Coronavirus (COVID-19) Legislation Update

Coronavirus (COVID-19) Legislation Update2021-04-09T15:48:26-04:00

As a result of the COVID-19 pandemic, law makers have been busy making changes to existing policies to help ease the burden on health care systems and those affected by this public health crisis. Check out the latest legislation impacting
pre-tax accounts below.

(Released March 26, 2021)

The Internal Revenue Service (IRS) released IRS Announcement 2021-7, which states that personal protective equipment such as masks, hand sanitizer, and sanitizing wipes that are purchased “for the primary purpose of preventing the spread of COVID-19” (COVID-19 PPE) are now qualified medical expenses under Section 213(d) of the Code.

Health savings account (HSA) participants may likely use the funds in their HSA to pay for masks, hand sanitizer, and sanitizing wipes on a pre-tax basis. Sponsors of flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) may also allow these expenses to be reimbursed from their plans.

SIGIS (Special Interest Group for IIAS Standards) is adding 272 items that were previously marked as ineligible, with the intent of publishing an updated Eligible Product list on 4/15/21.
 
As merchants work to get the products updated in their systems, please expect some inconsistency in point-of-sale purchases. Health account payment cards may not work immediately if participants are purchasing any of the newly eligible items added.
 
Read our related blog.

(Released March 17, 2021)

The IRS announced the extension of the federal income tax filing deadline from April 15, 2021 to May 17, 2021 (IRS Notice IR-2021-59) and is waiving all penalties and interest on tax payments during the 90-day postponement regardless of the amount owed.

This new deadline also means that HSA participants have more time to make 2020 contributions to their accounts. The maximum contribution limits remain the same, but participants now have more time to meet these limits, which are $3,550 for individuals and $7,100 for families for the 2020 tax year. It is important to note that HSA participants should check their local state laws to determine if local authorities have extended tax filing deadline in line with the federal extension, or work with their tax advisor to ensure correct filing.

On March 11, 2021 President Biden signed into law the latest COVID relief bill, the American Rescue Plan Act (ARPA) of 2021. This wide-ranging bill includes provisions for an increase of the Dependent Care Assistance Program (DCAP) contribution limit and a COBRA subsidy for involuntary terminations. Please see below for a summary of the provisions as they relate to DCAP and COBRA coverage.

Increase in DCAP Contribution Limit

For 2021 only, the DCAP contribution limit for qualifying dependent care expenses is increased from $5,000 to $10,500 for individuals or married couples filing jointly and from $2,500 to $5,250 for married individuals filing separately.

  • The increase in the DCAP contribution limit is optional. Employers may amend their plans if they wish to implement this change.
  • Plans may be amended retroactively, so long as the amendment is adopted by the last day of the plan year in which the amendment is effective and the plan is operated in compliance with the amendment’s terms beginning on its effective date.
  • Employers will want to consider the impact on Non-Discrimination requirements that this change may have. Highly-compensated employees may elect to increase elections at a higher rate, which may cause discrimination issues.

Employers may choose to elect a maximum contribution that is less than the new contribution limit.

COBRA Subsidy for Group Health Insurance

The ARPA of 2021 includes a 100% COBRA premium subsidy, effective from April 1 – September 30, 2021, for individuals who qualify for COBRA due to involuntary termination or a reduction in hours.

Provisions of the COBRA subsidy include:

  • It is not optional for group health insurance. All group health plans subject to COBRA except flexible spending accounts (FSA) must provide this coverage.
  • Appears to be available to both the primary participants and any eligible dependents.
  • Individuals who qualify for the subsidy will not be required to make any premium payments during the 6-month period of April 1 – September 30, 2021 to maintain coverage.
  • The 100% subsidy is calculated as the premium plus 2% administrative fee.
  • Employers may claim a tax credit for all self-funded and fully-insured group health coverage that has been subsidized.
  • Eligibility will end before September 30, 2021 if the participant or dependent becomes eligible for Medicare or other group health plan coverage.
  • The same 60-day election period applies for individuals who had become eligible for COBRA up to 18 months prior to April 1, 2021, and either declined COBRA or dropped coverage in the period prior to April 1, 2021. Employees will have 60 days from the date the notice is sent.
  • Employers are required to provide notice of the availability of the COBRA subsidy and its expiration date. The Department of Labor (DOL) will provide a model notice that administrators may use within 30 days. (Note: It is likely that the DOL will consider the American Recovery and Reinvestment Act of 2009 when issuing guidance for ARPA of 2021.)

Employers who currently subsidize COBRA may wish to speak about the impact of such an arrangement with counsel.

Please contact your account representative if you have any questions about adopting the temporary provisions included in ARPA of 2021. We advise you to speak with your tax or benefits counsel regarding interpretation of the legislation.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act 2021, a massive bill to fund the government that includes several provisions related to COVID relief.

On February 18, 2021, the IRS released additional guidance providing additional clarity around the regulations.

