IRS provides Cafeteria Plan Flexibility to Employers

The IRS issued two notices (2020-292020-33) yesterday, increasing election and reimbursement flexibility for employer-sponsored health plan elections, Healthcare Flexible Spending Accounts (FSA), Dependent Care Accounts (DCA), Health Savings Accounts (HSA), and Individual Coverage Health Reimbursement Arrangements (ICHRA).  
 
Additionally, the IRS has increased the amount of the maximum Carryover from $500 to $550 for plan years beginning on or after 1/1/2020.
 
The new rules allow for an employer to amend their plan to permit employees to make the following changes:
 
Employer-Sponsored Health Coverage:
  • make a new election on a prospective basis, if the employee initially declined to elect employer-sponsored health coverage; 
  • revoke an existing election and make a new election to enroll in different health coverage sponsored by the same employer on a prospective basis; and 
  • revoke an existing election on a prospective basis, provided that the employee attests in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer; 
  • these changes require an employer to amend their plan prior to any election changes.
 
FSA & DCA (on a prospective basis)
  • revoke an election, 
  • make a new election, or 
  • decrease or increase an existing election 
  • for a plan year ending during 2020, the plan may extend the grace period through December 31, 2020. This allowance is for plans with both Carryover and Grace Period, and essentially extends a plan year ending during 2020 through the end of 2020 for claims purposes.
  • Carryover Maximum for plans beginning on or after January 1, 2020 has been increased from $500 to $550
  • Allow for retroactive coverage during the plan year for a health FSA. 
  • Explanation: If an employee takes advantage of a mid-year election, their contributions can only be made from the election point forward, however their reimbursements can be made for any date in the plan year.   
  • Example: An employee making a mid-year election on 5/15 into an FSA with January 1, 2020 effective date would be able to submit a claim incurred as early as January 1, 2020 for reimbursement.  
  • Prior to this notice, the employee would not be eligible for any reimbursements on expenses incurred prior to their enrollment into the plan. This allowance begins with plan years starting on or after January 1, 2020.
 
HSA
  • The relief provided in notice 2020-15 exempting Telehealth from being disqualifying care under an HDHP has been applied retroactively to January 1, 2020.
 
ICHRA
  • Clarifies that a premium payment for a period during the plan year that is paid prior to the plan year can be reimbursed.  If the January premium is paid in December, for an ICHRA beginning in January, the plan may reimburse the expense.
 
Employers must choose to amend their plan to offer this flexibility to their employees.

ERISA Updates due to COVID-19

As a result of the FFCRA and the CARES Acts, there have been significant changes to ERISA benefit plans. Whether or not you are a customer of ours for ERISA document preparation, you should update your document to include these new provisions.
 
These changes include:
  • Inclusion of over-the-counter and menstrual care items in Healthcare FSAs
  • Continuation of coverage for employees taking applicable leave
  • Potential changes to eligibility for benefits during the outbreak period.
 
Linked below is a sample Summary of Material Modifications (SMM) for your Health and Welfare Benefits plan. The first page is some overall insight, and there are drafting instructions in red on the second page.
 
Simply edit the second page to fit your plan details, and save a copy with you Plan Document. Provide a copy of the SMM to your participants, and you’re done.
 
 
Feel free to reach out with any questions you may have.
 

Miss our webinar on the COVID-19 extensions for COBRA, HIPAA, and more? Video & Handouts inside!

On 4/28, the tri-agencies (HHS, DOL, and IRS) released new mandatory guidance in the form of a final rule instructing plans subject to ERISA and the Internal Revenue Code to disregard the “Outbreak Period” when calculating certain deadlines.

We’ve posted the full webinar here for your review, and the slides and federal regulations are available below as well.

COVID-19 Extension Regulations – Federal Register

COVID-19 Extension Slide Deck

 


Can I change my election?

***New IRS Guidance has allowed for Employers to offer more flexibility than below. While the rules posted below still apply unless employers take action, more opportunities for election changes now exist.  Learn more here.***

With all the changes due to COVID-19, may employees are asking if they can change their pre-tax benefits elections.  We’ll address each benefit for employees who are still actively employed and working the minimum number of hours for plan eligibility:

Commuter Benefits

Short answer: Yes.

Long Answer:

Commuter benefits elections can be changed at any point on a prospective basis.  Since Commuter benefits can only be used to pay for expenses to commute to and from work, if your employees are working from home, there are no commuting expenses to reimburse. In this case, employees should consider pausing or reducing their contributions. If an employee is terminated, any funds remaining in the account after any run-out claims are processed are forfeited.

