PPI Benefit Solutions

COVID-19 Update

DOL Clarifies FFCRA Eligibility Related to Reopened Schools

In the August 20, 2020, edition of Compliance Corner, we considered the eligibility of employees for leave under the Families First Coronavirus Response Act (FFCRA) when their child’s school has reopened but they have chosen to keep the child home on virtual learning. On Aug. 27, 2020, the DOL provided guidance on that topic and related issues by updating their ongoing FFCRA questions and answers.

As background, the FFCRA requires employers with fewer than 500 employees to provide emergency paid sick leave (EPSL), as well as expanded FMLA (EFMLA), to employees if they must take care of their children whose school or daycare is unavailable due to COVID-19.

In FFCRA questions #98 through #100, the DOL clarified that employees would be eligible for paid leave under FFCRA in the following two scenarios:

The child’s school remains physically closed. The school year has begun remotely only. Children are not permitted to attend school in person.
The child’s school has opened on a hybrid basis. The school is physically open every weekday. Students alternate days between attending school in-person and attending remotely from home. In other words, children are only permitted to attend school in-person on assigned days.

The employee would be eligible for paid leave under FFCRA on the days that the child is not permitted to attend school in-person if the employee is in need of leave to care for the child during that time. There must be no other suitable person available to care for the child.

Now consider a scenario where the child’s school is open and children are permitted to attend in-person. Parents are given a choice as to whether the child will attend school in-person or remotely. If the employee chooses for the child to attend school remotely due to personal reasons such as fear of contracting COVID-19, the employee is not eligible for paid leave under FFCRA. However, if the child does not attend in-person because the child is under a COVID-19 quarantine due or a healthcare provider’s advice to quarantine, the employee would be eligible for paid FFCRA leave if they need to care for the child and no other suitable person is available.

Employers should review the new guidance and revise their policies, if necessary, in order to provide appropriate leave for eligible employees.

FFCRA FAQs, Questions 98-100

Congressional Research Service Issues COVID-19 and Private Insurance FAQs

On August 24, 2020, the Congressional Research Service (CRS) issued COVID-19 and Private Health Insurance Coverage: Frequently Asked Questions in light of the ongoing pandemic. With private health insurance being the primary source of health coverage in the US, the FAQ addresses covered benefits and cost sharing regarding COVID-19 testing, treatment, and a potential vaccine under private health insurance (which includes employer-sponsored group health plans generally and individual market plans).

The FAQ reiterates that under the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief and Economic Securities Act (CARES Act), most private health insurance plans are required to cover COVID-19 testing without cost sharing (both in network and out of network), including test administration and related items and services. Further, there is not a federal requirement specifically for the coverage of COVID-19 treatment. However, there is a federal requirement for certain plans to cover a core set of categories for essential health benefits (EHB), and each state can select its EHB benchmark plan. That said, the EHB benchmark plans in all states currently provide coverage for the diagnosis of and treatment for COVID-19. However, the specific benefits provided may vary by state and by plan. Importantly, even if a coverage requirement exists, cost sharing may still apply.

Additionally, the FAQ explains that while there currently is no FDA-approved COVID-19 vaccine available, the CARES Act requires most plans to cover such vaccine (when available) with no cost sharing, if recommended by the Advisory Committee on Immunization Practices (ACIP). Likewise, coverage (without cost sharing) is required by most plans for other COVID-19 preventive services that are recommended by the United States Preventative Services Task Force (USPSTF). The FAQ also provides additional information on covered benefits and cost sharing regarding COVID-19 related services under private health insurance.

While the FAQ does not introduce any new guidance, employers should be aware of the COVID-19 coverage and cost sharing requirements as outlined in this report.

COVID-19 and Private Health Insurance Coverage: Frequently Asked Questions

Healthcare Reform

IRS Updates Employer Shared Responsibility Questions and Answers

On August 19, 2020, the IRS updated its guidance on the employer mandate (also known as employer shared responsibility).

