As Plan Administrator, the Employer is Liable – Not the Service Provider (i.e., What Kind of Indemnification Are You Getting?)
The plan administrator of an employee benefit plan (employee welfare or retirement) has the general fiduciary responsibility under ERISA to ensure the operational and documentary compliance of the plan. Under ERISA, the sponsoring employer is the plan administrator unless another person or entity is named in the plan. This generally means the employer retains ultimate responsibility and liability for legal compliance even though the employer may rely heavily on the plan’s third-party service providers. One way to mitigate this liability is to obtain indemnification from a service provider for the service provider’s errors, for which the employer (as plan administrator) would still be legally liable. The default language in third-party service provider contracts often provides indemnification only for the service provider’s “gross negligence”, but not its “ordinary negligence”, thus leaving the employer responsible for correcting (and paying for) errors caused by the service provider that do not amount to “gross negligence” or “intentional… 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
The IRS recently issued Rev. Proc. 2021-25, which sets the 2022 calendar year limits on (i) annual contributions that can be made to a health savings account (?Ç£HSA?Ç¥) and (ii) annual deductibles and out-of-pocket maximums under a high deductible health plan (?Ç£HDHP?Ç¥). The 2022 limits are as follows: Annual HSA contribution limits: $3,650 for self-only coverage ($50 increase from 2021) and $7,300 for family coverage ($100 increase from 2021); Minimum HDHP deductibles: $1,400 for self-only coverage (no change from 2021) and $2,800 for family coverage (no change from 2021); and HDHP out-of-pocket maximum limits: $7,050 for self-only coverage ($50 increase from 2021) and $14,100 for family coverage ($100 increase from 2021). Rev. Proc. 2021-25 is available here.
HHS recently issued its final ?Ç£Notice of Benefit and Payment Parameters for 2022?Ç¥ (the ?Ç£Notice?Ç¥), which includes the maximum annual limitations on cost-sharing that will apply to ?Ç£essential health benefits?Ç¥ in 2022 under non-grandfathered group health plans subject to the Affordable Care Act. For this purpose, cost-sharing generally includes deductibles, coinsurance, copayments, and other required expenditures that are qualified medical expenses with respect to essential health benefits available under the plan. The 2022 limitations are (i) $8,700 for self-only coverage and (ii) $17,400 for other than self-only coverage. The Notice is available here.
In Announcement 2021-7 (the ?Ç£Announcement?Ç¥), the IRS clarified that the costs to purchase personal protective equipment (?Ç£PPE?Ç¥), 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
Beginning on April 1, 2021, the American Rescue Plan Act of 2021 (“ARPA“) 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 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?ÇÖs 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
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.
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
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?ÇÖs 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 ?º107) and to maintain records for each employee sufficient to determine the benefits due or that may become due to such employee (ERISA ?º209), with no time limit on such requirement. In addition, HIPAA requires retention of the policies and… Continue Reading
We previously provided an overview of the Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥) 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.