Dependent Care

Short Answer: Yes

Long Answer:

Dependent Care expenses are similar to Commuter benefits, in that they are very likely reduced during this period.  The IRS allows for a prospective election change based on a change in the cost of care.  If an employee’s circumstances reflect a change in the cost of care, they can and should consider changing their election to avoid an over-contribution.  If an employee is terminated, any funds remaining in the account after any run-out claims are processed are forfeited.

Flexible Spending Accounts

Short Answer: No

Long Answer:

If an employee remains eligible for the FSA, their FSA contributions and expenses remain the same as they were before the COVID-19 outbreak. There is nothing in the regulations that would allow a change as a result of working from home.  If the employee is no longer eligible for the FSA due to a reduction in hours or termination, they would be subject to FSA COBRA.

An FSA is subject to COBRA if the group is subject to COBRA, and if, at the time of termination, the employee has contributed more than they’ve spent.  If that is the case, they can continue the plan with their full maximum election through the end of the plan year as long as they elect COBRA continuation and make their regular contribution as a COBRA premium equivalent.  If the employee has spent more than they have contributed at the time of termination, there is no continuation afforded.

Health Reimbursement Arrangements

Short Answer: No

Long Answer:

HRAs are not subject to state continuation, but they are subject to COBRA as a self-funded health plan.  While COBRA sets the floor of the minimum benefits that must be offered to qualified beneficiaries, employers can provide more generous continuation, even if the employer is not subject to

Health Savings Account Pre-Tax Contributions

Short Answer: Yes

Long Answer:

Employees can change their HSA contributions on a prospective basis at any time for any reason.


COVID-19 Scenarios and Benefits Available (Quick Reference Chart)




OTC and Menstrual Care products are now FSA-Eligible (Infographic)

The CARES Act reversed the provision of the Affordable Care Act that prohibited the purchase of Over-the-Counter (OTC) medicine with an FSA.  As of January 1, 2020, OTC can be purchased with your FSA.  Additionally, the CARES Act included language that allows for Menstrual Care Products to be purchased with an FSA.

While the products are eligible retroactively to January 1st, it does take some time for merchant updates.  With that, we expect that the cards will begin to work with these recent additions as early as this week. If you have an issue using your card paying for OTC or menstrual care products, just submit a claim for a manual reimbursement through our Participant Portal, by email with the Medical Claim Form, or via our mobile application – just search your app store for “gente FSA”.

Our friends at the FSA Store have put together this helpful infographic, as well as a CARES Act information page.  As always, they maintain the best eligibility list on the web, which you can find on our site, or theirs.

OTC and Menstrual Care Infographic


FFCRA: Updated Guidelines and FAQs for Paid Leave Credits to Employers

The IRS has provided helpful insight and answers to employer questions on how to take advantage of the paid leave credits made available in the Families First Coronavirus Relief Act.

COVID-19 Related Tax Credits for Paid Leave Provided by Small and Midsize Businesses.


UPDATED: NJ DOL Infographic: COVID-19 Scenarios and Benefits Available

The New Jersey Department of Labor has updated their COVID-19 SCENARIOS & BENEFITS poster to reflect changes in effect as of 3/30/2020.


Understanding the CARES Act

 

The Coronavirus (COVID-19) pandemic has put a major strain on every aspect of daily life around the world, including the United States. As spread of the disease shows no sign of slowing down, there is a steadily increasing concern in the United States regarding the health and wellness of not only our citizens, but the economy as well. In response, the United States Congress has been negotiating a historic stimulus package to address the havoc caused by the pandemic.  

It appears Congress’ hard work has paid off, as they justpassed a $2 trillion package to provide a jolt to the economy reeling from the deadly virus. All Americans would do well to understand the package’s provisions, as it will offer direct relief to businesses and individuals alike.

WHAT IS IN THE STIMULUS PACKAGE?

The $2 trillion stimulus package, negotiated by Republican and Democratic leaders, is the largest economic stimulus measure in modern history. The bill is a $2 trillion combination of tax provisions and other stimulus measures, including emergency business lending. The measure promises to provide help for struggling American families and businesses, as well as health care workers on the front lines of the coronavirus outbreak.