The Q&A updates reflect index adjustments to penalties and the affordability percentage for calendar year 2021. The employer shared responsibility payment, which is the penalty an applicable large employer must pay if it does not offer minimum essential coverage to at least 95% of its full-time employees, is now the product of $2,700 (which is up from $2,570 in 2020) multiplied by the number of full-time employees employed for the calendar year. The penalty for failing to offer affordable coverage or coverage that does not provide minimum value, which is computed separately for each month, is the product of $4,060 (up from $3,860 in 2020) multiplied by the number of full-time employees who received premium tax credits in that month. The update also confirms that the percentage used to determine whether coverage is affordable (the affordability threshold) for plan years beginning in 2021 is now 9.83% (up from 9.78% for plan years beginning in 2020).

As a reminder, the draft 2020 versions of the ACA employer shared responsibility reporting forms were discussed in the July 23, 2020 , edition of Compliance Corner .

Employers should be aware of these updates when determining premiums for 2021 and preparing their employer shared responsibility reporting forms for the calendar year 2021.

Employer Shared Responsibility Q&As »

Retirement Update

DOL Proposes Rule Outlining Pooled Plan Provider Registration Process

On August 20, 2020, the DOL issued a notice of proposed rulemaking on pooled plan provider registration requirements. As background, the Setting Every Community Up for Retirement Enhancement (SECURE) Act allows for pooled employer plans (PEPs), which are multiple employer retirement plans that are administered by pooled plan providers. PEPs are fiduciaries, and are therefore subject to ERISA’s prohibited transaction provisions.

This proposed rule establishes a registration process for entities that want to offer PEPs. Specifically, entities that are seeking to become PEP providers would have to complete an initial registration, supplemental filings in the event of specific events, and a final filing after the provider’s PEP has terminated. The initial filing registration would be due before the PEP begins operations, and would provide identifying information about the PEP and the PEP provider. Supplemental filings would need to be made within 30 days of any change in information in the initial registration or in the event of any significant changes in the corporate structure of the PEP. A final filing would be due within 30 days of the PEP filing the final Form 5500 for the plan.

The proposed rule also requires that these filings be made electronically through EFAST2 using the Form PR. The rule also provides a mock-up of the form.

Interested stakeholders will have 30 days to comment on the proposed rule. Entities that are looking to operate PEPs should review this proposed rule to gain an understanding of the filing requirements that will likely be imposed on PEPs.

Registration Requirements for Pooled Plan Providers Proposed Rule »
DOL Fact Sheet »

DOL Releases Interim Final Rule on Lifetime Income Illustrations

On August 18, 2020, the DOL announced an interim final rule regarding lifetime income illustrations for participant benefit statements. The rule’s requirements are applicable to defined contribution plans, which would include 401(k) plans.

As background, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) amended ERISA Section 105 to require an annual income disclosure to be included as part of a participant’s benefit statement. The disclosure is intended to help a participant understand how their account balance translates into monthly income at retirement. As a result, a participant may be better able to prepare for retirement and assess whether current contributions should be increased to achieve retirement income goals.

Accordingly, the disclosure would reflect the monthly payment amounts the participant would receive if their total account balance were used to provide a single life annuity (SLA) for the participant or a qualified joint and survivor annuity (QJSA) that would also provide a benefit for a surviving spouse. As prescribed by the SECURE Act, the interim final rule sets forth the specific assumptions upon which these lifetime income payments would be based.

The first assumption is the annuity commencement date, which is the last day of the statement period. For example, if the annual disclosure was included with the fourth quarter statement, the annuity starting date would be December 31. Second, the assumed age on the annuity starting date is 67, which was chosen because it is the Social Security full retirement age of most workers. However, for participants older than age 67, their actual age must be used instead.