The Consolidated Appropriations Act 2021 provides temporary provisions for health care and dependent care Flexible Spending Account (FSA) plans, which may impact employers and their benefits plans. Under these provisions, employers are allowed, but not required to amend their Cafeteria Plans, and will be given ample time to do so. Amendments must be made by the last day of the calendar year following the plan year in which the amendment is effective. For example, calendar year 2020 plan amendments must be adopted on or before December 31, 2021.

Health Care FSAs

  • Carryover Extension: Unused funds from plan years ending in 2020 and 2021 may be carried over into the next plan year.
  • Grace Period Extension: For plan years ending in 2020 or 2021, the grace period may be extended up to 12 months after the end of plan year.
  • Election Amount Changes: Plans ending in 2021 may allow election amount changes for any reason.
  • Terminated Participants: Allow participants who cease participation in a 2020 or 2021 plan to receive reimbursements from unused contributions through the end of the plan year in that the participation ceased including any applicable grace period

Dependent Care FSAs

  • Carryover Extension: Unused funds from plan years ending in 2020 and 2021 may be carried over into the next plan year.
  • Grace Period Extension: For plan years ending in 2020 or 2021, the grace period may be extended up to 12 months after the end of plan year.
  • Election Amount Changes: Plans ending in 2021 may allow election amount changes for any reason.
  • Maximum Age Increased: For a plan year that had an election period ending on or before January 31, 2020, participants may claim expenses for dependents who turned 13 during the applicable plan year and any extension to that plan year.
Please refer to this site for regular updates and additional guidance.

On April 28, 2020, the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) and the Internal Revenue Service (IRS) issued the EBSA Disaster Relief Notice 2020-01, which extends certain health care benefit deadlines.

Who does this temporary deadline extension impact?
The new Rule extends certain health care benefit deadlines under the Employee Retirement Income Security Act (ERISA) and may impact your ConnectYourCare (CYC) programs, including Health Care Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRA), and COBRA.

Note: Those not subject to ERISA may not be required to comply with this rule. Groups not subject to ERISA (e.g., church or government plans) and plans not subject to ERISA (e.g., Dependent Care Assistance Programs (DCAP) and Health Savings Accounts (HSA) or Commuter benefits) may not be required to comply with this Rule. You should consult your legal and benefits advisors to determine what impact this Rule has on your plans.
(Publication date: May 4, 2020)
What is the extension timeline?
The Rule extends health care benefit deadlines under ERISA. This means calculation of deadlines that begin or end during the timeframe of March 1, 2020 until 60 days following the declared end of the COVID-19 national emergency may not take that same period into account when calculating the deadline under applicable law.
What changes are included in the rule?
The Rule gives participants extra time to comply with certain deadlines related to health care FSAs, HRAs and COBRA.
Changes that may impact FSAs and HRAs include:
  • Extension of the deadline to notify the plan sponsor of a qualifying life event for purposes of an election change.
    This may result in delayed notifications from participants about a marriage, the birth of a child, or other change in life event that would allow participants to make a change to their HRA or FSA election.
  • Extension of the deadline for submitting HRA and FSA claims.
    If your plan’s run-out period ended after March 1, 2020, you may be required to extend a participants’ ability to submit FSA or HRA claims until 60 days after the end of the COVID-19 national emergency is declared over.
  • Extension of the deadline for appealing an adverse claim decision.
Changes that may impact COBRA include:
  • Extension of the deadline to notify the plan sponsor of a qualifying life event for the purpose of an election change.
  • Extension of the deadline for notifying plan sponsors of a qualifying life event or disability for the purpose of extending COBRA.
  • Extension of the deadline for electing COBRA continuation coverage.
  • Extension of the deadline for making COBRA premium payments.
Are there any administrative changes?
The Rule also extends deadlines for plan administrators to provide COBRA election notices, benefit statements, and other notices and disclosures required by ERISA if the plan sponsor acts in good faith and provides any required notice disclosure or other document as soon as administratively practicable.
For more information, please refer to COVID-19 FAQs for Participants and Beneficiaries FAQs from the Department of Labor.

(Signed into effect on March 27, 2020 and retroactively effective as of January 1, 2020.)

What is the CARES Act and how does it affect those that have a Health Savings Account (HSA), Flexible Spending Account (FSA), or Health Reimbursement Arrangement (HRA)?

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into effect on March 27, 2020, and positively impacts participants’ purchasing power by expanding the list of eligible items by 20K+ additional products. Retroactively effective as of January 1, 2020, the bill also makes telehealth services pre-deductible without impacting HSA eligibility (provision in place until December 31, 2021).

Read our CARES Act blog for more information.

Listed below are products that have been made more accessible through the CARES Act:

  • Over-the-counter (OTC) drugs and medicines like cold remedies and fever reducers no longer require a prescription for reimbursement. By removing the extra step of getting a prescription from the doctor for these commonly used items, participants now have more direct access when purchasing them onsite or online.
  • Menstrual care products like pads, tampons, liners, cups, and sponges are included in the list of newly eligible items, which is good news for women everywhere.

