The IRS recently released proposed regulations related to excess employment tax credits claimed by employers under the American Rescue Plan Act of 2021. Specifically, the proposed regulations clarify that any paid sick and family leave credits or employee retention tax credits that were refunded or credited to an employer in excess of the credits the employer was actually entitled to claim will be treated as an underpayment of the applicable employment taxes that will be collected by the IRS in accordance with its customary assessment and collection procedures. For additional information on the requirements and limitations related to these employment tax credits, please see our prior blog posts here, here, and here. The proposed regulations are available here.
The American Rescue Plan Act of 2021 (the “ARPA”) provides a 100% COBRA premium subsidy (the “COBRA Subsidy”) to certain COBRA qualified beneficiaries, which we previously reported on here, here, and here. Under the ARPA, the COBRA Subsidy is set to expire on September 30, 2021. The APRA requires that certain notices be sent to affected qualified beneficiaries regarding the COBRA Subsidy, including a notice of the upcoming expiration of their premium assistance. This expiration notice must be sent no fewer than 15 days and no more than 45 days before an individual’s COBRA Subsidy expires. The DOL has released a model “Notice of Expiration of Period of Premium Assistance” that plans may use to satisfy the notice requirement. Because the COBRA Subsidy is set to expire on September 30, 2021, the deadline to send out the expiration notices is quickly approaching. Employers are reminded to contact their third-party COBRA administrators,… Continue Reading
The IRS recently released Notice 2021-49 (the “Notice”), which provides additional guidance for employers who are claiming the employee retention tax credit for the third and fourth quarters of 2021 based on enhancements to the tax credit enacted in the American Rescue Plan Act of 2021 (the “ARPA”). The ARPA extended the employee retention tax credit for “qualified wages” paid to employees between July 1st and December 31st of 2021, and the Notice clarifies that the rules applicable to claiming the enhanced employee retention tax credit under the ARPA are generally the same as those for claiming the credit under the CARES Act. The Notice provides additional guidance on several miscellaneous issues with respect to the credit and also responds to questions received by the IRS related to the credit, including, among others: The definition of full-time employee and whether that definition includes full-time equivalents; The treatment of tips as… Continue Reading
The IRS recently issued Notice 2021-46 (the “Notice”), which provides new guidance in the form of FAQs regarding the application of the COBRA premium assistance provisions of the American Rescue Plan Act of 2021 (the “COBRA Subsidy”). The Notice supplements the IRS’s prior Notice 2021-31 regarding the COBRA Subsidy and addresses additional matters. Issues addressed in the Notice include, among others, (i) the availability of the COBRA Subsidy in situations where an individual is entitled to notify the plan administrator, but has not yet done so, of his or her eligibility for an extended COBRA coverage period due to a disability determination or the occurrence of a second COBRA qualifying event, (ii) the loss of an individual’s entitlement to the COBRA Subsidy with respect to dental and vision coverage when he or she becomes eligible to enroll in other group health plan coverage or Medicare that does not provide dental… Continue Reading
As we previously reported here, the American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥) provides a 100% COBRA premium subsidy to any qualified beneficiary who is entitled to COBRA coverage due to an involuntary termination of employment or reduction in hours of employment. Employers will receive a tax credit for the cost of COBRA premiums for April 1 to September 30, 2021. The IRS recently issued FAQs addressing many issues related to the subsidy, including: (i) subsidy eligibility, (ii) what qualifies as a reduction in hours or an involuntary termination of employment, (iii) the type of coverage eligible for the subsidy, (iv) when the subsidy period begins and ends, (v) the extended election period, (vi) coordination with the extended deadlines due to the COVID national emergency (?Ç£Outbreak Period Extensions?Ç¥), (vii) payments to insurers, (viii) application to state continuation coverage, and (ix) calculation and claiming of the subsidy tax credit. One of… Continue Reading
IRS Clarifies Taxability of Dependent Care Benefits Provided Pursuant to a Carryover or Extended Grace Period
The IRS recently issued Notice 2021-26 (the ?Ç£Notice?Ç¥), which addresses certain questions that were not specifically answered in the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (enacted as part of the Consolidated Appropriations Act, 2021), and subsequent IRS guidance (collectively, the ?Ç£CAA Guidance?Ç¥). The CAA Guidance addressed the taxability of dependent care benefits provided under a dependent care assistance program (?Ç£DCAP?Ç¥) when a carryover or extended grace period is applied.?á As discussed in our prior blog post here, the CAA Guidance permits employers to adopt (i) a carryover of unused DCAP funds from taxable years 2020 to 2021 and 2021 to 2022 (?Ç£CAA Carryover?Ç¥) or (ii) an extended grace period for incurring DCAP claims for plan years ending in 2020 and 2021 (?Ç£CAA Extended Grace Period?Ç¥). The CAA Guidance confirms that any unused DCAP amounts carried over from one year (?Ç£Prior Year?Ç¥) to, or available in, the subsequent… Continue Reading
The DOL?áissued new model notices that may be used in connection with COBRA premium assistance requirements under the American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥). These model notices include (i) an ARPA General Notice, (ii) a Notice in Connection with Extended Election Periods, (iii) an Alternative Notice, and (iv) a Notice of Expiration of Period of Premium Assistance. The DOL also issued a Summary of ARPA requirements, which the DOL states should be included with the ARPA General Notice, the Alternative Notice, and the Notice in Connection with Extended Election Periods. Use of the model notices is not required. The ARPA General Notice (or its equivalent) should be sent to each COBRA qualified beneficiary (?Ç£QB?Ç¥) who experiences a COBRA qualifying event from April 1, 2021 through September 30, 2021. The FAQs issued in conjunction with the model notices state that the ARPA General Notice must be sent only to those… Continue Reading
Beginning April 1, 2021, the American Rescue Plan Act of 2021 will provide a 100% COBRA premium subsidy (the ?Ç£Subsidy?Ç¥) to any qualified beneficiary who is entitled to COBRA coverage due to an involuntary termination of employment or a reduction in hours of employment. For more information on the Subsidy, please see our prior blog post here.
The American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥) extended the employee retention credit through the end of 2021 and enhanced the scope of employers eligible to claim the credit by adding two new employer categories: (i) ?Ç£recovery startup businesses?Ç¥ and (ii) ?Ç£severely financially distressed employers?Ç¥.?á A ?Ç£recovery startup business?Ç¥ is a business that was created after February 15, 2020 and has annual gross receipts of no more than $1,000,000. Recovery startup businesses may claim the employee retention credit (capped at $50,000 per quarter) even if they do not otherwise qualify for the credit (i.e., they neither experienced a complete or partial shutdown due to a COVID-19 governmental shutdown order nor had a decrease in gross receipts of at least 20% for the applicable quarter). A ?Ç£severely financially distressed employer?Ç¥ is an employer who had a decrease in gross receipts of at least 90% for the applicable quarter, and such employers… Continue Reading
Section 9705 of the American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥) extends the amortization period for prior year shortfalls from seven to 15 years, beginning with the 2022 plan year (or, at the election of the plan sponsor, the 2019, 2020, or 2021 plan year). Section 9706 of the ARPA both modifies and extends the funding stabilization percentages for single employer defined benefit pension plans through 2029 and allows plan sponsors to elect whether to have these modified percentages apply for all purposes or solely for the purpose of determining the plan?ÇÖs adjusted funding target attainment percentage.?á The plan sponsor may further elect whether to apply the modified percentages beginning with the 2020, 2021, or 2022 plan year.?á The ARPA is available here.?á