The third assumption focuses upon the specific characteristics of the SLA and QJSA benefits for purposes of the illustrations. The SLA benefit must reflect a single life annuity, which will pay a fixed monthly amount for the life of the participant, with no survivor benefit upon the participant’s death. The QJSA benefit assumes that all participants have a spouse of equal age and provides a 100% survivor annuity, so the same fixed monthly amount would continue for the life of the participant or surviving spouse upon the participant’s death.

Fourth, the assumed interest rate is the 10 year constant maturity Treasury rate, which was selected because it approximates the rates used by insurers for immediate annuities. Finally, the assumed life expectancies are to be based upon gender neutral mortality tables that are currently used by defined benefit pension plans to determine lump sum payments.

Explanations must also be provided to participants that describe how the illustrative payments were calculated and that emphasize the portrayed estimates are not guarantees. Model language is provided for this purpose. Plan administrators can either insert the eleven model provisions into their existing statement formats or attach one of the Model Benefit Statement Supplements as an addendum.

Significantly, the rule provides ERISA liability relief to plan sponsors and fiduciaries for providing lifetime income illustrations that conform to the specified requirements. This relief was intended to address sponsor concerns of potential participant lawsuits if their actual monthly payments at retirement were less than the statement projections.

Defined contribution plan sponsors should be aware of the interim final rule’s requirements and consult with their service providers regarding incorporation of the disclosures in participant benefit statements. The rule is effective one year from publication in the federal register and applies to benefit statements provided after such date.

Interim Final Rule »
Fact Sheet »

DOL Proposes Rule on Qualified Plan Loan Offset Rollovers

On August 20, 2020, the DOL issued a proposed rule on qualified plan loan offset rollovers. As background, when a plan loan must be paid immediately (usually due to default or termination of employment) and goes unpaid, the loan is treated as a deemed distribution or a loan offset. The deemed distribution would occur if the participant is able to take a distribution under the plan terms. An offset, or a reduction of the account balance by the unpaid portion of the loan, would occur if the participant is not yet able to take a distribution. Offsets are treated like an actual distribution for rollover purposes, meaning that the offset must generally be rolled over to a qualified retirement plan within 60 days to avoid taxation of the offset amount.

However, an offset that is deemed a qualified plan loan offset (QPLO) can be rolled over at any time up to the individual’s tax filing deadline for the year in which the offset occurred. QPLOs were introduced by the Tax Cuts and Jobs Act (TCJA) of 2017. In order for the offset to be a QPLO, the offset loan has to meet all the IRC requirements for rollovers, and the distribution of the loan offset must occur “solely” because the person failed to repay the loan due to termination of employment or plan participation. Unfortunately, though, the TCJA did not actually define what it means for the loan offset to occur “solely” because of the termination of the participant.

This proposed rule answers that question by indicating that an offset occurs “solely” due to the termination of employment if the plan loan offset occurs because of the failure to repay the loan and it occurs during the first year following employment termination. This can be the case even where the participant is able to make some loan payments following termination.

QPLOs will be reported using Box 7 of the Form 1099-R. The rules also indicate that plan sponsors and recordkeepers can rely on this guidance until the final rule is published.

Rollover Rules for Qualified Plan Loan Offset Amounts »

FAQ

What options do employers have when dealing with health FSA and/or dependent care FSA experience gains (i.e., forfeitures)?

Under the “use-or-lose” rule, health FSA and DCAP contributions that are not used to reimburse expenses incurred during the plan year (or during a carryover or grace period, if applicable) will be “forfeited,” even if the reimbursements are less than the participant's contribution. In light of the COVID-19 public health emergency, employers may be dealing with such experience gains/participant forfeitures more so than usual given that participants may not have the opportunity to use designated health FSA and DCAP funds within the period of coverage.

Fortunately, the IRC and ERISA provide guidance to employers on what can be done with such experience gains/participant forfeitures.