Note about newly eligible items: Health account payment cards may not work immediately if participants are purchasing any of the newly eligible items added through the CARES Act. Merchants are currently working to get their systems and inventories updated with the anticipated time frame of May 2020 for most.

View our updated list of eligible items here:

The CYC Marketplace is an easy way to shop for eligible items.

This shopping option is a convenient way to purchase products without the guesswork of product eligibility, it offers you discounts and incentives, and keeps you healthy by giving you easy online access to the products you most need from the safety of your home.

Visit the CYC Marketplace. 

(Released March 21, 2020)

The IRS announced the extension of the federal income tax filing deadline from April 15, 2020 to July 15, 2020 (IRS Notice IR-2020-58) and is waiving all penalties and interest on tax payments during the 90-day postponement regardless of the amount owed.

This new deadline also means that HSA participants have more time to make 2019 contributions to their accounts. The maximum contribution limits remain the same, but participants now have more time to meet these limits, which are $3,500 for individuals and $7,000 for families for the 2019 tax year. It is important to note that HSA participants should check their local state laws to determine if local authorities have extended tax filing deadline in line with the federal extension, or work with their tax advisor to ensure correct filing.

(Released March 11, 2020)

To remove barriers for testing and treatment of COVID-19, the IRS announced in Notice 2020-15 on March 11, 2020, that COVID-19 testing and treatment is considered preventive care and may be covered pre-deductible by a High Deductible Health Plan (HDHP).

Read our related blog.

On May 12, 2020, the Internal Revenue Service (IRS) released Notice 2020-29 and Notice 2020-33, which gives employers the option to amend their plans:

  • To extend grace periods for Health Care Flexible Spending Accounts (FSA) and Dependent Care Assistance Programs (DCAP) plans to December 31, 2020.
  • To allow health care FSA and DCAP participants to make mid-year election changes in more circumstances.
  • To permanently increase the allowable carryover for health care FSAs:
    • Increased to $550 for 2020 plan year.
    • Future plan year carryover limits will be indexed to reflect an amount equal to 20% of the maximum permitted health care FSA contribution.

FSA and DCAP Grace Period Extended and and Mid-Year Elections Allowed

NOTICE 2020-29 includes the following changes:

  • Ability to amend plan documents to allow an extended grace period for FSA and DCAP plans to December 31, 2020.
    • Employers decide on whether or not they want to extend the grace period.
    • Change is only applicable to grace periods ending in 2020 and may only continue to December 31, 2020 regardless of when grace period was scheduled to end.
    • Example: A grace period ending March 15, 2020 or December 29, 2020 may only be extended to December 31, 2020.
  • Ability to amend a plan to allow mid-year elections for FSA and DCAP plans.
    • Employers decide on whether or not they want to allow at will election changes.
    • Allows election changes on a prospective basis.
    • May limit election changes to no less than amounts already reimbursed.
    • Example: An employee could elect an FSA today that has an effective date of May 18, 2020, whether or not the employee has had any qualifying life event or change to cost or coverage.
  • Prior relief to cover tele-health services related to COVID-19 under High Deductible Health Plans (HDHP) is now retroactively effective back to January 1, 2020.

Health Care FSA Carryover Increased and HRA Coverage of Health Premiums Allowed

NOTICE 2020-33 includes the following changes:

  • Increasing the carryover amount for health care FSAs from $500 to $550 for the 2020-2021 plan year.
  • Employers may amend plans to allow increased carryover from their 2020- plan year to the 2021 plan year.
  • Not all plans will require amendment if they are tied to a statutory limit.
  • A carryover increase is not permitted for 2019 plans into the 2020 plan year.
  • ICHRA/QSEHRA plans are permitted to treat an expense for a premium for health insurance coverage as incurred on:
    (1) the first day of each month of coverage on a pro-rated basis
    (2) the first day of the period of coverage, or
    (3) the date the premium is paid.

    • A 2020 ICHRA may reimburse a January 1, 2021 premium if the premium is paid in December 2020.
    • Example: An individual coverage HRA with a calendar year plan year may immediately reimburse a substantiated premium for health insurance coverage that begins on January 1 of that plan year, even if the covered individual paid the premium for the coverage prior to the  first day of the plan year.

Please speak to your benefits administrator and internal team about how to manage election changes.

Feeling a little rusty on COBRA regulations, notifications, and timelines?
Our New COBRA Academy Can Help!

connectyourcare roadmap to commuter benefits infographic

There’s no doubt that over the past few weeks, COBRA has resurfaced as a focal point for many employers. That means many HR professionals and benefits specialists are spending more time on COBRA administration now than in years past…and many find themselves brushing off the dust to complete tasks they haven’t had to focus on for a while.

If you’re feeling a little uncertain on your COBRA duties, we’d like to share our new COBRA Academy: a complimentary learning hub for HR professionals who administer COBRA, as well as brokers seeking to keep their clients compliant. Within, you’ll find helpful administration resources and ways to avoid common COBRA mistakes.

Take Me to the Academy

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