IRS Clarifies When Expenses Can Be Reimbursed Under Dependent Care FSA

On March 31, 2020, the IRS issued information letter Number 2020-0002 that addressed a question concerning whether a dependent care FSA under a Section 125 plan could reimburse an employee for expenses incurred before they became a participant in the plan.

The IRS reminded the employer that expenses incurred before an employee becomes a participant in the plan are not eligible for reimbursement under the plan. The plan can only pay or reimburse for substantiated expenses incurred on or after the date the employee enrolls in the plan.

Information letters are not legal advice and cannot be relied upon for guidance. Taxpayers needing binding legal advice from the IRS must request a private letter ruling. While the letter does not provide any new guidance, this letter does provide general information that may be helpful to employers with questions on this particular topic.

Letter No 2020-0002 »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

DOL Issues New COBRA Model Notices

On May 1, 2020, the DOL issued a series of questions and answers regarding COBRA, as well as a new set of model notices. As background, regulations governing COBRA require plan administrators to provide persons who enroll in the plan with an initial notice of their right to elect COBRA when they initially sign up for plan coverage. Plan administrators must also provide those persons who lost coverage after the occurrence of certain events with an election notice that explains their rights to coverage through COBRA and provides them with an opportunity to make that election. The agency updated these model notices.

The revisions to the model notices and the question and answer document focus on the interaction between COBRA and Medicare. They make clear that there are circumstances under which a person who is eligible for both Medicare and COBRA, and who chooses coverage through COBRA, may face penalties when they later enroll in Medicare. They also make clear that when a person is enrolled in both Medicare and COBRA coverage, Medicare is the primary payer and COBRA is the secondary payer.

Although certain deadlines in COBRA administration have been extended in response to the COVID-19 outbreak, the revisions to the COBRA materials do not mention them.

Plan administrators may use the model notices to comply with COBRA notice requirements, and they should familiarize themselves with the information provided in the revisions regarding the interaction between COBRA and Medicare.

Model Notices and FAQ »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

Extension of Certain Timeframes for Employee Benefit Plans, Participants and Beneficiaries

On May 4, 2020, the DOL and the Department of the Treasury (the Departments) issued guidance providing an extension of various compliance deadlines in its “Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak” final rule. Recognizing the potential difficulties for group health plans attempting to comply with certain notice obligations due to the COVID-19 public health crisis, and in effort to minimize the possibility of individuals losing benefits due to a failure to timely meet requirements, the Departments have extended certain timeframes for group health plans, disability and other welfare plans, and pension plans.

The relief provides that all group health plans, disability and other employee welfare benefit plans, and employee pension plans subject to ERISA or the Code must disregard the period from March 1, 2020, until 60 days after the end of the National Emergency (known as the “Outbreak Period”) for certain deadlines, including:

    *The 30-day (or 60-day, if applicable) deadline to request a special enrollment under HIPAA
    *The 60-day COBRA election period
    *The 30-day (or 60-day, if applicable) deadline to notify the plan of a COBRA qualifying event (and the 60-day deadline for individuals to notify the plan of a determination of a disability)
    *The 14-day deadline for plan administrators to furnish COBRA election notices
    *The 45-day deadline for participants to make a first COBRA premium payment and 30-day deadline for subsequent COBRA premium payments
    *Deadlines for individuals to file claims for benefits, for initial disposition of claims, and for providing claimants a reasonable opportunity to appeal adverse benefit determinations under ERISA plans and non-grandfathered group health plans
    *Deadlines for providing a state or federal external review process following exhaustion of the plan’s internal appeals procedures for non-grandfathered group health plans

Notably, with this relief applying to deadlines for individuals to file claims for benefits, this may impact health FSA administration. For example: let’s say that under H Company’s health FSA, participants must submit claims incurred in the 2019 plan year by March 31, 2020 (also called the run-out period). Further, for purposes of this example, let’s say that the national emergency is proclaimed to be over on May 31, 2020. The health FSA participants would have until October 28, 2020, to submit claims (90 days following the end of the outbreak period). Note that this relief does not extend a date in which a claim can be incurred for health FSAs. Rather, it extends the time in which a claim can be submitted for reimbursement. This relief will impact health FSAs or even HRAs with a run-out period ending during the outbreak period, as described in the example. Importantly, this extension does not apply to Dependent Care FSAs.