For plans not subject to ERISA, they may be retained by the employer maintaining the cafeteria plan.
For plans subject to ERISA, the forfeitures may be used only in one or more of the following ways:

To reduce required salary reduction amounts for the immediately following plan year, on a reasonable and uniform basis
Returned to the employees on a reasonable and uniform basis
To defray expenses to administer the cafeteria plan

Practically speaking, many employers choose to use experience gains to defray reasonable administration expenses as this is generally the easiest approach to administer. Importantly, if an employer chooses to return funds to employees, experience gains may not be allocated among employees based (directly or indirectly) on their individual claims experience — it must be on a reasonable and uniform basis. For example, experience gains may be returned to all employees who elected coverage for the plan year on a per capita basis or weighted to reflect the employees' elected levels of coverage. Further, any cash returned to employees from a FSA's experience gains will be considered to be W-2 wages for purposes of FICA and federal income tax withholding.

While the IRS and DOL provide the above options, employers should be sure to follow any terms in their plan document that may dictate how forfeitures and experience gains must be applied.

State Updates

California

September 1, 2020

Sonoma County Emergency Paid Sick Leave

On August18, 2020, Sonoma County became the latest California jurisdiction to enact an emergency paid sick leave ordinance related to COVID-19. The law applies to employers with more than 500 employees — those not covered by the Families First Coronavirus Response Act (FFCRA). Employees, including healthcare industry workers and first responders, will be eligible for up to two weeks of paid leave if they have worked within the unincorporated area of Sonoma County for at least two hours. Those working in Santa Rosa are exempt as the city has passed its own emergency paid sick leave law.

Eligible full-time employees (those working 40 hours per week) are entitled up to 80 hours of paid sick leave benefits in a two week period. Eligible part-time employees would receive a prorated benefit based on the average number of hours worked in a two-week period during the previous six months. The maximum benefit is $511 per day.

Mirroring the FFCRA, the leave must be provided if the employee cannot work or telework because:

The employee has been advised by a healthcare provider to isolate or self-quarantine to prevent the spread of COVID-19
The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis
The employee is subject to quarantine or isolation by federal, state or local order due to COVID-19
The employee needs to care for an individual who is subject to a federal, state or local quarantine or isolation order related to COVID-19; has been advised by a healthcare provider to self-quarantine related to COVID-19; or is experiencing COVID-19 symptoms and is seeking a medical diagnosis
The employee takes time off work because the employee needs to provide care for an individual whose senior care provider or whose school or childcare provider is closed or is unavailable in response to a public health or other public official’s recommendation

Employers may require employees to identify the reason for the leave, but may not require a doctor’s certification or other supporting documentation.

The law and its provisions are effective through December 31, 2020, unless the FFCRA is extended beyond that date.

Sonoma County Emergency Paid Sick Leave »

Colorado

September 1, 2020

Paid Sick Leave Update

In August 2020, the Division of Labor and Employment issued two Interpretive Notices and Formal Opinions (INFOs) describing the terms of the “Healthy Families and Workplace Act” (SB 20-205). INFO #6A covers the statute’s paid leave requirements which will be in effect through December 31, 2020. During this time, employers must provide up to two weeks (or 80 hours) of paid leave paid sick leave to workers who miss work for one of three COVID-19 related reasons as outlined in the statute. INFO #6B covers the statute’s paid leave requirements which will be in effect beginning January 1, 2021. Starting in 2021, employers are only required to provide one hour of paid sick leave for every 30 hours worked, up to 48 hours per year, but the worker can use this leave for a wider range of reasons.

SB20-205 was discussed in the July 23, 2020, edition of Compliance Corner.

Employers with employees in the state should be aware of these Interpretive Notices and Formal Opinions.

