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IRS Issues Updated Guidance Regarding Substantially Equal Periodic Payments

The IRS recently issued Notice 2022-6 (the “Notice”), which provides guidance regarding how to determine whether a series of payments from a qualified retirement plan is considered a series of substantially equal periodic payments and is thus exempt from the 10% excise tax under Code Section 72(t). Payments are exempt from that excise tax if they are made in accordance with one of the following methods: (i) the required minimum distribution method, (ii) the fixed amortization method, or (iii) the fixed annuitization method. The Notice provides an updated life expectancy table that can be used to determine distribution periods for the required minimum distribution method and the fixed amortization method. In addition, the Notice modifies the existing minimum interest rate that may be used to apply the fixed amortization method and the fixed annuitization method (which is 120% of the federal mid-term rate) to add a 5% floor. The guidance… Continue Reading

HIPAA Breach by Express Scripts Vendor Triggers Plan Sponsor Actions

Many employers that sponsor a group health plan which is a “covered entity” subject to the HIPAA privacy and security rules have recently received notice from Express Scripts, Inc., a pharmacy benefit manager (“ESI”), regarding a cyberattack on the computer network of its subcontractor, Medical Review Institute of America (“MRIA”). This cyberattack apparently resulted in a HIPAA breach of current or former participants’ protected health information (“PHI”) under the plans. The breach notices were sent to the employers by ESI in its capacity as a HIPAA business associate of the plans.  A breach of unsecured PHI triggers notification obligations on the part of covered entities under HIPAA’s breach notification regulations (the “Breach Rules”), including (i) notifications to the individuals whose PHI was involved in the breach (the “Impacted Individuals”), and (ii) notification to HHS. Such notifications are subject to specific requirements of the Breach Rules, including content and timing requirements.   ESI’s… Continue Reading

IRS Provides Further Clarification Regarding COBRA Deadline Extensions

Last year, the DOL and IRS issued joint guidance providing that certain plan related deadlines, including the 60-day deadline to elect COBRA continuation coverage and the 45-day deadline to make COBRA premium payments, would be suspended during the “COVID-19 outbreak period” (i.e., the time period from March 1, 2020 until 60 days after the end of the national emergency or other date announced by the government) for up to one year. The DOL released other guidance earlier this year clarifying that the one-year deadline suspension is applied on an individual basis (see our prior blog post on that guidance here). Recently, the IRS issued Notice 2021-58 (the “Notice”), which clarifies that the extended timeframes for an individual to (i) elect COBRA continuation coverage, and (ii) make initial and subsequent COBRA premium payments, generally run concurrently. The Notice provides that if an individual elects COBRA coverage after the 60-day election period… Continue Reading

Federal Agencies Issue Proposed Revisions to Form 5500 Return/Report

The DOL, PBGC, and IRS (the “Agencies”) recently issued a Notice of Proposed Revision (the “Notice”) to update the Form 5500 Annual Return/Report filed for employee pension and welfare benefit plans. The DOL simultaneously issued a Notice of Proposed Rulemaking to implement the revisions proposed in the Notice. These proposed revisions primarily relate to certain statutory amendments to ERISA and the Code enacted as part of the SECURE Act and include other changes intended to improve Form 5500 reporting. Specifically, the Notice describes the following proposed revisions to the Form 5500 Annual Return/Report:  Consolidation of the Form 5500 reporting requirement for defined contribution retirement plan groups by (i) adding a new type of direct filing entity called a “defined contribution group” reporting arrangement, and (ii) establishing a new reporting schedule for such arrangement; Modifications to reflect pooled employer plans as a type of multiple employer pension plan (“MEP”) and implement… Continue Reading

Additional Guidance on Claiming Employee Retention Tax Credit for Q3 and Q4 of 2021

The IRS recently released Notice 2021-49 (the “Notice”), which provides additional guidance for employers who are claiming the employee retention tax credit for the third and fourth quarters of 2021 based on enhancements to the tax credit enacted in the American Rescue Plan Act of 2021 (the “ARPA”). The ARPA extended the employee retention tax credit for “qualified wages” paid to employees between July 1st and December 31st of 2021, and the Notice clarifies that the rules applicable to claiming the enhanced employee retention tax credit under the ARPA are generally the same as those for claiming the credit under the CARES Act. The Notice provides additional guidance on several miscellaneous issues with respect to the credit and also responds to questions received by the IRS related to the credit, including, among others: The definition of full-time employee and whether that definition includes full-time equivalents; The treatment of tips as… Continue Reading