Significant Provisions Affecting Businesses

The tax package itself is broad, with tax payment relief and significant business tax incentives. Here is a list of the most significant provisions affecting businesses:

$367 billion will be made available in loans for small businesses and $150 billion for state and local governments. The loans will be forgiven so long as businesses pledge not to lay off their workers.
Small businesses forced to suspend operations or that have seen gross receipts fall by 50% from the previous year will be eligible for a tax credit worth up to 50% of wages paid during the crisis, so long as they keep their workers employed throughout.
The Treasury Department will distribute $500 billion in loans to struggling industries (e.g., passenger airlines and businesses critical to maintaining national security). Additionally, an oversight board and inspector general will be created to oversee loans to large companies.
Health care providers will receive $100 billion in grants to help fight the coronavirus and make up for revenue lost by delaying elective surgeries and other procedures.
$200 million will be carved out for the Federal Communications Commission to provide health care providers with connected devices to facilitate telemedicine services, with the goal of freeing up hospital beds. Another $25 million will go to a grant program that helps rural communities purchase broadband equipment for telemedicine.
The Commodity Credit Corporation, an institution that USDA uses to stabilize the farm economy, would see its spending authority increased to $14 billion. The package also sets up a $9.5 billion emergency fund for producers, including fresh fruit  and vegetable growers, dairy farmers and cattle ranchers, along with local food systems like farmers markets.
Colleges and universities, as well as school districts, will receive more than $30 billion.
State and local governments will receive $150 billion, with $8 billion set aside for local governments.
The package will provide the U.S. Postal Service with a $10 billion Treasury loan to stave off insolvency. Retailers, restaurateurs and hotels will be able to immediately deduct from their taxes what they spend on property improvements.
Employers can defer the 6.2% tax they pay on wages used to fund Social Security.

Significant Provisions Affecting Individuals

The major piece of the individual tax changes will offer rebate checks based on a new tax credit of $1,200 per filing adult and $500 for each qualifying child. Additionally, unemployed individuals will receive an unprecedented expansion of benefits and payments.

Here is a list of the most significant provisions affecting individuals, many of which will be discussed in detail later in this piece:

Single Americans will receive $1,200, married couples will get $2,400 and parents will receive $500 for each child.
Unemployed individuals, including freelancers and furloughed employees, will get an extra $600 per week for up to four months, on top of state unemployment benefits.
The package also calls for a new pandemic unemployment assistance program, which will provide jobless benefits to those who are unemployed, partially unemployed or unable to work because of COVID-19 and don’t qualify for traditional benefits.
The Department of Education will suspend payments for student loan borrowers without penalty through September 30.
There will be housing protections against foreclosures on mortgages and evictions for renters. Anyone facing a financial hardship from the coronavirus will receive a forbearance on federally backed mortgage loans of up to 60 days. Those with federally backed mortgage loans who have tenants are not allowed to evict tenants solely for failure to pay rent for a 120-day period.

As you can see, the package will have a far-reaching impact as it drives money toward workers, small businesses and industries that have been impacted by the economic downturn due to the pandemic.

OVERVIEW OF MAJOR BILL PROVISIONS

Now that you’re aware of the major implications for both businesses and individuals, let’s take a more in-depth look at the most important provisions.

Loans and Tax Credit Available to Small Businesses

Keeping businesses afloat and workers under the wing of their employers is critical for ensuring the economy can quickly restart after the pandemic subsides. To this end, the stimulus package creates a $367 billion federally guaranteed loan program for small businesses that employ 500 or fewer people who must pledge not to lay off their workers. The loans will be available during an emergency period ending June 30, and would be forgiven if the business uses the loan funds for approved purposes and maintains the average size of its full-time workforce, based on when it received the loan.

Additionally, small businesses forced to suspend operations or that have seen gross receipts fall by 50% from the previous year, will be eligible for a tax credit worth up to 50% of wages paid during the crisis, so long as they keep their workers employed through the crisis. Wages remain eligible until business is no longer suspended or gross receipts for a quarter reach 80% of the prior year. The credit could be applied to all wages for employers with fewer than 100 employees, while the benefit is capped at $10,000 in wages per employee for larger employers.

Expansion of Unemployment Benefits

The stimulus package includes a significant expansion of unemployment benefits that will extend unemployment insurance by 13 weeks and include a four-month enhancement of benefits (for reference, many states already provide 26 weeks of unemployment benefits, and thus participants in such states would be eligible for a total of 39 weeks when adding the 13 weeks of federal relief). The enhanced benefits will provide an additional $600 per week on top of what state unemployment programs pay.

Note that many individuals who typically do not qualify for unemployment insurance will qualify under the package, including independent contractors and self-employed individuals. In sum, those who are unemployed, partially unemployed or who cannot work for a wide variety of coronavirus-related reasons will be more likely to receive benefits.