In addition, there is relief for group health plans in furnishing participant notices. More specifically, plans (and responsible plan fiduciaries) will not be treated as having violated ERISA if they act in good faith and furnish any notices, disclosures or documents that would otherwise have to be furnished during the outbreak period (including those requested in writing by a participant or beneficiary) “as soon as administratively practicable under the circumstances.” Here, it’s important to note that acting in good faith includes sending documents electronically as long as the employer believes employees have effective access to electronic means of communications.

Employers should be aware of these developments and confirm with any vendors and administrators, as applicable, that the specified timelines are being administered in accordance with the DOL’s guidance. For more guidance on application, see the examples provided in the DOL’s final rule.

DOL News Release »
Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak Final Rule »
COVID-19 FAQs for Participants and Beneficiaries »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

DOL Adds Additional Q&As to FFCRA Guidance

The DOL has added nine additional questions and answers (Questions 80-88) to their guidance related to leaves taken under the Families First Coronavirus Response Act (FFCRA). Among other things, the new guidance provides clarification on the following issues:

  • *To calculate the available paid sick leave hours for an employee who works irregular hours, the employer would determine the average number of hours the employee was scheduled to work each calendar day in the prior six-month period. To calculate the available expanded FMLA leave for an employee who works irregular hours, the employer would use the average number of hours the employee was scheduled to work each workday (not calendar day).
    *When determining an employee’s rate of pay for FFCRA leave purposes, the employer would look at the employee’s average rate for the prior six month period. The employer would include only hours worked, not leave hours. Any period of zero hours worked would be disregarded for the purpose of calculating the employee’s regular rate of pay.
    *An employer may not require an employee to use employer provided paid leave (such as vacation, personal time or PTO) concurrently with emergency paid sick leave under the FFCRA. However, an employer may require that an employee use any available accrued paid leave provided by the employer concurrently with expanded FMLA leave. The employee could receive 100% pay under this scenario, but the employer would only receive a tax credit for 2/3 of the employee’s normal wages up to $200 daily maximum.
  • As the DOL and IRS continue to update their FFCRA-related guidance, NFP’s Benefits Compliance Team will provide you with developments in future editions of Compliance Corner, webinars and the Insights from the Experts podcast.

    DOL FFCRA Q&A »

    Source: NFP BenefitsPartners

    Filed under: Abentras Blog

    IRS Extends Some Form 5500 Deadlines, But Not for Calendar Year Plans

    The IRS recently published Notice 2020-23, which extends the due date for some governmental filings as a result of the COVID-19 pandemic. As background, in March the IRS announced that taxpayers generally have until July 15, 2020, to file and pay federal income taxes originally due on April 15. No late-filing penalty, late-payment penalty or interest will be due. Notice 2020-23 expands this relief to additional returns, tax payments and other actions. As a result, the previously announced extensions generally now apply to all taxpayers who have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020.

    For Form 5500, this means that Form 5500 filings that would otherwise be due on or after April 1 and before July 15, 2020, are now due on July 15, 2020. This extension is automatic — plan sponsors do not need to file an extension request, form or other letter. This automatic extension to July 15, 2020, would apply to plan years that ended in September, October or November 2019. Normally, Form 5500 would be due for those plan years on April 30, June 1 (since May 31 is a Sunday) and June 30, 2020, respectively. An extension beyond July 15, 2020, would still be available, although the 2.5 month extension would be measured from the regular due date (not the July 15, 2020, due date).

