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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

New Required COBRA Premium Subsidy

Beginning on April 1, 2021, the American Rescue Plan Act of 2021 (“ARPA“) 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 reduction in hours of employment. Under the ARPA, the federal government will reimburse the employer, in the form of a tax credit, the cost of the premiums for up to six months, from April 1 to September 30, 2021. Specifically, the Subsidy will end on the earliest of: (i) September 30, 2021; (ii) the date the qualified beneficiary becomes eligible for other health plan coverage or Medicare; or (iii) the date the qualified beneficiary’s COBRA coverage period ends. Further, any individual who would have been eligible for the Subsidy, had he or she previously elected, or continued, COBRA coverage, will have another opportunity to elect COBRA coverage under a special… Continue Reading

Court Finds Exclusion for Autism Treatments Violates the Mental Health Parity and Addiction Equity Act

In Doe v. United Behavioral Health, No. 4:19-CV-07316-YGR (N.D. Cal. Mar. 5, 2021) a federal district court in California recently considered a plaintiff’s claim that an exclusion from coverage for “applied behavior analysis” and “intensive behavioral therapies” (the “ABA/IBT Exclusion”) used to assist children with Autism Spectrum Disorder (“Autism”) violated the federal Mental Health Parity and Addiction Equity Act (the “Parity Act”). The plaintiff, as the representative of her minor son who was diagnosed with Autism, was covered under an employer-sponsored, self-funded group health plan subject to ERISA.  The court held that the ABA/IBT Exclusion violated the Parity Act for two reasons. First, the court found that the ABA/IBT Exclusion, on its face, created a separate treatment limitation applicable only to services for a mental health condition (in this case, Autism). Second, the court concluded that the ABA/IBT Exclusion constituted a more restrictive limitation for a mental health condition than… Continue Reading

Employee Benefits Regulations Potentially Impacted by the Biden Administration’s Regulatory Freeze

On January 20, 2021, the Biden Administration issued a memorandum (the “Memo”) announcing a regulatory freeze on regulations that have not taken effect as of the date of the Memo. Specifically, the Memo recommends postponing the effective date of any regulation that has been issued, but has not taken effect, for 60 days from the date of the Memo. The Memo further directs that regulations not yet published in the Federal Register be immediately withdrawn for review. Listed below are some of the proposed and final regulations related to employee benefits that may be subject to withdrawal or postponement under the Memo: Prohibited Transaction Exemption 2020-02 – Improving Investment Advice for Workers & Retirees. Final Rule. Application of the Employer Shared Responsibility Provisions and Certain Nondiscrimination Rules to Health Reimbursement Arrangements and Other Account-Based Group Health Plans Integrated with Individual Health Insurance Coverage or Medicare. Final Rule. Pension Benefit Statements-Lifetime… 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.

IRS Clarifies Optional Flexible Spending Account and Cafeteria Plan Enhancements

In 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Act”) 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 (“HFSAs”) and dependent care flexible spending accounts (“DCFSAs”) (collectively, “FSAs”), 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 (“Enhanced Carryover”); (ii) extension of the permissible period for incurring FSA claims for plan years ending in 2020 and 2021 (“Enhanced Grace Period”); (iii) a special rule regarding post-termination reimbursements from HFSAs during plan years 2020 and 2021 (“HFSA Post-Termination Option”); (iv) a special claims period and carryover rule for DCFSAs when a dependent “ages out” during the COVID-19 public health emergency; and… Continue Reading

Before Cleaning Out Files, Brush Up on Record Retention Requirements

Our world is filled with paper and electronic records, and the HR departments at most companies are no exception. Enrollment forms, notices, plan documents, summary plan descriptions, benefit statements, and service records are just a few of the records that fill the HR department’s file cabinets and computer storage. While it might be tempting to clean out files, plan sponsors should exercise care before disposing of any files relating to benefits under a plan. A clean desk today could create headaches tomorrow. Generally, ERISA requires an employer to retain plan records to support plan filings, including the annual Form 5500, for at least six years from the filing date (ERISA §107) and to maintain records for each employee sufficient to determine the benefits due or that may become due to such employee (ERISA §209), with no time limit on such requirement. In addition, HIPAA requires retention of the policies and… Continue Reading

New Year’s Resolutions to Ensure Proper ERISA Fiduciary and HIPAA Privacy Training

With the start of the new year, a good New Year’s resolution for employers that sponsor ERISA retirement and/or health and welfare benefit plans is to ensure that all current ERISA plan fiduciaries—including any new members of plan administrative and investment committees—have received up-to-date ERISA fiduciary training. ERISA litigation brought against individual plan fiduciaries has significantly increased in recent years. Plan fiduciaries assume responsibilities and make decisions that could potentially subject them to substantial personal liability. To mitigate this risk exposure, each committee member (or other ERISA plan fiduciary) should receive fiduciary training initially upon becoming a plan fiduciary and at least annually thereafter. Plan fiduciaries need to understand (i) when they are acting on behalf of the plan’s participants in a fiduciary capacity, (ii) the different fiduciary roles under a plan and how fiduciary liability can attach in different ways, (iii) the difference between fiduciary decisions and non-fiduciary (“settlor”)… Continue Reading

Future Updates on the Consolidated Appropriations Act of 2021

We previously provided an overview of the Consolidated Appropriations Act of 2021 (the “CAA”) and the specific benefits changes employers need to focus on right now, which can be found here. There were numerous other provisions of the CAA that will impact retirement and group health plans. As the effective dates for those other provisions approach, we will provide you with a summary of the new provisions and how they may impact your plans.

Ordinary Employee Benefits Issues That Can Cause Extraordinary Problems in M&A Deals

Employee benefits rarely drive corporate transactions, but if the benefits of a target company are not reviewed carefully, they can sometimes derail the transaction.  Even some of the most routine facets of benefit plan administration can result in significant potential financial exposure (e.g., additional employer contributions, taxes, penalties, and fees as well as fees associated with the preparation and filing of IRS and DOL correction program applications) that could negatively affect the overall value of the target company. By identifying issues early in the transaction, the seller can prevent costly purchase price reductions and identify issues that need correction, while the buyer can avoid overpaying for a target and ensure that representation and warranty insurance will be available to cover potential claims. Some of those routine compliance issues include, but are not limited to, the following: Failing to timely file an annual Form 5500.  The DOL can assess a penalty… Continue Reading

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