updated Form 720 had not yet been released and, therefore, employers were advised to wait to file their PCORI fees until the IRS released the updated form. Late last week, the IRS issued the updated Form 720, which is the April 2020 Revised form. Employers who sponsored a self-funded health plan, including an HRA, with a plan year that ended in 2019 should use this updated Form 720 to pay the PCORI fee by the July 31, 2020 deadline.
As a reminder:
- The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan.
- The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA. In general, health FSAs are not subject to the PCORI fee.
- Plans that ended between January 1, 2019 and September 30, 2019 use Form 720 to pay their PCORI fee of $2.45 per covered life.
- Plans that ended between October 1, 2019 and December 31, 2019, use Form 720 to pay their PCORI fee of $2.54 per covered life.
Due to COVID-19 and state and local stay-at-home orders, utilization of group medical and dental insurance benefits is down. As a result, some carriers recently notified employers that they will be issued premium credits. When asking how these premium credits should be treated by the employer, we often compare then to the ACA’s medical loss ratio (MLR) rebates. While these premium credits are not MLR rebates, a similar decision must be made to determine whether they, like MLR rebates, are ERISA plan assets.
As background, the Affordable Care Act’s MLR rule requires health insurers to spend a certain percentage of premium dollars on claims or activities that improve health care quality, otherwise they must provide a rebate to employers. At the same time the U.S. Department of Health and Human Services issued the MLR rule, the U.S. Department of Labor (DOL) issued Technical Release 2011-04 (TR 2011-04), which clarifies how rebates should be treated under ERISA. Under ERISA, anyone who has control over plan assets, such as the plan sponsor, has fiduciary obligations and must act accordingly.
Clearly, the premium credits we are seeing are not subject to the MLR rule; however, a similar analysis applies. TR 2011-04 clarified that insurers must provide any MLR rebates to the policyholder of an ERISA plan. However, while the DOL’s analysis was focused on MLR rebates, it recognized that distributions from carriers can take a variety of forms, such as “refunds, dividends, excess surplus distributions, and premium rebates.” Regardless of the form or how the carrier describes them, to the extent that a carrier credit, rebate, dividend, or distribution is provided to a plan governed by ERISA, then the employer must always consider whether it is a “plan […]
On March 27, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act comes as a continued response to the Coronavirus 2019 (COVID-19) pandemic that is significantly impacting the United States. The Act is a $2.2 trillion economic package that is meant to stabilize individuals and employers, while the nation continues to experience shelter-in-place advisories/orders and hospitals report a surge of severely ill COVID-19 patients. The Act’s Paycheck Protection Program is retroactive to February 15, 2020, which is important for businesses that have been experiencing financial hardships starting in February.
Overview of CARES Act
The CARES Act amends several laws, as well as appropriates funds to assist individuals, families, and businesses that are experiencing financial difficulties due to COVID-19. There are loans available to small businesses for paycheck protection and loan forgiveness, and other assistance for individuals and businesses as it relates to unemployment insurance and tax relief. The Act supports the health care system by providing financial assistance for medical supplies and coverage. It also provides economic stabilization and assistance for severely distressed sectors (such as airlines), as well as additional COVID-19 relief funds, expanded telehealth and COVID-19 testing provisions, and emergency appropriations for COVID-19 health response and agency operations.
HSA and Telehealth Expansion
The CARES Act includes a new safe harbor under which high deductible health plans (HDHPs) can cover telehealth and other remote care before participants meet their deductibles (i.e., without cost-sharing). This temporary safe harbor applies for plan years beginning on or before December 31, 2021, unless extended. As a result of this safe harbor, no-cost telehealth may be provided for any reason–not just COVID-19 related issues–without disrupting HSA eligibility.
Prescription Drug Reimbursement under FSA/HRA/HSAs
The CARES Act […]