Prepare Benefits Materials in Consideration of the Surprise Medical Billing Rules and Model Notice

As employers prepare group health plans, SPDs, and other employee benefits materials for 2022, they need to consider the new surprise medical billing requirements under the No Surprises Act of the Consolidated Appropriations Act of 2021. Interim final rules were recently released for these new requirements, which are generally effective for plan years beginning on or after January 1, 2022. Provisions that may need to be changed include those regarding: (i) coverage of emergency services, including the definitions of emergency services and emergency medical conditions, how benefit payments are calculated, and coverage for out-of-network, independent freestanding emergency departments; (ii) network cost-sharing for out-of-network providers at network facilities who do not obtain consent for non-emergency services; and (iii) coverage of out-of-network air ambulance services. In addition, there is a new notice required that must be made publicly available, posted on a public website of the plan, and included in the plan’s… Continue Reading

IRS Extends Tax-Relief for Employees?ÇÖ Leave-Based Charitable Donation Payments

In Notice 2020-46, the IRS provided guidance regarding cash payments made by employers to certain charitable organizations for the relief of COVID-19 victims under employer-sponsored, leave-based donation programs (see our prior blog post about Notice 2020-46 here). Under such donation programs, an employee could elect to forgo paid vacation, sick, or personal leave in exchange for cash payments made by his or her employer to qualifying charitable organizations for the relief of COVID-19 victims, without having such amounts being included in his or her taxable gross income. Under Notice 2020-46, such cash payments had to be made before January 1, 2021; however, in Notice 2021-42, the IRS extended this relief period to include qualifying cash payments that are made after December 31, 2020 and before January 1, 2022. Notice 2021-42 is available here.

Nothing in Life is Free ?Çô ERISA Expense Account Considerations

Many 401(k) plans contain spending accounts funded by revenue-sharing generated by a plan?ÇÖs mutual fund holdings. These accounts, often referred to as ERISA expense accounts, revenue-sharing accounts, or plan expense reimbursement accounts, can cause complications for plans if not administered properly. These revenue-sharing accounts can accumulate quickly, and in large plans, can result in hundreds of thousands of dollars each year. However, plan sponsors often do not know that the accounts are accumulating, and when they find them, may think they have just discovered ?Ç£free money.?Ç¥ But nothing in life is free, and missteps with the use of these funds could result in participant claims. Accordingly, before utilizing these funds, plan sponsors should use care and consider the following questions: Are the funds being held in the trust??áDOL Advisory Opinion 2013-03A (which is available here) noted that revenue sharing payments that were being received by the third party administrator prior… Continue Reading

IRS Issues Additional Guidance Regarding COBRA Premium Subsidy

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

IRS Clarifies Taxability of Dependent Care Benefits Provided Pursuant to a Carryover or Extended Grace Period

The IRS recently issued Notice 2021-26 (the ?Ç£Notice?Ç¥), which addresses certain questions that were not specifically answered in the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (enacted as part of the Consolidated Appropriations Act, 2021), and subsequent IRS guidance (collectively, the ?Ç£CAA Guidance?Ç¥). The CAA Guidance addressed the taxability of dependent care benefits provided under a dependent care assistance program (?Ç£DCAP?Ç¥) when a carryover or extended grace period is applied.?á As discussed in our prior blog post here, the CAA Guidance permits employers to adopt (i) a carryover of unused DCAP funds from taxable years 2020 to 2021 and 2021 to 2022 (?Ç£CAA Carryover?Ç¥) or (ii) an extended grace period for incurring DCAP claims for plan years ending in 2020 and 2021 (?Ç£CAA Extended Grace Period?Ç¥). The CAA Guidance confirms that any unused DCAP amounts carried over from one year (?Ç£Prior Year?Ç¥) to, or available in, the subsequent… Continue Reading

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