    The automatic extension also applies to Form 5500 deadlines that fall within the relief window due to a previously filed extension. For example, if a plan year ended June 30, 2019, and the employer timely filed a Form 5558 extension extending the due date to April 15, 2020 (from January 30, 2020), then the Form 5500 would be due on July 15, 2020.

    Importantly, the extension does not apply for calendar year plans (which is the majority of plans). Thus, the deadline for 2019 Form 5500 filings for calendar year plans is July 31, 2020. Because that due date falls outside the special COVID-19-related extension, the July 31, 2020, filing date is not extended. Those plans may obtain a regular 2.5 month extension by timely filing Form 5558.

    NFP Benefits Compliance will continue to monitor the situation in case other extensions are granted relating to COVID-19 or other circumstances.

    IRS Notice 2020-23 »

    Source: NFP BenefitsPartners

    Filed under: Abentras Blog

    IRS Updates Tax Credit Guidance for Coronavirus Paid Leave

    On April 17, 2020, the IRS updated tax credit questions and answers regarding coronavirus (COVID-19) paid leave. Specifically, the agency added a question to address certain leave provided by employers of health care providers or emergency responders.

    The Families First Coronavirus Response Act (FFCRA) included provisions mandating employers with less than 500 employees to provide paid leave to employees who are unable to work or telework due to certain COVID-19-related reasons. Federal tax credits are available to fund the leave payments.

    Employers of health care providers or emergency responders are permitted to exclude these employees from the paid sick leave and expanded family and medical leave requirements. The exclusions could be applied as to leave taken for certain qualifying reasons (e.g., to care for a family member under a quarantine or isolation order), but not other reasons (e.g., to care for employee’s own health upon experiencing symptoms of COVID-19 and seeking a medical diagnosis).

    However, if an employer elects to allow a health care provider or emergency responder to take FFCRA paid leave for a specific COVID-19-related reason, it is subject to all other FFCRA requirements with respect to such leave. Accordingly, the new Question #67 clarifies that for a non-excluded employee and reason, the employer providing the paid leave for the health care provider or emergency responder is also entitled to the corresponding tax credit. The employer can claim the credit for the employee’s qualified sick leave wages, the employer’s share of Medicare tax on those wages, and any allocable qualified health plan expenses.

    Employers of health care providers and/or emergency responders may find this additional guidance to be helpful.

    COVID-19-related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs »

    Source: NFP BenefitsPartners

    Filed under: Abentras Blog

    Congress Enacts the CARES Act, Including Several Benefits-Related Provisions

    On March 27, 2020, Congress enacted and the president signed into law the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The CARES Act is a comprehensive economic stimulus package, which (among many other things) includes loans to small businesses attempting to navigate the COVID-19 pandemic and an expansion of unemployment benefits available through states (backed by federal funding). The CARES Act also has several provisions relating to employee benefits, both on the health side and the retirement side, as well as a few miscellaneous provisions on fringe benefits (student loan repayment).

    Health Plans: Telehealth
    Expanding on the IRS’s prior notice stating that an HDHP can cover COVID-19-related tests and coverage absent cost-sharing without adversely affecting HSA eligibility, the CARES act permits (but does not require) HDHPs to waive deductibles for all telehealth or remote care services without adversely impacting HSA eligibility. This allows HDHPs to cover telehealth with no cost-sharing, whether or not the telehealth relates to COVID-19, without impacting the plan’s status as an HDHP and without impacting the HSA eligibility of those covered under the HDHP. The CARES Act does not mandate telehealth coverage (although laws in some states have been enacted recently to provide additional telehealth coverage, at least for fully insured plans in those states). This expansion on telehealth is temporary — applying to plan years beginning on or before December 31, 2021.

