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IRS Proposed Regulations Address the Elimination of the Deduction for Certain Qualified Transportation Fringe Expenses

On June 23, 2020, the IRS released proposed regulations regarding the deduction of certain employer-provided transportation and commuting benefits to reflect changes made to Section 274 of the Internal Revenue Code by the Tax Cuts and Jobs Act (the “TCJA”). The TCJA eliminated deductions by employers for qualified transportation fringe (“QTF”) expenses for amounts paid or incurred in the taxable years beginning after December 31, 2017. Key issues addressed in the proposed regulations include: (i) the amount of parking expenses that is not deductible when an employer owns or leases the parking facility; (ii) the amount of QTF expenses that is not deductible when an employer pays a third party to provide QTF benefits; (iii) the amount of certain expenses or reimbursements relating to transportation between an employee’s residence and place of employment that is not deductible; and (iv) the application of exceptions that may allow certain QTF expenses to… Continue Reading

IRS Extends Deadline to Roll Over Waived RMD Distributions / Provides Model Amendment

The IRS issued Notice 2020-51 which provides additional guidance and relief relating to the required minimum distribution (“RMD”) waiver provisions in Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act waived the requirement to make RMDs in 2020. Distributed amounts that—but for the CARES Act waiver—would have been RMDs are instead treated as eligible rollover distributions. Generally, the deadline to roll over an eligible rollover distribution into an IRA or another qualified plan is 60 days from the distribution date. However, for those eligible rollover distributions made in 2020 that otherwise would have been RMDs and for which the 60-day rollover period expires before August 31, 2020, the IRS extended the rollover deadline to August 31, 2020. Additionally, Notice 2020-51 includes a Q&A relating to the waiver of RMDs in 2020 and a model amendment that plan sponsors can adopt to provide… Continue Reading

Additional Federal Guidance Regarding COVID-19 and Telehealth Coverage: Some Employer Take-Aways

The U.S. Departments of Labor, Treasury, and Health and Human Services (the “Departments”) recently issued FAQs regarding the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and COVID-19. A number of these FAQs address a group health plan’s required coverage of COVID-19 tests, including which tests must be covered, related facility fees, reimbursement rates, and balance billing to patients. Employers should ensure that the third party administrators of their group health plans have incorporated this guidance for plan administration purposes. In addition, some of the other FAQs may be of interest to employers. For example, the FAQs provide that, if a group health plan reverses the increased coverage of COVID-19 or telehealth after the COVID-19 public health emergency period is over, the Departments will consider the plan to have satisfied the requirement to provide advance notice of changes to the Summary of Benefits… Continue Reading

Have You Notified Participants of Extended Deadlines?

As noted in our prior post here, the U.S. Departments of Labor and Treasury recently issued a notice requiring all employee health and welfare benefit plans to disregard the period from March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency (or other announced date) when determining the deadline to request HIPAA special enrollment, elect COBRA coverage, make a COBRA premium payment, notify the plan of a COBRA qualifying event or determination of a disability, file a benefit claim or appeal, or request an external review of a benefit claim denial. Although the notice did not address whether plan participants needed to be notified of these extended deadlines, plan administrators should be aware that they likely have a fiduciary duty to accurately convey this information to participants. For example, a COBRA election notice that states a deadline to elect or make premium payments without mentioning… Continue Reading

IRS Issues Guidance on Employer COVID-19 Leave-Based Charitable Donation Payments

In Notice 2020-46, the IRS provided guidance allowing employers to make cash payments to certain charitable organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo without otherwise including such amounts in the employees’ gross income. In order to qualify for this relief, the payments must be made to a qualifying charitable organization no later than December 31, 2020 for the relief of victims of the COVID-19 pandemic as set forth in President Trump’s March 13, 2020 declaration of a nationwide emergency (a copy of which is available here). The employees will not be treated as constructively receiving any of the amounts they elect to forgo under the program, and the employees cannot claim a charitable contribution deduction with respect to the value of the forgone paid leave. Employers should (i) make sure that any election made by their employees is in writing and the recipient… Continue Reading

IRS Expands Definition of Qualified Individual for Loans and Coronavirus-Related Distributions under the CARES Act

