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IRS Provides for a New Mid-Year Election Change Event under Cafeteria Plans

In its recent Notice 2022-41 (the “Notice”), the IRS has provided for a new, optional election change event, which may be adopted by Code Section 125 cafeteria plans that operate on a non-calendar year plan year. The Notice was issued in conjunction with final regulations recently promulgated by the Treasury Department under Code Section 36B (“Final Regulations”).  Final Regulations  Pursuant to Code Section 36B, which was originally enacted under the Affordable Care Act, applicable taxpayers who enroll in a qualified health plan through a Health Insurance Exchange (“Exchange Plan”) and are not otherwise eligible for coverage under an employer-sponsored group health plan (“ER Plan”) that provides “minimum value” and is “affordable” are generally entitled to a premium tax credit (“PTC”). Under the prior regulations regarding the PTC, the “affordability” of coverage under the ER Plan for an employee, as well as for each of the employee’s family members, was based… Continue Reading

BREAKING: One-Year Limit on Suspended COBRA and Other Deadlines Applies On An Individual Basis

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.

The Consolidated Appropriations Act of 2021 and Benefits Changes Employers Need to Focus on Right Now

Retirement Plans Additional Relief May Help Prevent Partial Plan Terminations The recently adopted Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥) provides relief for qualified retirement plans of employers that had to reduce their workforce as a result of the pandemic (through furloughs, layoffs, or terminations) for plan years that include the period beginning on March 13, 2020 and ending on March 31, 2021. Specifically, these plans shall not be treated as incurring a partial plan termination if the number of active participants covered by the plan on March 31, 2021 is at least 80% of the number of active participants that were covered by the plan on March 13, 2020. A partial plan termination generally occurs when more than 20% of a plan?ÇÖs participants are terminated in a plan year. If a partial plan termination occurs, then the plan is required to 100% vest any ?Ç£affected employees?Ç¥. ?Ç£Affected employees?Ç¥ are… Continue Reading

Ordinary Employee Benefits Issues That Can Cause Extraordinary Problems in M&A Deals

Employee benefits rarely drive corporate transactions, but if the benefits of a target company are not reviewed carefully, they can sometimes derail the transaction.  Even some of the most routine facets of benefit plan administration can result in significant potential financial exposure (e.g., additional employer contributions, taxes, penalties, and fees as well as fees associated with the preparation and filing of IRS and DOL correction program applications) that could negatively affect the overall value of the target company. By identifying issues early in the transaction, the seller can prevent costly purchase price reductions and identify issues that need correction, while the buyer can avoid overpaying for a target and ensure that representation and warranty insurance will be available to cover potential claims. Some of those routine compliance issues include, but are not limited to, the following: Failing to timely file an annual Form 5500.  The DOL can assess a penalty… Continue Reading

COVID-19 Relief ?Çô 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 (?Ç£FSAs?Ç¥), and dependent care FSAs during calendar year 2020, regardless of whether the basis for the election change satisfies the ?Ç£change in status?Ç¥ rules under Treas. Reg. ?º 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

COVID-19 Relief ?Çô 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 (?Ç£FSAs?Ç¥), and dependent care FSAs during calendar year 2020, regardless of whether the basis for the election change satisfies the ?Ç£change in status?Ç¥ rules under Treas. Reg.  ?º1.125-4: 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

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