    HSAs/HRAs/FSAs: Over-the-Counter Drugs and Menstrual Products
    The CARES Act eliminates the ACA rule that employees/individuals cannot be reimbursed from their HSAs, HRAs and FSAs for over-the-counter (OTC) drugs unless the drug was accompanied by a prescription. Under the CARES Act, effective January 1, 2020, employees/individuals can reimburse themselves from those accounts for non-prescribed OTC drugs. Similarly, menstrual care products (defined to include tampons, pads, liners, cups, sponges or similar products) will be considered qualified medical expenses payable from those accounts.

    Health Plans: Expansion of COVID-19 Tests Covered Under the FFCRA
    The CARES Act amends the recently enacted Families First Coronavirus Response Act (FFCRA) by expanding the types of COVID-19 tests that group health plans/carriers must cover without cost sharing, prior authorization, and other medical management requirements. Specifically, the new tests that must be covered without such restrictions include tests for which the developer has requested “emergency use authorization” under the Federal Food, Drugs, and Cosmetics Act, and tests authorized and used by a state to diagnose patients.

    Health Plans: Coverage of Qualifying COVID-19 Preventive Services and Vaccines
    The CARES Act also directs the relevant agencies (HHS, DOL and Treasury) to require health plans/carriers to cover any COVID-19 preventive services without cost sharing. That would include vaccines and immunizations, or any other item or service, that are determined by the CDC or the U.S. Preventive Services Task Force to prevent or mitigate COVID-19. This is a preemptive move to ensure that any immunizations and vaccines that are developed will be covered by the group health plan without any participant cost sharing.

    Health Plans: Transparency in COVID-19 Test Pricing
    The CARES Act attempts to address transparency in pricing by generally requiring providers to publicize the prices of COVID-19 tests. Group health plans and carriers, which are required to pay for the tests under the Families First Coronavirus Response Act (FFCRA), are required to reimburse the provider in accordance with the negotiated rate that it had with the provider before the COVID-19 public health emergency. If there is no negotiated rate, then it will be the publicized cash price. This relates more to the carrier and the provider, but employers may be interested in understanding the pricing of the COVID-19 tests, and how that will be handled.

    Fringe Benefits: Student Loan Repayment
    The CARES Act adds “eligible student loan repayments” to the list of items that can be reimbursed under an educational assistance program under IRC Section 127. “Eligible student loan repayments” are payments made by the employer, whether paid to the employee or a lender, of principle or interest on any qualified higher education loan (including undergraduate and graduate school) for the education of the employee (but not of a spouse, domestic partner or other dependent).

    Student loan repayments are limited to $5,250 (and are combined with other educational assistance provided under the Section 127 program sponsored by the employer — an employer cannot provide student loan repayment and other educational assistance in a combined amount over $5,250). Prior to the CARES Act, Section 127 applied only to educational assistance programs (current employee education, not student loans previously incurred). Also, employees may not double dip on tax benefits — an employee may not deduct student loan repayment amounts that are reimbursed or paid by the employer. This provision is temporary, as it’s effective for payments made after March 27, 2020, and before January 1, 2021. Employers interested in this provision will need to adopt or amend a Section 127 plan document.

    Retirement Plans: Increased Hardship Distributions Available
    The CARES Act allows “qualified individuals” to take hardship distributions of up to $100,000 from their retirement plan or IRA, without being assessed the 10% early withdrawal penalty tax. They can also pay the tax on this income over a three-year period. For these purposes, plan participants are “qualified individuals” if they:

      *Are diagnosed with COVID-19
      *Have a spouse or dependent diagnosed with COVID-19
      *Experience adverse financial consequences of COVID-19, or
      *Are faced other factors as determined by the Secretary of the Treasury

    Retirement Plans: Plan Loan Changes
    The CARES Act increases the amount that “qualified individuals” may request in plan loans to twice the amount of what is normally allowed, meaning participants can request loans for the lesser of $100,000 or 100% of their vested balance in the plan. (Here, qualified individuals has the same meaning as was described for hardship distributions.) Additionally, participants who currently have loans with repayments due between March 27, 2020, and December 31, 2020, may delay their repayment for up to a year without defaulting.