Individual Checks to Taxpayers

As noted earlier, the package will provide direct payments to taxpayers based on the adjusted gross income found on their 2019 federal tax return. All U.S. residents with adjusted gross incomes up to $75,000 ($150,000 for married couples) will get a $1,200 ($2,400 for couples) payment. Families will receive an additional $500 per child, as a way to create a safety net for those whose jobs and businesses are affected by the pandemic. However, the payments will start to phase out for individuals with adjusted gross incomes greater than $75,000. Those with incomes higher than $99,000 will not qualify for payments under the stimulus package.

It is unclear how long it will take the IRS to process every payment. The Trump administration has indicated that Americans could be seeing direct payments as soon as April 6.

HOW CAN I TAKE ADVANTAGE OF THE STIMULUS?

Now that you’re acquainted with the impact of the stimulus package, let’s discuss how you might take advantage of these benefits:

How can I obtain a small business loan from the government?

The U.S. Small Business Administration (SBA) is offering loans for qualifying small businesses. These are low-interest (3.75% for small businesses and 2.75% for nonprofits) loans with terms potentially as long as 30 years. You can apply for an SBA loan through its website. Be prepared to provide the following information:

Tax Information Authorization (IRS Form 4506T), completed and signed by each principal or owner
Recent federal income tax returns
Personal Financial Statement (SBA Form 413)
Schedule of Liabilities listing all fixed debts (SBA Form 2202)

You may also need to provide profit and loss statements, recent tax returns and balance sheets.

After you apply, the SBA will review your credit before conducting its own inspection to verify your losses. The SBA says its goal is to arrive at a decision on any disaster loans within two to three weeks. If it determines you are eligible, it will send you a loan closing document for your signature.

How can employees collect unemployment assistance?

If your business is closed because of COVID-19 and your employees cannot work from home, or your employees are unable to work due to the disease or need to take care of someone who has it, they can likely collect unemployment. As each state administers a separate unemployment insurance program, employees should be told to visit their state’s unemployment insurance website, which will provide the relevant details regarding their individual programs. The information employees will need includes their Social Security number and driver’s license or state ID.

CONCLUSION

If there’s anything that is certain, it is that the full economic impact of this unprecedented pandemic is yet to be understood. Despite the unpredictability, Congress’ historic economic stimulus package is a sight for sore eyes for struggling businesses and individuals alike.

As the pandemic develops and the stimulus package is rolled out, look for more relevant guidance from gente in the near future, and continue to stay abreast of the latest state and federal developments.

Provided by gente

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2020 Zywave, Inc. All rights reserved.


The Coronavirus Aid, Relief and Economic Security (CARES) Act Passed into Law

From our friends at NAHU:
Congress passed a $2 trillion economic stimulus package by an overwhelming vote in the Senate and the House. President Trump is expected to sign the bill immediately.
Individuals and Businesses: The CARES Act functions largely as an economic stimulus by providing cash payments to individuals below a certain income, providing extra unemployment benefits and allowing self-employed individuals to apply for unemployment. For businesses, aid is provided through emergency grants, forgivable loans and relief for existing loans. These provisions are intended to assist employers to help them stay in business, keep employees on their payroll, and allow them to continue to support employees through employee benefits and health insurance.
Healthcare: The CARES Act also includes $100 billion for hospitals and $150 billion for state and local governments to combat the COVID-19 pandemic. The bill expands coverage beyond what was in last week’s Families First bill by requiring health insurers to pay for coronavirus testing beyond those that are FDA-approved, including lab and state-developed tests as well as other tests approved by HHS.
Accessibility for telehealth is also expanded. High-deductible health plans with HSAs may now allow pre-deductible coverage for telehealth and other remote services, as well as allowing the use of HSAs for the purchase of over-the-counter medications without a prescription.
Very limited action was also taken to address surprise medical bills. Under the CARES Act, all health insurance plans would reimburse a COVID-19 test provider at the in-network rate put in place prior to the pandemic. If the provider is out of network, the health plan is to fully reimburse the provider based on the provider’s own “cash price,” which must be made publically available while the public health emergency is still declared. Providers that do not post their test price publically could be fined up to $300 a day.
This action taken by Congress follows the passage of the Families First Coronavirus Response Act and several pieces of emergency guidance released by the Trump Administration. We are expecting more action from Congress and the Administration to address other aspects of the coronavirus pandemic. Be sure to regularly check your email, NAHU’s social media channels and website for any updates. Should either the CDC or WHO guidance change, NAHU will act accordingly and immediately update you.

You can find links to pertinent information from WHO, CDC, the Department of Labor and CMS guidance on our website along with webinars and other resources from NAHU. We also encourage you to contact insurance carriers, check plan documents, state law, and consider the needs of your clients as coverage decisions are being made.