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COBRA Premium Assistance FAQs and Model Notices Issued

The DOL issued new model notices that may be used in connection with COBRA premium assistance requirements under the American Rescue Plan Act of 2021 (“ARPA”). 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 (“QB”) 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

IRS Announces that Purchases of Personal Protective Equipment are Tax Deductible

In Announcement 2021-7 (the “Announcement”), the IRS clarified that the costs to purchase personal protective equipment (“PPE”), such as masks, hand sanitizers, and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19, are tax deductible as a medical expense. Specifically, the amounts paid for PPE will be treated as amounts paid for medical care under Section 213(d) of the Internal Revenue Code. The costs of PPE are also eligible to be paid or reimbursed by health flexible spending arrangements, Archer medical savings accounts, health reimbursement arrangements, and health savings accounts. However, if the PPE expense is paid or reimbursed by such an arrangement or account, then the expense will not be tax deductible as a medical expense. The IRS also stated that group health plans may be amended to provide for the reimbursement of PPE expenses incurred for any period beginning on or after January 1, 2020… Continue Reading

Upcoming Compliance Deadline

Beginning April 1, 2021, the American Rescue Plan Act of 2021 will provide a 100% COBRA premium subsidy (the “Subsidy”) 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.

American Rescue Plan Enhancements to Employee Retention Credit

The American Rescue Plan Act of 2021 (“ARPA”) 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) “recovery startup businesses” and (ii) “severely financially distressed employers”.  A “recovery startup business” 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 “severely financially distressed employer” is an employer who had a decrease in gross receipts of at least 90% for the applicable quarter, and such employers… Continue Reading

Big Increase in Dependent Care Flexible Spending Account Limit for 2021

The American Rescue Plan Act of 2021 (“ARPA”), which was enacted on March 11, 2021, temporarily increases the maximum amount that an employee is permitted to contribute to a dependent care flexible spending account (“FSA”) from $5,000 to $10,500 (or from $2,500 to $5,250 for a married person filing a separate return) for the taxable year beginning in 2021. The increased dependent care FSA limit is an optional change that a plan sponsor may choose to incorporate into its dependent care program included under its cafeteria plan. This change, combined with the change under the Consolidated Appropriations Act, 2021 (“CAA”), which authorizes a cafeteria plan to permit participants to make prospective changes to their dependent care FSA contributions (see our prior blog post regarding the CAA here), allows participants to increase contributions to their dependent care FSAs in 2021. In order to implement the new dependent care FSA limit, the… Continue Reading

IRS Issues New FAQs on Claiming the Employee Retention Credit

The IRS recently issued Notice 2021-20, which contains 71 new FAQs related to the employee retention credit (the “ERT”) available on qualified wages paid between March 13, 2020 and December 31, 2020. The new FAQs do not address changes to the ERT enacted as part of the Consolidated Appropriations Act, 2021 on qualified wages paid between January 1, 2021 and June 30, 2021, which the IRS says will be addressed in future guidance. The FAQs provide numerous, helpful examples of how to apply key definitions and other provisions applicable to the ERT, such as who is an eligible employer; what constitutes a full or partial suspension of a trade or business, a significant decline in gross receipts, qualified wages, and allocable qualified health plan expenses; and the interaction of the ERT and Paycheck Protection Program loan recipients, among other topics. For additional information on the ERT, please see our prior… Continue Reading

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.  This means those deadlines do not resume running as of March 1, 2021.  Instead, each individual has up to a one-year suspension as long as the COVID-19 national emergency continues.  As discussed in our prior blog post here, it was unclear whether those deadlines were to resume running as of March 1, 2021.  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’s 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.

Required Minimum Distributions: A Tragedy in Three Acts

The SECURE Act and CARES Act made significant changes to required minimum distributions (“RMDs”). What should you be doing to ensure your retirement plans are administered correctly? The first step is to understand your options. SECURE Act Shifts the Start Before the SECURE Act, RMDs had to begin by April 1st of the calendar year following the later of (i) the calendar year during which the participant retires or (ii) the calendar year in which the participant turns age 70½.  Following the passage of the SECURE Act, the age cutoff in that rule changed from age 70½ to age 72, but only for individuals who turned age 70½ on or after January 1, 2020 (i.e., individuals born on or after July 1, 1949). In short, those terminated vested participants born before July 1, 1949 had to start their RMDs by April 1 of the year after turning 70½, while those… Continue Reading

IRS Issues Updated FAQs on Certain COVID-Related Employer Tax Credits

The IRS recently issued updated FAQs related to the expanded paid sick and family leave tax credits authorized under the Consolidated Appropriations Act of 2021 (the “CAA”). Specifically, the CAA extends through March 31, 2021, the availability of paid sick and family leave credits, which were first adopted in the Families First Coronavirus Response Act in March 2020. The extended paid leave tax credits are not new benefits and simply extend the period of time during which eligible employers may claim the credits. Consequently, if an employer has already claimed the maximum amount of these tax credits, they will not be eligible to claim additional paid leave tax credits. For additional information on the paid sick and family leave tax credits, please see our prior blog posts here and here.  The IRS has yet to update its FAQs for changes made in the CAA to the terms and conditions of… Continue Reading

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