The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) offers relief to businesses affected by COVID-19 through various programs, including forgivable loans and federal income tax credits. However, the CARES Act prevents businesses from claiming certain benefits that are considered duplicative. The following checklist outlines key considerations for businesses when selecting among the Paycheck Protection Program (the “PPP”), the Employee Retention Tax Credit, the Employer Social Security Tax Deferral, and Work Opportunity Tax Credit. Certain industries, such as aviation, have specialized relief, which is beyond the scope of this checklist. In deciding what relief is appropriate, businesses should consider, as discussed in detail below, employer size, what may be best for the business’s employees, and the business’s long-term prospects. While this checklist is designed as a tool to assist businesses in choosing the proper relief, the best way to determine which option is optimal for a particular business… Continue Reading
In a series of news releases, notices, and FAQs, the IRS has begun to issue guidance on the various employer payroll tax credits and payment deferrals enacted by the Families First Coronavirus Response Act (the “FFCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Links to the guidance are below, and more detailed information on the employee benefits, compensation, and employment tax provisions of the FFCRA and CARES Act can be found on our blog here. FFCRA Tax Credits: News Release: Implementation of Paid Leave and Tax Credits under the FFCRA. FAQs: COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses. Notice 2020-21: Effective Date for Employment Tax Credits under the FFCRA. CARES Act Tax Relief: News Release: Employee Retention Credit. FAQs: Employee Retention Tax Credit under the CARES Act. Notice 2020-22: Relief from Penalty for Failure to Deposit Employment Taxes. Forms… Continue Reading
On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). This historic $2 trillion relief package received bipartisan support and is part of the third wave of federal government support as the nation copes with the acute economic fallout from the coronavirus (COVID-19) pandemic. Some of the key provisions of the CARES Act that apply to health and welfare plans, educational assistance programs, retirement plans, executive compensation programs, and employment and payroll taxes are outlined below. Health and Welfare Plans Q1. What COVID-19 testing and treatment is our company’s employer-sponsored group health plan required to cover? The Families First Coronavirus Response Act (“FFCRA”) requires an employer-sponsored group health plan (including a grandfathered plan under the Affordable Care Act (“ACA”)) (a “Plan”) to provide coverage for COVID-19 diagnostic testing and services related to the diagnostic testing without any cost sharing (including deductibles, copayments, and… Continue Reading
In light of the recent economic developments stemming from the COVID-19 pandemic, many employers are evaluating their employee benefit plans and how employee and employer costs will be impacted. The following summary provides a list of questions we have been receiving from clients over the past week, along with action items to help employers address these issues. Health and Welfare Plans and Fringe Benefits Should benefits coverage continue while an employee is on an unpaid furlough? If so, how would the employee pay the employee’s portion of the premium? Could the employee elect to drop coverage due to the reduction in hours of active service? Could the employer pay for coverage for some or all of its furloughed employees? Continued eligibility for benefits will depend on whether the employer treats the furlough as a termination of employment or as an unpaid leave of absence. The terms of the plan, including… Continue Reading
The IRS announced it is extending the deadline for plan sponsors to update their pre-approved and individually designed 403(b) plan documents as well as certain upcoming deadlines applicable to pre-approved defined benefit plans. The IRS’s announcement is available here.
In Notice 2020-15 (the “Notice”), the IRS provides relief for certain expenses related to the 2019 novel coronavirus (“COVID-19”). Generally, a high deductible health plan (“HDHP”) must satisfy the minimum deductible and maximum out-of-pocket expense requirements under Section 223(c)(2) of the Internal Revenue Code. However, “[t]o facilitate the nation’s response to [COVID-19],” the Notice provides that a health plan that otherwise satisfies the requirements to be an HDHP will not fail to be an HDHP merely because the plan provides health benefits for testing and treatment of COVID-19 before satisfying the applicable minimum deductible requirements. Notice 2020-15 is available here.
Tax-exempt organizations that sponsor individually-designed 403(b) plans that have not received favorable determination letters and which may contain one or more form defects, and plan sponsors that have not timely adopted amendments to reflect changes in the law or regulations, generally have until March 31, 2020 to cure any defects by either (i) amending and restating their plan on an up-to-date pre-approved plan document or (ii) correcting any form defects retroactively to January 1, 2010 (or the plan’s original effective date, if later). After the March 31, 2020 deadline, generally, the only way to cure form defects in a 403(b) plan that arose prior to March 31, 2020 will be through the IRS’s voluntary correction program.
In Peter E. and Eric E. v. United Healthcare Services, Inc., the plaintiffs, a father and son, brought a claim against the defendants for violation of the federal Mental Health Parity and Addiction Equity Act (the “MHPAEA”), alleging that the group health plan’s denial of continued coverage for the dependent son’s mental health and substance abuse treatment violated the MHPAEA. This alleged violation, the plaintiffs argued, resulted in an impermissible disparity under the MHPAEA because equivalent mental health/substance abuse benefits were denied, but analogous levels of medical/surgical benefits would have been covered under the plan. Holding that the plaintiffs had alleged sufficient facts to show they had a plausible claim for a violation of the MHPAEA, the court denied the defendants’ motion to dismiss and allowed the case to proceed to trial. Although this court’s opinion is controlling only in the jurisdiction in which it was issued (Utah), the case… Continue Reading
New Jersey Employers with Twenty or More Employees Must Offer a Pre-Tax Transportation Fringe Benefit
New Jersey enacted Senate Bill No. 1567 (the “Senate Bill”), which requires every employer in New Jersey that employs at least 20 persons, excluding employees covered by a collective bargaining agreement, to offer a pre-tax transportation fringe benefit to all of its employees in New Jersey, effective as of March 1, 2020. A pre-tax transportation fringe benefit allows an employee to set aside wages on a pre-tax basis to purchase eligible transportation services, such as transit passes and commuter highway vehicle travel, as consistent with Section 132(f)(1) of the Internal Revenue Code. An employer that is found to be in violation of this requirement is liable for a civil penalty ranging from $100 to $250 for the first violation. An employer has 90 days to correct the violation before such penalty is imposed. After 90 days, a $250 penalty will be imposed for each additional 30-day period during which an… Continue Reading
Federal agencies recently issued updated versions of certain documents that are required to be disclosed to individuals under applicable employer-sponsored group health plans. A set of FAQs regarding the Affordable Care Act (“ACA”) was issued by the federal Departments of Labor (“DOL”), Health and Human Services (“HHS”), and Treasury (collectively, the “Departments”), which describe recent changes made by the Departments to the “summary of benefits and coverage” template under the ACA (“SBC”). Among other minor changes to the SBC, certain verbiage on the SBC and the associated uniform glossary were revised to reflect the prior elimination, as of January 1, 2019, of the tax penalty related to an individual’s failure to comply with the so-called “individual mandate” under the ACA. The FAQs also provide additional guidance regarding the updated SBC coverage examples calculator that was released by HHS late last year. The revised SBC and SBC coverage examples calculator each… Continue Reading