Interpretive Notice and Formal Opinion #6A »
Interpretive Notice and Formal Opinion #6B »

Delaware

September 1, 2020

Coverage for Telehealth Expanded

Under existing state law, policies providing hospital, medical and surgical coverage must also provide coverage for certain telehealth services. Effective July 17, 2020, and expiring July 1, 2021, House Substitute 1 for H.B. 348 expands that coverage to include telehealth services provided without the use of visual communication. This would include services provided via non-smart phones and landline connections. The plan cannot require a previously established relationship between the participant and the healthcare provider prior to the telehealth visit. The healthcare provider must be licensed to provide services in Delaware or the state in which they are located. Finally, coverage for telehealth services must include prescribing of controlled substances, including opioids.

The insurer providing the group policy should make the appropriate changes to the plan’s benefits to comply with the law. Employer plan sponsors should revise any plan documentation and communications as necessary to inform participants of the expanded coverage.

House Substitute 1 for H.B. 348 »

Massachusetts

September 1, 2020

Final Regulations on Paid Family Medical Leave Released

On August 12, 2020, the Massachusetts Department of Family and Medical Leave (DFML) published new guidance relating to an extension for PFML private plan exemptions. According to the guidance, for employers that currently have an exemption from remitting contributions to the Family and Employment Security Trust Fund for the period beginning October 1, 2019, and ending September 30, 2020, DFML is extending the private plan exemption until December 31, 2020. The guidance also states that renewal applications will not be accepted before November 30, 2020. On November 30, 2020, the renewal application period will open for employers with fully insured private plans. Employers must renew their PFML exemption in MassTaxConnect by providing DFML with the policy form number via an Insurance Declaration Document signed by the carrier on or before December 31, 2020. This number will be located on the PFML policy forms that will be provided to the employer by their PFML insurance carrier. Lastly, employers that intend to renew and switch to a self-insured plan may do so beginning on October 1, 2020, by logging on to the employer’s PFML account in MassTaxConnect to complete the renewal application.

Massachusetts employers interested in the exemptions should review the new guidance and work with their carriers in renewing their applications.

PFML Guidance »

New York

September 1, 2020

Special Enrollment for Uninsured New Yorkers Extended

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On August 18, 2020, Gov. Cuomo announced that the special enrollment period for uninsured New Yorkers will be extended through September 15, 2020. This extension will allow uninsured state residents to apply for coverage through NY State of Health, New York state's health insurance marketplace, or directly through insurers.

The measure is intended to ensure that residents can enroll in affordable and comprehensive coverage during this critical period. Individuals who have lost employer coverage must apply within 60 days of losing that coverage. Those who enroll in qualified health plans by September 15, 2020, have a choice of a coverage start date of either September 1 or October 1, 2020.

Employers should be aware of this special enrollment period extension, which may provide an affordable alternative for individuals who have recently lost or will lose employer-provided coverage.

Announcement »

Utah

September 1, 2020

Coverage for COVID-19 Testing

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On August 12, 2020, the Insurance Department issued Bulletin 2020-16, providing information on the federal and state requirements for coverage of COVID-19 testing. The guidance reminds insurers of the requirements imposed by the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Securities Act (CARES Act). Specifically the bulletin indicates that insurers should providing COVID-19 testing without cost sharing, regardless of the network status of the provider or lab.

The guidance also discusses the fact that COVID-19 testing for surveillance or employment purposes is not required to be covered. It also mentions that any facility fees that are charged for a visit that results in an order for or administration of a COVID-19 test must be covered by the insurer.

While this guidance is geared towards insurers, employers should review this information should any of their employees need to access COVID-19 testing through the plan.

Bulletin 2020-16 »

Vermont

September 1, 2020

Relaxed Prescription Refill Rules Due to COVID-19

Gov. Scott recently signed H. 960 into law, which relaxes certain rules related to prescription drug refills due to the COVID-19 emergency.

Through June 30, 2021, a pharmacist may extend a previous prescription for a maintenance medication for which the patient has no refills remaining or for which the authorization for refills has recently expired if it is not feasible to obtain a new prescription or refill authorization from the prescriber.

