The federal Departments of Health and Human Services, Labor, and the Treasury (collectively, the ?Ç£Departments?Ç¥) have jointly issued final regulations that are intended to provide for more transparency in health coverage (the ?Ç£Regulations?Ç¥). The Regulations have important implications for employer sponsors of certain group health plans (?Ç£Plans?Ç¥) and health insurers. The Regulations do not apply to health plans that are grandfathered under the Affordable Care Act, health reimbursement arrangements, certain other account-based group health plans, or short-term limited duration insurance. The Regulations require two key forms of disclosures (collectively, the ?Ç£Disclosures?Ç¥) in order to provide for this improved transparency: Self-Service Disclosure. First, the Regulations require Plans and insurers in the individual and group markets to disclose certain cost-sharing information upon request to a participant, beneficiary, or enrollee (or his or her authorized representative), including (a) an estimate of the individual?ÇÖs cost-sharing liability for covered items or services furnished by a… Continue Reading
IRS Issue Snapshot Highlights Plan Sponsor Responsibilities to Missing Participants and Beneficiaries
The IRS recently published an Issue Snapshot (the ?Ç£Snapshot?Ç¥) on IRS.gov that revisits the steps a plan sponsor must complete in order to locate missing plan participants and beneficiaries. While the Snapshot does not contain any new guidance, its publication is an indication that ensuring plan sponsors are undertaking appropriate steps to locate missing participants and beneficiaries remains an area of focus for the IRS, including when they are conducting plan audits. Under current IRS guidance, plan sponsors should complete the following steps to attempt to locate missing plan participants and beneficiaries: Search for alternate contact information (address, telephone number, email, etc.) held by the plan or any related plan, sponsor, or publicly-available records or directories. Use a commercial locator service, credit reporting agency, or proprietary Internet search tool for locating individuals. Mail a letter via certified mail to the last known mailing address and through any appropriate means for… Continue Reading
Federal agencies issued a new interim final rule that applies to group health plans that are subject to the Affordable Care Act (?Ç£ACA?Ç¥) and not grandfathered under the ACA. These plans are required to cover, without cost-sharing, qualifying coronavirus preventive services (including recommended COVID-19 immunizations) within 15 business days after the date the preventive service either (i) receives an A or B rating from the United States Preventive Services Task Force or (ii) has a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention. Coverage must be provided for any qualifying coronavirus preventive service received in-network or out-of-network. If there is no negotiated rate between the plan and provider, the plan must pay the provider the prevailing market rate for such service. The new rules are effective upon being published in the Federal Register and apply until the end of the public health… Continue Reading
Federal Tax Withholding and Reporting Requirements for Distributions from a Qualified Retirement Plan to a State?ÇÖs Unclaimed Property Fund
Third party administrators for employer-sponsored qualified retirement plans often recommend to employers that unclaimed account balances for mandatory cash-outs of small amounts (under $1,000) be remitted to the unclaimed property fund for the participant?ÇÖs state of residence. The IRS recently clarified in Rev. Rul. 2020-24 that amounts remitted to a state?ÇÖs unclaimed property fund are subject to withholding under Section 3405 of the Internal Revenue Code (the ?Ç£Code?Ç¥) and, in the event the amounts distributed exceed $10, reporting under Section 6047 of the Code. A plan sponsor will not be treated as failing to comply with the withholding and reporting requirements with respect to payments made before the earlier of January 1, 2022 or the date it becomes reasonably practicable for the plan sponsor to comply with such requirements. An employer that sponsors a qualified retirement plan should discuss this guidance with their plan?ÇÖs third-party administrator to ensure that any… Continue Reading
IRS Expands Reasons for Self-Certification of Eligibility for a Waiver of the 60-Day Rollover Requirements
The Internal Revenue Code provides that amounts distributed from a qualified plan or individual retirement arrangement (?Ç£IRA?Ç¥) will be excluded from income if they are transferred to an eligible retirement plan within 60 days following the day of receipt. The IRS previously announced in Rev. Proc. 2016-47 (the ?Ç£Prior Rev. Proc.?Ç¥) that individuals who fail to rollover retirement plan distributions into a new retirement plan or IRA within 60 days may self-certify to the new plan?ÇÖs administrator or the IRA?ÇÖs trustee that the individual qualifies for a waiver of the 60-day rollover requirement. The Prior Rev. Proc. listed 11 reasons that support waiving the 60-day rollover requirement, which include an error committed by a financial institution, a lost or uncashed distribution check, or the death or serious illness of a family member. In Rev. Proc. 2020-46, the IRS expanded this list to include instances in which the distribution was made… Continue Reading
The IRS recently announced cost-of-living adjustments for 2021. Below is a list of some of the key annual limits that will apply to qualified retirement plans in 2021: Compensation limit used in calculating a participant?ÇÖs benefit accruals: increased to $290,000. Elective deferrals to 401(k) and 403(b) plans: remains unchanged at $19,500. Annual additions to a defined contribution plan: increased to $58,000. Catch-up contributions for employees aged 50 and over to 401(k) and 403(b) plans: remains unchanged at $6,500. Annual benefit limit for a defined benefit plan: remains unchanged at $230,000. Compensation dollar limit for defining a ?Ç£key employee?Ç¥ in a top heavy plan: remains unchanged at $185,000. Compensation dollar limit for defining a ?Ç£highly compensated employee?Ç¥: remains unchanged at $130,000. View the full list of 2021 plan limits in Notice 2020-79 here.
