On Aug. 16, 2021, the Departments of Health and Human Services (HHS), Labor (DOL) and the Treasury (Departments) issued a frequently asked question (FAQ) regarding enforcement of the contraceptive coverage mandate under the Affordable Care Act (ACA).
This FAQ indicates that the Departments intend to amend existing religious and moral exemptions to the contraceptive coverage mandate in light of recent litigation.
The ACA requires non-grandfathered health plans to cover certain women’s preventive health services without cost sharing, including all FDA-approved contraceptives.
Religious exemptions apply to certain churches, houses of worship, and other church-affiliated institutions, allowing them to choose not to contract, arrange, pay or refer for any contraceptive coverage.
On Nov. 15, 2018, the Departments published final regulations that expanded the exemptions and accommodations to the contraceptive mandate to apply to any entities with religious or moral objections to the contraceptive coverage requirement.
On July 8, 2020, the U.S. Supreme Court upheld these regulations as a valid exercise of power under the Trump administration.
The FAQ indicates that the Departments intend to issue regulations within six months to amend the 2018 final regulations. The FAQ does not provide any additional detail or specify the types of changes that may be made.
The American economy is finally recovering after more than a year of stagnation due to the COVID-19 pandemic. President Joe Biden’s administration wants to continue this momentum and further stimulate the economy. To help in that effort, President Biden recently signed an executive order aimed at increasing competition among businesses.
According to the White House, the order was designed to “promote competition in the American economy, which will lower prices for families, increase wages for workers, and promote innovation and even faster economic growth.”
The Biden administration notes that corporate consolidation has been accelerating for many years, leaving the majority of industries in the hands of only a few entities. The administration points to this trend as the main reason for slow wage growth and rising consumer prices. This latest executive order intends to reverse these effects.
All in all, the executive order includes 72 initiatives by more than a dozen federal agencies to help address competition inequality.
Health Care Impact
The executive order addresses competition in health care in four main areas:
The executive order broadly addresses competition inequalities across market sectors, with a significant focus on health care. These proposed initiatives have the potential to help individuals and small businesses alike. However, it remains to be seen how all of these initiatives will play out, as executive orders are essentially a directive to federal agencies to revise their regulations. Employers should continue to monitor exactly how the executive order plays out.
On June 17, 2021, the U.S. Supreme Court rejected a lawsuit challenging the constitutionality of the Affordable Care Act’s (ACA) individual mandate in a 7-2 ruling.
This lawsuit was filed in 2018 by 18 states as a result of the 2017 tax reform law that eliminates the individual mandate penalty. In 2012, the U.S. Supreme Court upheld the ACA on the basis that the individual mandate is a valid tax. With the penalty’s elimination, the appeals court in this case determined that the individual mandate is no longer valid under the U.S. Constitution.
Supreme Court’s Ruling
The Supreme Court determined that the plaintiffs in this case did not have standing to sue, meaning that they have not shown that they suffered any injury as a result of the elimination of the individual mandate penalty and, therefore, do not have a legal right to sue. As a result, the ACA as it exists today will remain in place.
According to the Court, allowing a lawsuit "attack[ing] an unenforceable statutory provision [to continue] would allow a federal court to issue what would amount to 'an advisory opinion without the possibility of any judicial relief.'"
The Court did not make any determinations on any other issue in the case, including the validity of the individual mandate or whether the rest of the ACA can be severed from the individual mandate provision. However, this case is now concluded and the ACA will remain in place.
On May 10, 2021, the Internal Revenue Service (IRS) released guidance on the taxability of dependent care assistance programs (DCAPs) for 2021 and 2022, clarifying that amounts attributable to previously issued carryover and extended grace period relief generally are not taxable.
Specifically, if these dependent care benefits would have been excluded from income if used during taxable year 2020 (or 2021, if applicable), these benefits will remain excludible from gross income and are not considered wages of the employee for 2021 and 2022. They will also generally not be taken into account for purposes of applying the exclusion limits of Internal Revenue Code Section 129.
