This is the Employee Communications 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.
On April 7, 2021, the U.S. Department of Labor (DOL) released a link to its webpage dedicated to the COBRA premium assistance authorized under the American Rescue Plan Act, 2021 (ARPA), the third COVID-19 stimulus bill. The webpage includes model notices, frequently asked questions, and related information. With the exception of the model notices, the guidance appears targeted towards impacted workers, leaving many employer-related questions unanswered. This alert summarizes the recent guidance and model notices.
What does ARPA Provide and Who is an Assistance Eligible Individual?
Among other things, the ARPA provides a 100% subsidy for COBRA premiums for group health plans (other than health FSAs) from April 1, 2021 through September 30, 2021 for assistance eligible individuals (AEIs). AEIs are employees and their family members who are:
- eligible for, and enroll in, COBRA (or state mini-COBRA) due to a reduction in hours or involuntary termination of employment;
- not eligible for other group health plan coverage or Medicare; and
- still within their maximum COBRA continuation coverage period (generally, 18 months).
AEIs include individuals newly eligible for COBRA between April 1, 2021 and September 30, 2021, individuals who were in their COBRA election period as of April 1, 2021, and individuals who would be AEIs but whose COBRA coverage lapsed due to non-payment prior to April 1, 2021. AEIs also include any qualified beneficiaries, such as family members, who did not elect COBRA continuation coverage when first eligible. Generally, this means an employee (and their qualified beneficiaries) with a COBRA start date on or after November 1, 2019, would have one or more months of eligibility for the COBRA subsidy. Therefore, employers should identify any employees involuntarily terminated or whose hours were reduced on or after […]
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., […]
Alera Group, Inc. employees announced their alleviation of $1.35 million of medical debt for families located across the state of New Jersey through two of its New Jersey based divisions, CRISP and Broad Reach Benefits. This gift is part of approximately $19 million in healthcare debt being relieved by Alera Group employees for struggling households across the country, an effort that began during the 2020 holiday season and remains open for contributions today. Alera is one of the youngest and fastest growing privately held, national insurance brokerage firms in the country.
Alera employees worked directly with the debt-forgiveness nonprofit, RIP Medical Debt, to identify individuals and families with outstanding healthcare-related bills in more than 200 cities located in 35 counties across the country. Founded by two former debt collectors, RIP is able to purchase medical debts for those most in need in bundled portfolios for a fraction of their face value.
“The global pandemic has impacted the lives of millions of people across the country, with so many families struggling to pay off soaring medical bills associated with getting sick in this environment,” stated David Russo, a partner at CRISP. “Giving back to the local communities in which we live is at the heart of what Alera Group stands for, and we are proud to be part of such an incredible initiative that is easing the worries of families across New Jersey during these challenging times.”
Rather than waking up to the knocking of a debt collector, thousands of Americans will receive letters of forgiveness to alert them of the gift from Alera employees. These letters will be delivered by March 2021 and beyond, targeting individual and families living below 200% of the poverty […]
After weeks of negotiations, Congress overwhelmingly passed a second COVID-19 stimulus package – the COVID-Related Tax Relief Act of 2020 (COVIDTRA) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR), both part of the Consolidated Appropriations Act, 2021 (CAA, 2021). President Trump signed the bill into law on December 27, 2020. The new stimulus package includes several employee benefits-related provisions relevant to health and welfare plans, as summarized below. A provision on surprise medical billing (effective for plan years beginning in 2022) will be the subject of a future client alert.
FFCRA Paid Leave
As the COVID-19 pandemic continues and the vaccine is unlikely to be available on a wide-scale basis in the next several months, 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, are extended through March 31, 2021. Notably, 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 policy behind this may have been to incentivize employers to continue allowing employees in the middle of FFCRA leave as of January 1, 2021 to finish out, and be paid for, any remaining leave to which they would have otherwise been entitled. The tax credit is only available for leave that would otherwise satisfy the FFCRA, had it remained in effect, i.e., if employees for whom the employer provides paid leave would otherwise meet the eligibility requirements under the FFCRA and did not use the full amount of EPSL or E-FMLA leave between April 1, 2020 and December 31, 2020.
Relief for Health Care and Dependent Care Flexible […]
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 […]
The Internal Revenue Service (IRS) has released Rev. Proc. 2020-36, which contains the inflation adjusted amounts for 2021 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (ACA) employer shared responsibility provisions and premium tax credit program. As shown in the table below, for plan years beginning in 2021, the affordability percentage for employer mandate purposes is indexed to 9.83%. Employer shared responsibility payments are also indexed.
|Description||Coverage not offered to 95% (or all but 5) of full-time employees.||Coverage offered, but unaffordable or is not minimum value.||Premium credits and affordability safe harbors.|
*Section 4980H(a) and (b) penalties 2021 are projected.
**No employer shared responsibility penalties were assessed for 2014.
Under the ACA, applicable large employers (ALEs) must offer affordable health insurance coverage to full-time employees. If the ALE does not offer affordable coverage, it may be subject to an employer shared responsibility payment. An ALE is an employer that employed 50 or more full-time equivalent employees on average in the prior calendar year. Coverage is considered affordable if the employee’s required contribution for self-only coverage on the employer’s lowest-cost, minimum value plan does not exceed 9.83% of the employee’s household income in 2021 (prior years shown above). An ALE may rely on one or more safe harbors in determining if coverage is affordable: W-2, Rate of Pay, and Federal Poverty Level.
If the employer’s coverage is not affordable under one of the safe harbors and a full-time employee is approved […]
In Rev. Proc. 2020-32, the IRS released the inflation adjusted amounts for 2020 relevant to HSAs and high deductible health plans (HDHPs). The table below summarizes those adjustments and other applicable limits.
|Annual HSA Contribution Limit
(employer and employee)
|Self-only: $3,600 Family: $7,200||Self-only: $3,550 Family: $7,100||Self-only: +$50 Family: +$100|
|HSA catch-up contributions
(age 55 or older)
|Minimum Annual HDHP Deductible||Self-only: $1,400 Family: $2,800||Self-only: $1,400 Family: $2,800||No change|
|Maximum Out-of-Pocket for HDHP
(deductibles, co-payment & other amounts except premiums)
|Self-only: $7,000 Family: $14,000||Self-only: $6,900 Family: $13,800||Self-only: +$100 Family: +$200|
Out-of-Pocket Limits Applicable to Non-Grandfathered Plans
The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2021.
|ACA Maximum Out-of-Pocket||Self-only: $8,550
Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage, if the family out-of-pocket limit is above $8,550 (2021 plan years) or $8,150 (2020 plan years). Exceptions to the ACA’s out-of-pocket limit rule are available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). A one-year extension of transition relief was announced on January 31, extending the transition relief to policy years beginning on or before October 1, 2021, provided that all policies end by December 31, 2022. (This transition relief has been extended each year since the initial announcement on November 14, 2013.)
Next Steps for Employers
As employers prepare for the 2021 plan year, they should keep in mind the following rules and ensure that any plan materials and participant communications reflect the new limits:
- HDHPs cannot have an embedded […]