    Retirement Plans: Required Minimum Distributions Temporarily Waived
    The CARES Act waives the required minimum distribution (RMD) rules for the 2020 calendar year. As background, individuals must generally begin to take RMDs from their defined contribution plan or IRA when they turn 72. This provision allows participants to keep funds in their retirement account.

    Retirement Plans: Plan Administration Changes
    The CARES Act allows plan sponsors to adopt these changes immediately, as long as they amend the plan on or before the last day of the first plan year beginning on or after January 1, 2022. The Act also allows the DOL to potentially postpone certain deadlines under ERISA. This could allow the DOL to postpone certain obligations such as the annual Form 5500 filing requirement.

    Small Business Loans and Health Insurance Premiums
    NOTE: A full analysis of small business loans is beyond our scope; but employers may be interested in understanding how health insurance premiums might be addressed through small business loans.

    The CARES Act includes a small business loan program (with loan forgiveness under certain circumstances) which specifically allows employers to use loan amounts for payroll support, including employee salaries (up to $100,000); paid sick or medical leave; insurance premiums; and mortgage, rent and utility payments. Although qualifications, loan forgiveness, and other details of the loan program are beyond the benefits compliance scope, employers may be interested (and should consult outside counsel) in better understanding the loan provisions, as loans could be a source for health insurance-related premium payments during a furlough.

    Unemployment Expansion: Potential Impact on Furloughed Employees
    NOTE: A full analysis of unemployment benefits is beyond our scope; but employers may be interested in understanding how a furlough may impact employees with respect to unemployment benefits.

    The CARES Act creates a temporary Pandemic Unemployment Assistance program (through December 31, 2020), which is intended to provide unemployment benefits to those that have not traditionally been eligible (including furloughed employees). The Act expands benefits from 26 weeks (in most states) to 39 weeks, increases the state benefit level by $600 for up to four months, and waives the usual one-week waiting period for unemployment benefits.

    Individuals are not eligible for these expanded benefits if they have the ability to telework with pay or are receiving paid sick leave (including that provided under the recently enacted FFCRA) or other paid leave benefits (under a state law or through the employer’s PTO/leave policy). An individual can qualify for the expanded benefits if they are unemployed or partially unemployed and if one or more of the following is true:

      *They or a member of their household has been diagnosed with COVID-19
      *They are providing care for a family or household member with a COVID-19 diagnosis
      *They are the primary caregiver for a child or other household member who is unable to attend school or daycare as a direct result of COVID-19
      *They are unable to reach their place of employment because of a COVID-19 related quarantine
      *They are unable to work because a health care provider has advised them to self-quarantine due to COVID-19 concerns
      *They have become the major support for a household because the head of household has died as a direct result of COVID-19
      *They had to quit their job or their employer has closed as a direct result of COVID-19

    The CARES Act provides flexibility for plan sponsors to assist their employees during this pandemic. We will continue to monitor any developments in the law, including agency guidance. Employers should consult with their advisor about any changes that they wish to make to their plan as a result of the law.

    CARES Act »

    Source: NFP BenefitsPartners

    Filed under: Abentras Blog

    IRS Releases Filing and Payment Deadline Questions and Answers

    On March 25, 2020, the IRS released a set of questions and answers on the recently-extended federal income tax filing and payment deadline. The release was designed to assist taxpayers and tax professionals in understanding the scope and impact of the extension.

    As background, in Notice 2020-18, the IRS announced special federal income tax return filing and payment relief in response to the ongoing coronavirus (COVID-19) emergency. This relief extended the federal income tax filing deadline from April 15, 2020, to July 15, 2020.

