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:
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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. Over-the-Counter Drugs 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. Increased Limits 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. The Internal Revenue Service (IRS) released final 2020 forms and instructions for reporting under Internal Revenue Code (Code) Sections 6055 and 6056.
Employers should become familiar with these forms and instructions for reporting for the 2020 calendar year. Individual statements must be furnished by March 2, 2021, and IRS returns must be filed by Feb. 28, 2021 (March 31, 2021, if filed electronically). Since 2017, the Affordable Care Act (ACA), has been the subject of numerous legal challenges. Several bills were introduced to repeal the law, although those efforts failed. The ACA has also been challenged in federal court. A lawsuit seeking to invalidate the ACA in its entirety is currently pending before the Supreme Court, with oral arguments scheduled for November.
On Sept. 18, 2020, U.S. Supreme Court Justice Ruth Bader Ginsburg passed away at the age of 87. Whether the court vacancy created by Justice Ginsburg’s death should be filled prior to the November election is the subject of much controversy. On Sept. 26, 2020, President Donald Trump nominated federal circuit court judge Amy Coney Barrett to fill the vacancy, and the Senate plans to hold a vote on this nomination. However, a number of Democrats in Congress believe that the nomination process should not take place until after the November election. If a new Supreme Court justice is confirmed before the election, it could greatly impact the outcome of that litigation. It is widely expected that President Trump’s nominee will have a more conservative viewpoint and would be more likely to invalidate the ACA. In contrast, a Supreme Court justice nominated by Democratic Party candidate Joe Biden would be more likely to uphold the ACA. Until a nominee is ultimately confirmed, the practical impact of this decision remains to be seen. As a result, employers may want to closely monitor developments related to the Supreme Court nomination. Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable.
Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2020—the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use. This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees. Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before Oct. 15, 2020. To make the process easier, employers often include Medicare Part D notices in open enrollment packets they send out prior to Oct. 15. The IRS recently issued Revenue Procedure 2020-36 to index the contribution percentages in 2021 for determining affordability of an employer’s plan under the Affordable Care Act (ACA).
For plan years beginning in 2021, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed:
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