Through March 31, 2021, a pharmacist may, with the informed consent of the patient, substitute an available drug or insulin product for an unavailable prescribed drug or insulin product in the same therapeutic class if the available drug or insulin product would, in the clinical judgment of the pharmacist, have substantially equivalent therapeutic effect even though it is not a therapeutic equivalent.

Through March 31, 2021, to the extent permitted under federal law, a healthcare professional authorized to prescribe buprenorphine for treatment of substance use disorder may authorize renewal of a patient's existing buprenorphine prescription without requiring an office visit.

The pharmacy benefit manager administering the group’s prescription drug benefits should revise the plan’s procedures to accommodate these changes. Employers should be aware of the changes and discuss any questions with the administrator.

H. 960 »

Washington

September 1, 2020

Extension of Emergency Orders on COVID-19 Testing and Surprise Billing

On August 28, 2020, Gov. Kreidler issued orders further extending emergency orders 20-01 and 20-06. Emergency Order 20-01, which has been extended through September 27, 2020, requires health insurers to waive copays and deductibles for COVID-19 testing. The order also requires insurers to allow a one-time early refill for prescription drugs.

Emergency Order 20-06, which has also been extended through September 27, 2020, protects consumers from receiving surprise bills for lab fees related to COVID-19 diagnostic testing. The order also encourages insurers to report out-of-network labs that are not publishing or honoring the cash price of COVID-19 diagnostic testing.

These orders apply to insurers, but provide employers with information about the continued coverage of COVID-19 testing.

Further Extending Emergency Order 20-01 »
Further Extending Emergency Order 20-06 »

This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI^®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.

PPI in the News Compliance Corner - September 3, 2020 Archive
You are here: Home / PPI in the News / Compliance Corner - September 3, 2020 Archive

COVID-19 Update

DOL Clarifies FFCRA Eligibility Related to Reopened Schools

Congressional Research Service Issues COVID-19 and Private Insurance FAQs

Healthcare Reform

IRS Updates Employer Shared Responsibility Questions and Answers

Retirement Update

DOL Proposes Rule Outlining Pooled Plan Provider Registration Process

DOL Releases Interim Final Rule on Lifetime Income Illustrations

DOL Proposes Rule on Qualified Plan Loan Offset Rollovers

FAQ

What options do employers have when dealing with health FSA and/or dependent care FSA experience gains (i.e., forfeitures)?

State Updates

California

September 1, 2020

Colorado

September 1, 2020

Delaware

September 1, 2020

Massachusetts

September 1, 2020

New York

September 1, 2020

Utah

September 1, 2020

Vermont

September 1, 2020

Washington

September 1, 2020

FAQ

Compliance Corner Archive

PPI in the News Compliance Corner - September 3, 2020 Archive You are here: Home / PPI in the News / Compliance Corner - September 3, 2020 Archive

COVID-19 Update

DOL Clarifies FFCRA Eligibility Related to Reopened Schools

Congressional Research Service Issues COVID-19 and Private Insurance FAQs

Healthcare Reform

IRS Updates Employer Shared Responsibility Questions and Answers

Retirement Update

DOL Proposes Rule Outlining Pooled Plan Provider Registration Process

DOL Releases Interim Final Rule on Lifetime Income Illustrations

DOL Proposes Rule on Qualified Plan Loan Offset Rollovers

FAQ

What options do employers have when dealing with health FSA and/or dependent care FSA experience gains (i.e., forfeitures)?

State Updates

California

September 1, 2020

Colorado

September 1, 2020

Delaware

September 1, 2020

Massachusetts

September 1, 2020

New York

September 1, 2020

Utah

September 1, 2020

Vermont

September 1, 2020

Washington

September 1, 2020

FAQ

Compliance Corner Archive

PPI in the News Compliance Corner - September 3, 2020 Archive
You are here: Home / PPI in the News / Compliance Corner - September 3, 2020 Archive