Notice 2020-50 provides additional guidance to taxpayers and sponsors of qualified retirement plans regarding coronavirus-related distributions and loan extensions under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Among the guidance included in Notice 2020-50 are the following three items of special importance to plan sponsors: Notice 2020-50 expands the definition of “Qualified Individual” for purposes of eligibility to receive a coronavirus-related distribution or special loan treatment to also include three new categories of individuals: an individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19; an individual whose spouse or a member of the individual’s household (as defined below) is quarantined, furloughed or laid off, or has work hours reduced due to COVID-19, is unable to work due to lack of childcare due to COVID-19, has a reduction… Continue Reading

IRS Releases Proposed Rule on Executive Compensation for Tax-Exempt Organizations; Relief for Certain Employees Who Volunteer

On June 11, 2020, the IRS published a proposed rule under Section 4960 of the Internal Revenue Code (the “Code”), which was added to the Code by Section 13602 of the Tax Cuts and Jobs Act. Under Section 4960 of the Code, during a taxable year, an applicable tax-exempt organization (“ATEO”) that pays to certain of its highest compensated employees remuneration in excess of $1,000,000 or any excess parachute payments would be subject to a 21% excise tax on the excess remuneration and excess parachute payments. Prior to the proposed rule, the IRS issued Notice 2019-09, which provided interim guidance on Section 4960. The proposed rule generally incorporates the guidance in Notice 2019-09. However, in response to comments received on Notice 2019-09, the proposed rule makes certain modifications and clarifications to the initial guidance. Notably, the proposed rule includes an exception so that employees of a related non-ATEO who provide… Continue Reading

PCORI Fee is Back and There’s No Relief From Its Deadline: July 31, 2020

The plan year ending before October 1, 2019 was supposed to be the last year that the Patient-Centered Outcomes Research Institute (“PCORI”) fee was required to be paid. However, legislation passed in December 2019 extended the PCORI fee for another ten years. Recognizing that plan sponsors believed the PCORI fee was ending and may not have anticipated the need to identify the number of covered lives to determine the PCORI fee, the IRS issued transition relief for the plan year ending before October 1, 2020. Under this transition relief, in addition to using one of the three methods specified in the regulations, plan sponsors may use any reasonable method for calculating the average number of covered lives. For the plan year ending on or after October 1, 2019 and before October 1, 2020, the PCORI fee is $2.54 times the average number of covered lives. Payment of the PCORI fee… Continue Reading

Payments for Certain Healthcare Arrangements are Tax Deductible

The IRS recently issued proposed regulations that address the treatment of amounts paid by an individual for a “direct primary care arrangement” or a “health care sharing ministry” (collectively, the “Arrangements”) as being tax-deductible “medical care expenses” under Section 213 of the Internal Revenue Code (the “Code”). Under the proposed regulations, a direct primary care arrangement (“DPC Arrangement”) is defined as a contract between the individual and one or more primary care physicians pursuant to which the physician(s) agree to provide medical care for a fixed annual or periodic fee without billing a third party. A health care sharing ministry (“Sharing Ministry”) is defined as a tax-exempt organization under Section 501(c)(3) of the Code that meets specified requirements, including that its members share a common set of ethical or religious beliefs and share medical expenses in accordance with those beliefs. HSAs and the Arrangements. The preamble to the proposed regulations confirms… Continue Reading

The IRS Amends COVID-19 Relief to Add Additional Time-Sensitive Actions

Previously, IRS Notice 2020-23 extended the due dates for certain tax payments, filings, and other “Time-Sensitive Actions” that would ordinarily fall on or after April 1, 2020 through July 14, 2020 to July 15, 2020. See our prior blog post on Notice 2020-23 here. The IRS recently issued Notice 2020-35 to make additional Time-Sensitive Actions eligible for relief. For example, under this new guidance, an employer that receives a compliance statement issued under the voluntary correction program (VCP) component of the Employee Plans Compliance Resolution System (EPCRS) with a 150-day deadline to implement all corrective actions that ends between April 1, 2020 through July 14, 2020 has until July 15, 2020 to implement the corrections. A full list of the Time-Sensitive Actions is included in Section III.B of Notice 2020-35, which is available here.

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