[firm] blog logo

COVID-19 Relief – 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 (“FSAs”), and dependent care FSAs during calendar year 2020, regardless of whether the basis for the election change satisfies the “change in status” rules under Treas. Reg. § 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

CARES Act: Calculating Qualified Health Plan Expenses for Purposes of the Employee Retention Credit

Under the CARES Act, employers are eligible to claim an employee retention credit if certain conditions are met (see our prior blog post on the employee retention credit, as well as other employee benefits and executive compensation changes made by the CARES Act, here). The tax credit is equal to 50% of “qualified wages” paid to employees of up to $10,000. Qualified wages include (i) wages actually paid to covered employees (other than qualified paid sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act) and (ii) the “qualified health plan expenses” allocable to such employees. On May 11, 2020, the IRS published new FAQs clarifying how qualified health plan expenses should be calculated for purposes of the employee retention credit. Notably, the FAQs provide guidance on how to calculate such expenses when an employer sponsors more than one health plan (e.g.,… Continue Reading

UPDATE: Calculation of Payroll Costs for Purposes of the Paycheck Protection Program (“PPP”)

The Small Business Administration (“SBA”) continues to update its FAQs on PPP loans to provide additional guidance regarding what costs constitute payroll costs. Borrowers should use care in determining what amounts constitute payroll costs since borrowers are responsible for providing an accurate calculation of payroll costs and must attest to the accuracy of those calculations on their Borrower Application Form. Under the new guidance the SBA clarified: The $100,000 annualized per employee cap only applies to cash compensation and does not include any non-cash benefits, such as employer contributions to defined benefit or defined contribution retirement plans, payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and payment of state and local taxes assessed on employees’ compensation. PPP loans can be used to cover costs for employee paid vacation, parental, family, medical and sick leave (other than qualified sick and family wages for… Continue Reading

COVID-19 Relief – 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 (“FSAs”), and dependent care FSAs during calendar year 2020, regardless of whether the basis for the election change satisfies the “change in status” rules under Treas. Reg.  §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 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

Employers Take Note of Suspended COBRA Deadlines due to COVID-19

The U.S. Departments of Labor and the Treasury recently issued a joint notice promulgating final rules that take effect immediately upon publication in the Federal Register (the “Notice”). The Notice suspends a number of deadlines for employer-sponsored, group health plans, including deadlines under COBRA. The extension period is from March 1, 2020 until 60 days after the federal government announces the end of the COVID-19 national emergency or other date announced by the DOL (the “Outbreak Period”). The Outbreak Period is disregarded in determining whether the following COBRA deadlines have been met: (i) the date by which an individual must notify the plan of a COBRA qualifying event or disability determination, (ii) the 60-day period to elect COBRA coverage, and (iii) the deadline to make COBRA premium payments. Group health plans were also offered relief via the suspension of the deadline for providing COBRA election notices to COBRA qualified beneficiaries.… Continue Reading

Extension of Certain Timeframes for Employee Benefit Plans

On April 29, 2020, the U.S. Departments of Labor and the Treasury (together, the “Departments”) issued a notice (the “Notice”) requiring that all group health plans, disability and other types of employee welfare benefit plans, and employee pension benefit plans, subject to ERISA and the Internal Revenue Code, must disregard the period from March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency or such other date as announced by the Departments in a future notice (the “Outbreak Period”) for the following periods and dates: The 30-day period (or 60-day period, if applicable) to request HIPAA special enrollment; The 60-day election period for COBRA continuation coverage; The date for making COBRA premium payments; The date for individuals to notify the plan of a COBRA qualifying event or determination of disability; The date within which individuals may file a benefit claim under the plan’s claims procedures;… Continue Reading

SBC Relief for COVID-19 Coverage or Telehealth Changes to Group Health Plans

Generally, if an employer-sponsored group health plan makes a material modification to coverage midyear that would affect the content of the plan’s Summary of Benefits and Coverage (“SBC”), the plan administrator must provide participants with 60 days’ prior notice of the modification. The U.S. Departments of Labor, Treasury, and Health and Human Services have issued a FAQ stating that they will not take any enforcement action against any plan for not providing such notice when the modification is to provide greater coverage related to the diagnosis and/or treatment of COVID-19 or to add benefits or reduce or eliminate cost sharing for telehealth and other remote care services. However, the plan administrator must still provide notice of the changes to participants as soon as reasonably practicable. This non-enforcement policy only applies while there is a public health emergency declaration or national emergency declaration related to COVID-19 in effect. The FAQs are… Continue Reading

The DOL and the IRS Jointly Provide Relief from Certain Timeframes Applicable to Health and Welfare and Pension Plans

On April 28, 2020, the IRS and DOL issued a Final Rule extending certain timeframes under ERISA and the Internal Revenue Code for group health, disability and other welfare plans, pension plans, and the participants and beneficiaries under those plans. The timeframe extensions include, among other things, the time to elect COBRA and pay premiums, special enrollment timeframes under HIPPA and CHIPs, claims procedure timeframes, and certain external review process timeframes.  Applicable plans must disregard the period from March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the enumerated time periods and dates and for providing COBRA election notices.  In addition, Disaster Relief Notice 2020-01 was issued addressing the timeframe relief and addressing certain other COVID-19 relief. The Final Rule is available here: https://www.dol.gov/sites/dolgov/files/ebsa/temporary-postings/covid-19-final-rule.pdf. Disaster Relief Notice 2020-01 is available here: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/disaster-relief/ebsa-disaster-relief-notice-2020-01.

Employee Benefits as Payroll Costs under the Paycheck Protection Program

Businesses that received a loan under the Paycheck Protection Program (“PPP”) are eligible for forgiveness of that loan if, among other things, the loan proceeds are used to cover “payroll costs” incurred over the eight-week period after the loan is made. Payroll costs, capped at $100,000 on an annualized basis for each employee (i.e., $15,384 over the eight-week period), are broadly defined to include, among other things: Salary, wages, commissions, or tips; Employee benefits costs, such as for vacation or paid family or medical leave (other than wages for which a credit is received under the Families First Coronavirus Response Act), group health care costs, retirement plan contributions, and severance benefits; and State and local taxes assessed on employee compensation. As of the date of this posting, no guidance has been issued by the IRS or the Department of Treasury to further clarify what specific items qualify as payroll costs.… 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’ 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

May 2020
S M T W T F S
« Apr    
 12
3456789
10111213141516
17181920212223
24252627282930
31  

Archives