IRS Notice 2021-26 clarifies the interaction of this standard with the one-year increase in the exclusion for employer-provided dependent care benefits from $5,000 to $10,500 for the 2021 taxable year under the American Rescue Plan Act:
FACTS: Employee elects to contribute $5,000 for DCAP benefits for the 2020 plan year but incurs no dependent care expenses during that plan year. The employer amends its plan to allow the employee to carry over the unused $5,000 of DCAP benefits to the 2021 plan year. The employee elects to contribute $10,500 for DCAP benefits for the 2021 plan year, incurs $15,500 in dependent care expenses for that plan year, and is reimbursed $15,500 by the DCAP.
CONCLUSION: The $15,500 is excluded from the employee’s gross income and wages because $10,500 is excluded as 2021 benefits and the remaining $5,000 is attributable to a carryover permitted by the previously issued coronavirus-related relief.
President Joe Biden signed the American Rescue Plan Act of 2021 (ARPA) into law on March 11, 2021. The law generally provides financial relief for individuals, state and local governments, schools, businesses and for other purposes.
In addition, the law contains the following measures of special interest to employers and their employees:
On Feb. 18, 2021, the IRS released Notice 2021-15 to clarify special rules for Section 125 plans, health flexible spending arrangements (FSAs) and dependent care assistance programs (DCAPs).
Special Rules for Health FSAs and DCAPs
The Notice is intended to clarify the application of special rules for health FSAs and DCAPs under the Consolidated Appropriations Act, 2021 (CAA). The CAA provides flexibility for carryovers of unused amounts, extends the time period for incurring claims, allows post-termination reimbursements from health FSAs and provides special rules for dependents who “age out” of DCAP coverage during the COVID-19 public health emergency. The Notice provides details and examples regarding these rules.
Section 125 Mid-year Election Changes
The Notice’s relief for mid-year Section 125 plan elections for plan years ending in 2021 is similar to prior guidance for 2020. Section 125 plans may allow employees to make or revoke election changes in certain circumstances.
The Notice clarifies that employers can decide how long to allow mid-year election changes with no change in status during the plan year and can limit the number of election changes during the plan year that are not associated with a change in status.
The Notice also provides relief with respect to plan amendments expanding reimbursable expenses for health FSAs and HRAs to include over-the-counter drugs and menstrual care products. Amendments to these plans must normally be made on a prospective basis, but these amendments may allow these reimbursements beginning on or after Jan. 1, 2020.
The Centers for Disease Control and Prevention (CDC) has issued guidance on the elements of consent and disclosures necessary to support employee decision-making when employers incorporate workplace COVID-19 testing.
Differences in position and authority (such as workplace hierarchies), as well as employment status in nonstandard working arrangements (e.g., temporary help, contract help or part-time employment) can affect an employee’s ability to make free decisions. This guidance suggests measures employers can take when developing a testing program.
To fully support employee decision-making and consent, these measures should include:
The Department of Labor (DOL) has released its 2021 inflation-adjusted civil monetary penalties that may be assessed on employers for violations of a wide range of federal laws, including:
Employers should become familiar with the new penalty amounts and review their pay practices, benefit plan administration and safety protocols to ensure compliance with federal requirements.
The COVID-19 pandemic is not only challenging the way Americans live on a daily basis, but also posing significant economic threats that could have a lasting effect on their financial well-being. For purposes of this article, financial well-being refers to the state in which a person is able to meet their current and ongoing financial obligations, feel secure in their financial future and make choices that allow them to thrive.
Why It Matters
Finances are a leading cause of stress for employees and can be a major distraction at work. As a result, the workforce could experience reductions in engagement and productivity, increased absences, and poor health and well-being.
How to Help Employees
Employers can play a key role in supporting the financial well-being of their employees, and should consider the following ways to improve employees’ financial literacy:
Financial well-being is a challenging topic that directly impacts the workforce, but employers can offer support and help their employees make educated decisions.
Many employee benefits are subject to annual dollar limits that are periodically updated for inflation by the IRS.
The IRS typically announces the dollar limits that will apply for the next calendar year well in advance of the beginning of that year. This gives employers time to update their plan designs and make sure their plan administration will be consistent with the new limits. Although some of the limits will increase for 2021, most of the limits remain the same.
For plan years beginning on or after Jan. 1, 2021, the following limits have increased:
Certain limits will not change for 2021, including the flexible spending account salary reduction contribution limit, HDHP minimum deductible, 401(k) contribution limit and transportation fringe benefits monthly limits.
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