As we previously reported here, earlier this year, the IRS provided relief to plan sponsors of safe harbor 401(k) and 403(b) plans, allowing them to amend their plans mid-year to suspend or reduce safe harbor contributions through the end of the 2020 plan year. Many employers elected to make this change in order to reduce overall costs to help them weather the COVID-19 pandemic. Plan sponsors who want to go back to a safe harbor plan design for 2021 must (i) amend their plan documents before the end of the year to include safe harbor contributions; (ii) notify their third party administrators as soon as possible so that the third party administrator is prepared to administer the plan as a safe harbor plan; and (iii) provide the required safe harbor notice to participants at least 30 days (and not more than 90 days) before the beginning of the plan year.… Continue Reading
In keeping with prior years, the IRS has extended the due date for providing the 2020 Forms 1095-B and C to individuals until March 2, 2021. These forms are required for compliance with the Affordable Care Act (?Ç£ACA?Ç¥). In Notice 2020-76, the IRS also extended the good-faith transition relief for penalties related to incomplete or incorrect Forms 1095-B and C to 2020. Notice 2020-76 also states that this is the last year for which the IRS intends to provide this type of good-faith relief. This relief was especially helpful for employers who received ACA employer penalty notices and determined that the penalty notices were related to reporting errors on their Form 1095-C. Employers should thus ensure that all software errors and glitches that resulted in incorrect coding on Forms 1095-C are resolved before the 2021 reporting is due. Notice 2020-76 is available here.
On September 30, 2020, the IRS issued final regulations providing guidance on the business expense deductions for meals and entertainment under Section 274 of the Internal Revenue Code in light of changes made by the Tax Cuts and Jobs Act (the ?Ç£TCJA?Ç¥). The TCJA eliminated most deductions for business expenses related to entertainment, amusement, or recreational activities, but allowed taxpayers to continue to deduct certain business expenses for food and beverages, as we discussed in our prior blog post here. The final regulations (i) address the elimination of the deduction for most entertainment, amusement, or recreational activity expenses; (ii) provide guidance on what constitutes entertainment for such purposes; and (iii) address the limitation on the deduction for meal expenses. The final regulations will be effective on the date of their publication in the Federal Register, which is scheduled for October 9, 2020. Taxpayers who pay or incur business expenses for… Continue Reading
Last year, the safe harbor rules for hardship withdrawals were amended to include a new subsection which permits hardship withdrawals for expenses and losses incurred by an employee on account of a disaster declared by the Federal Emergency Management Agency (?Ç£FEMA?Ç¥). Recently, FEMA issued a disaster declaration as a result of Hurricane Sally that impacted portions of Alabama and Florida on September 14, 2020. A list of areas covered by the disaster declaration can be found on FEMA?ÇÖs website. This disaster declaration means that affected participants may be eligible for hardship distributions under their 401(k) plans. Plan sponsors should review their 401(k) plan?ÇÖs hardship distribution provisions to ensure they contain either the updated safe harbor provisions specifically allowing hardship distributions for federally declared disasters or catch-all language allowing distributions on any permissible hardship under the Internal Revenue Code.