The IRS recently issued Notice 2021-46 (the “Notice”), which provides new guidance in the form of FAQs regarding the application of the COBRA premium assistance provisions of the American Rescue Plan Act of 2021 (the “COBRA Subsidy”). The Notice supplements the IRS’s prior Notice 2021-31 regarding the COBRA Subsidy and addresses additional matters. Issues addressed in the Notice include, among others, (i) the availability of the COBRA Subsidy in situations where an individual is entitled to notify the plan administrator, but has not yet done so, of his or her eligibility for an extended COBRA coverage period due to a disability determination or the occurrence of a second COBRA qualifying event, (ii) the loss of an individual’s entitlement to the COBRA Subsidy with respect to dental and vision coverage when he or she becomes eligible to enroll in other group health plan coverage or Medicare that does not provide dental… Continue Reading
On January 20, 2021, the Biden Administration issued a memorandum (the ?Ç£Memo?Ç¥) calling for a 60-day freeze on regulations that had not taken effect as of the date of the Memo, which included certain regulations related to employee benefits (see our prior blog post regarding the Memo here). The Memo also authorized additional postponement of such regulations following the 60-day period where deemed necessary for further review. Listed below are some of the previously discussed proposed and final regulations related to employee benefits that were impacted by the Memo and updates to their effective dates: Independent Contractor Status Under the Fair Labor Standards Act. Final Rule. Effective date is delayed until May 7, 2021. There is also a proposed withdrawal of this rule with comments due by April 12, 2021. Medicare Program; Secure Electronic Prior Authorization for Medicare Part D. Final Rule. Effective date was delayed until March 30, 2021.… Continue Reading
The American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥) 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) ?Ç£recovery startup businesses?Ç¥ and (ii) ?Ç£severely financially distressed employers?Ç¥.?á A ?Ç£recovery startup business?Ç¥ 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 ?Ç£severely financially distressed employer?Ç¥ is an employer who had a decrease in gross receipts of at least 90% for the applicable quarter, and such employers… Continue Reading
Employee Benefits Regulations Potentially Impacted by the Biden Administration?ÇÖs Regulatory Freeze
On January 20, 2021, the Biden Administration issued a memorandum (the ?Ç£Memo?Ç¥) 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 ?Çô 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
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 ?Ç£Notice?Ç¥). 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 ?Ç£Outbreak Period?Ç¥). 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
Health plans that offer prescription drug coverage must distribute the Annual Medicare Part D Notice of Creditable Coverage (the ?Ç£Notice?Ç¥) prior to October 15, 2019. The Notice informs participants whether the plan?ÇÖs prescription drug coverage constitutes creditable or non-creditable coverage. Employers must provide the Notice to all Medicare-eligible participants and dependents. The Centers for Medicare and Medicaid Services has posted forms and instructions for providing this Notice, which are available here.
Employers whose policies include prescription drug coverage must notify Medicare eligible policyholders as to whether their prescription drug coverage is creditable coverage prior to October 15 of each year.?á Model notice documents are available on the CMS website here.
Prior to October 15, health plans must distribute the Medicare Part D Annual Notice of Creditable Coverage.?á The notice informs participants whether the plan?ÇÖs prescription drug coverage constitutes creditable or non-creditable coverage.?á Employers must provide the Annual Notice of Creditable Coverage to all Medicare-eligible participants and dependents.?á The Centers for Medicare and Medicaid Services has posted forms and instructions for providing this notice at the following link.
IRS Issues Proposed Rules for New Medicare Tax on High Wage Earners?ÇÖ Net Investment Income; Whether Tax Applies to 404(k) Dividends is Unclear
The U.S. Internal Revenue Service (?Ç£IRS?Ç¥) recently issued proposed regulations regarding a new 3.8 percent Medicare tax on the ?Ç£net investment income?Ç¥ of high wage earners ($200,000 for single filers, $250,000 for joint filers, and $125,000 for married persons filing separately), effective January 1, 2013.?á Under the proposed regulations, net investment income includes income from interest, dividends, annuities, royalties, and rents, less any allowable deductions.?á Notably, the proposed regulations exclude from net investment income distributions from most tax-favored retirement plans, such as those described in Internal Revenue Code (?Ç£Code?Ç¥) sections 401(a), 403(a), 403(b), 408, 408A, or 457(b).?á Yet, the proposed regulations did not directly address whether 404(k) dividends paid under an Employee Stock Ownership Plan (?Ç£ESOP?Ç¥), including a 401(k) plan with an ESOP component, would be included in net investment income. Code section 404(k) permits plan participants, to the extent provided under the plan, to elect to receive dividends on… Continue Reading
Effective January 1, 2013, employers must withhold an additional Medicare tax of 0.9% from the wages of employees who earn $200,000 or more. The IRS issued Frequently Asked Questions (FAQs) to help employers implement this new tax. The FAQs state that the employer must withhold the additional tax beginning with the pay period in which it pays wages in excess of $200,000 to an employee. The tax applies only to the wages over the $200,000 threshold. There is no requirement to notify employees once the employer begins withholding the additional tax and there is no employer contribution required with respect to the tax. The IRS plans to release revised Forms 941, 943 and the tax return schemas for the Form 94X series of returns. The IRS’ FAQs can be found here.