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BREAKING: One-Year Limit on Suspended COBRA and Other Deadlines Applies On An Individual Basis

The DOL issued guidance today stating that the one-year limit on the suspension of COBRA, special enrollment, and claims deadlines during the COVID-19 outbreak period applies on an individual basis.?á This means those deadlines do not resume running as of March 1, 2021.?á Instead, each individual has up to a one-year suspension as long as the COVID-19 national emergency continues.?á As discussed in our prior blog post here, it was unclear whether those deadlines were to resume running as of March 1, 2021.?á Employers should contact their service providers to ensure they are aware of this new guidance and to issue new participant communications as needed. Notice 2021-01 is available here.

Upcoming Compliance Deadlines

After February 28, 2021, the suspension of COBRA, special enrollment, and claims deadlines may be over. The government?ÇÖs authority for suspending these deadlines is limited by statute to a period of one year. It is unclear whether the one-year limit applies on the individual level (i.e., each person gets up to a year disregarded if the national emergency is ongoing) or applies as a limit on the outbreak period itself (i.e., deadlines for all persons would resume being counted as of March 1, 2021). The DOL/IRS have not yet issued guidance on this question. Employers may want to contact their service providers to see how they intend to administer, and communicate to participants, the end of the suspension of deadlines.

IRS Clarifies Optional Flexible Spending Account and Cafeteria Plan Enhancements

In 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the ?Ç£Act?Ç¥) was enacted. The Act is part of the Consolidated Appropriations Act of 2021. The Act provides employer sponsors of cafeteria plans, including health flexible spending accounts (?Ç£HFSAs?Ç¥) and dependent care flexible spending accounts (?Ç£DCFSAs?Ç¥) (collectively, ?Ç£FSAs?Ç¥), with helpful new options for easing the normal FSA use-it-or-lose-it and mid-year election change rules. Generally, the Act provides for (i) flexibility with respect to carryovers of unused FSA amounts from the 2020 and 2021 plan years (?Ç£Enhanced Carryover?Ç¥); (ii) extension of the permissible period for incurring FSA claims for plan years ending in 2020 and 2021 (?Ç£Enhanced Grace Period?Ç¥); (iii) a special rule regarding post-termination reimbursements from HFSAs during plan years 2020 and 2021 (?Ç£HFSA Post-Termination Option?Ç¥); (iv) a special claims period and carryover rule for DCFSAs when a dependent ?Ç£ages out?Ç¥ during the COVID-19 public health emergency; and… Continue Reading

The Consolidated Appropriations Act of 2021 and Benefits Changes Employers Need to Focus on Right Now

Retirement Plans Additional Relief May Help Prevent Partial Plan Terminations The recently adopted Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥) provides relief for qualified retirement plans of employers that had to reduce their workforce as a result of the pandemic (through furloughs, layoffs, or terminations) for plan years that include the period beginning on March 13, 2020 and ending on March 31, 2021. Specifically, these plans shall not be treated as incurring a partial plan termination if the number of active participants covered by the plan on March 31, 2021 is at least 80% of the number of active participants that were covered by the plan on March 13, 2020. A partial plan termination generally occurs when more than 20% of a plan?ÇÖs participants are terminated in a plan year. If a partial plan termination occurs, then the plan is required to 100% vest any ?Ç£affected employees?Ç¥. ?Ç£Affected employees?Ç¥ are… Continue Reading

COVID-19 Relief ?Çô Added Flexibility to Code Section 125 Cafeteria Plans

Prospective Mid-Year Election Changes IRS Notice 2020-29 allows employers to amend cafeteria plans to permit employees to make the following prospective mid-year election changes (including an initial election) for employer-sponsored health coverage, health flexible spending accounts (?Ç£FSAs?Ç¥), and dependent care FSAs during calendar year 2020, regardless of whether the basis for the election change satisfies the ?Ç£change in status?Ç¥ rules under Treas. Reg. ?º 1.125-4: Make a new election for employer-sponsored health coverage, if the employee initially declined to elect employer-sponsored health coverage; Revoke an existing election for employer-sponsored health coverage and make a new election to enroll in different health coverage sponsored by the same employer (including changing enrollment from self-only to family coverage); Revoke an existing election for employer-sponsored health coverage, provided the employee attests in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer; and Revoke an… Continue Reading

COVID-19 Relief ?Çô Added Flexibility to 125 Cafeteria Plans

Prospective Mid-Year Election Changes IRS Notice 2020-29 allows employers to amend cafeteria plans to permit employees to make the following prospective mid-year election changes (including an initial election) for employer-sponsored health coverage, health flexible spending accounts (?Ç£FSAs?Ç¥), and dependent care FSAs during calendar year 2020, regardless of whether the basis for the election change satisfies the ?Ç£change in status?Ç¥ rules under Treas. Reg.  ?º1.125-4: Make a new election for employer-sponsored health coverage, if the employee initially declined to elect employer-sponsored health coverage; Revoke an existing election for employer-sponsored health coverage and make a new election to enroll in different health coverage sponsored by the same employer (including changing enrollment from self-only coverage to family coverage); Revoke an existing election for employer-sponsored health coverage, 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; Revoke an… Continue Reading

Health and Welfare Issues and COVID-19: Reminder: Decrease in Pay/Hours Does Not Permit Dropping Health Plan Coverage If There is No Loss of Eligibility

As many employers reduce employees?ÇÖ work hours, employers should consider that employees will remain responsible for their health plan contributions even though their pay is decreasing. As long as eligibility for coverage does not change, an employee is not permitted to change his or her health plan elections due solely to the decrease in pay or hours. One exception to this general rule is a change in status event created in connection with the Affordable Care Act, which provides that, in certain circumstances, an employee with reduced work hours may drop health plan coverage if the employee enrolls in other health plan coverage. Because the reduced pay may not cover all payroll deductions, employers should consider adopting a priority order for payroll deductions (e.g., health plan deductions are made before 401(k) plan deductions). In addition, an employer may want to consider a waiver of premiums, which is permitted if done… Continue Reading

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