    The new guidance explains that any type of taxpayer, such as an individual, a trust, an estate, a corporation, or any type of unincorporated business entity, with a return or payment due on April 15, 2020, is eligible for the relief. (The taxpayer does not need to have been impacted by COVID-19 in any particular way.) Additionally, the relief extends to both 2019 federal income tax payments (including payments of tax on self-employment income) and 2020 estimated federal income tax payments due on April 15, 2020. However, normal filing, payment, and deposit due dates continue to apply to both payroll and excise taxes.

    As a result of the extended filing deadline, taxpayers now also have until July 15, 2020, to make 2019 contributions to their HSAs and IRAs. Employers with April 15, 2020, filing deadlines may also have additional time to make 2019 contributions to certain workplace retirement plans.

    Employers may find these questions and answers helpful in understanding the details and effects of the available tax relief. The IRS has indicated the material will be updated periodically in this changing environment. These questions and answers are accessible at the below link:

    Filing and Payment Deadlines Questions and Answers »

    Filed under: Abentras Blog

    CMS Issues FAQs on Catastrophic Plan Coverage and COVID-19

    On March 18, 2020, CMS provided a set of FAQs that discusses the coverage of COVID-19 treatment in catastrophic plans. As background, insurers are generally not permitted to modify the health insurance coverage for a product midyear.

    The FAQs address two questions:

  • *Question and Answer 1 confirms that catastrophic plans must cover essential health benefits (EHB), such as the diagnosis and treatment of COVID-19. However, this coverage is subject to certain limitations, and can vary by plan. A catastrophic plan may not provide coverage of EHB before an enrollee meets their catastrophic plan deductible for that applicable plan year, except as follows: 1) a catastrophic plan must provide coverage for at least three primary care visits per year before reaching the deductible, and 2) in accordance with section 2713 of the Public Health Service Act (PHS Act), a catastrophic plan may not impose any cost-sharing requirements (such as a copayment, coinsurance or deductible) for preventive services.
    *Question and Answer 2 confirms that HHS will not take enforcement action against any health insurance issuer that amends its catastrophic plans to provide pre-deductible coverage for services associated with the diagnosis and/or treatment of COVID-19, and encourages states to follow suit.
  • Employers should consider this guidance as they provide coverage to participants who may be diagnosed with and treated for COVID-19.

    FAQs on Catastrophic Plan Coverage and COVID-19 »

    Source: NFP BenefitsPartners

    Filed under: Abentras Blog

    DOL Issues FMLA Guidance for Coronavirus Public Health Emergency

    On March 9, 2020, the DOL issued guidance on the application of the FMLA during a public health emergency. The release was in the form of questions and answers designed to assist employers with preparing workplaces for the coronavirus crisis.

    As background, the FMLA requires covered employers to provide job-protected unpaid leave to employees for specified family and medical reasons. Under the FMLA, employees are entitled to the continuation of group health insurance coverage under the same terms as existed prior to the leave.

    The guidance explains that an employee who is sick or whose family members are sick may be entitled to FMLA leave under certain circumstances. Such circumstances may include a viral illness, where complications arise that create a serious health condition. However, FMLA leave does not apply to employees who stay home from work to avoid exposure to a virus or to care for healthy children who have been dismissed from school as a preventive measure.

    The release further emphasizes the importance of developing a plan of action for the workplace in the event of a pandemic outbreak, and communicating the plan to employees. Such plan may permit employees showing symptoms of pandemic disease to be sent home, or require certifications that inflicted employees are able to resume work. Any such policy would need to comply with applicable non-discrimination laws. Although paid leave is generally not required by the FMLA or other federal laws, an employer would need to take state and local laws and other obligations (e.g., employment contracts) into account.

    Employers may find these questions and answers helpful in addressing various workplace situations and contingencies resulting from the coronavirus pandemic. The complete release is accessible at the below link:

    COVID-19 and Other Pandemics and the FMLA »

    Source: NFP BenefitsPartners

    Filed under: Abentras Blog