IRS Announces that Personal Protective Equipment Can Be Treated as Medical Expenses
On March 26, 2021, the IRS issued announcement 2021-7, indicating that personal protective equipment (PPE) can be treated as medical expenses under §213(d) of the IRC. Specifically, PPE, including masks, hand sanitizer and sanitizing wipes, can be deducted on individual taxpayers’ taxes or reimbursed under FSAs, Archer MSAs, HSAs and HRAs.
The PPE may be reimbursed through the reimbursement programs listed above beginning on or after January 1, 2020. Group health plan sponsors will need to amend their plan documents to reflect this change by December 31, 2022.
Plan sponsors should be mindful of this guidance. While the announcement does not require an employer communication be sent to employees, employers should work with their service providers and vendors to facilitate this change to their plans.
IRS Extends the Individual Tax-Filing Deadline
On March 17, 2021, the IRS issued news release IR-2021-59, announcing that the federal income tax filing due date for individuals for the 2020 tax year will be extended from April 15, 2021, to May 17, 2021. On March 29, 2021, the IRS also released Notice 2021-21, providing additional guidance on the extension. This extension comes as the IRS acknowledges that many people are still experiencing tough times due to the pandemic.
The announcement explains that all individual taxpayers (including self-employed individuals) with a return or payment due on April 15, 2021, will have until May 17, 2021, to file their taxes. Similarly to last year’s extension, taxpayers do not need to have been impacted by COVID-19 to access this relief. Additionally, the relief extends to 2020 federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020. (Unlike last year’s extension, this extension does not apply to estimated tax payments that are due on April 15, 2021; estimated tax payments are quarterly payments made by those whose income isn’t subject to income tax withholding.)
As a result of the extended filing deadline, taxpayers now also have until May 17, 2021, to make 2020 contributions to their HSAs and IRAs. Employers with April 15, 2020, filing deadlines may also have additional time to make 2020 contributions to certain workplace retirement plans.
The announcement also mentions that residents of the states of Louisiana, Oklahoma and Texas will have until June 15, 2021, to file and pay their taxes (as a result of the federally declared winter storm disaster in those states). This extension of the filing deadline for the entire country does not affect that extension; it is still June 15, 2021.
The IRS has indicated that they will provide additional guidance in the coming days. In the meantime, employers should be aware of the tax deadline extension.
EEOC Announces 2021 Schedule for EEO-1 and Other EEO Reports
HR360, January 19, 2021. On Jan. 12, 2021, the U.S. Equal Employment Opportunity Commission (EEOC) announced that it will open four equal employment opportunity (EEO) data collections in 2021. The agency had previously delayed EEO collections in May 2020 due to the coronavirus pandemic.
According to the announcement, EEO reporting will now resume according to the following schedule:
- April 2021: Private employers and federal contractors will be required to file 2019 and 2020 EEO-1 Component 1 data.
- July 2021: Certain public elementary and secondary school districts will be required to file 2020 EEO-5 data.
- August 2021: Certain unions will be required to file 2020 EEO-3 data.
- October 2021: State and local governments will be required to file 2021 EEO-4 data.
Clients who have recorded employee EEO classifications in AutoEnroll can run an EEO-1 report from the Standard Reports dropdown menu. This report provides information on equal employment opportunity through the current date. It includes fields such as: name, address, Structure Group, ethnic identification, and EEO classification.
Congress Passes Appropriations Bill with COVID-19 Relief
On December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021, which includes COVID-19 relief legislation. (As of the time of publication of Compliance Corner, President Trump had not signed the legislation, but is expected to.) In addition to approximately $1.4 trillion in stimulus spending, the legislation includes various benefits-related provisions, such as extensions for FFCRA leave tax credits, temporary extension of FSA and DCAP grace and carryover periods, a new federal prohibition against certain surprise billing practices and price transparency requirements which prohibit certain information from being withheld from third parties and require plans and issuers to file reports with the federal government. This article provides a preliminary summary of these provisions.
The new law allows employers covered by the FFCRA (those with fewer than 500 employees) to extend the time they can offer EPSL or EFMLA to employees to March 31, 2021. If they do, then they can apply for the tax credits available under the FFCRA for leave granted under the extension. The law does not provide any additional leave for employees, just additional time during which employers may grant that leave if any is still available to the employee.
FSAs and DCAPs
The law also permits additional flexibility for FSAs and DCAPs. DCAP sponsors are temporarily permitted to adopt carryover features, which are otherwise limited to FSAs. Furthermore, for plan years ending in 2020 and 2021, both FSAs and DCAPs appear to be permitted to carry over any unused funds to the following plan year. (There is no reference to the $550 carryover cap currently applicable to FSAs.) Similarly, the law allows for the extension of FSA and DCAP grace periods for a plan year ending in 2020 or 2021 to 12 months.
Employees who cease participating in an FSA during calendar year 2020 or 2021 can continue to receive reimbursements from unused benefits or contributions through the end of the plan year in which such participation ceased (including any grace period, such as one extended under this law). This provision resembles a DCAP spend-down and does not appear to require employees to elect COBRA coverage in order to take advantage of it.
In addition to these extensions, plans can allow employees to make elections to prospectively modify the amount (but not in excess of any applicable dollar limitation) of their contributions to an FSA or DCAP without a change in status.
These changes are optional for employers. Plan documents will need to be amended to make these changes; however, the amendments can be retroactive, if (1) such amendment is adopted not later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective (e.g., calendar 2020 plan amendments must be adopted on or before December 31, 2021) and (2) the plan or arrangement is operated consistent with the terms of such amendment during the period beginning on the effective date of the amendment and ending on the date the amendment is adopted.
The law also provides that expenses for an employee’s child continue to be eligible for reimbursement under a DCAP even when the child turns age 14 (the age a child normally ages out of eligibility for qualified expenses), provided that the regular enrollment period for the DCAP plan year at issue ended on or before January 31, 2020. This also goes for any unused balance rolling over to the next plan year.
Effective January 1, 2022, the relief legislation protects people from large unexpected medical bills they may incur when obtaining emergency medical care from out-of-network providers (including air ambulance services). The law requires health plans or insurers to pay out-of-network providers for emergency care services provided to their insureds, without imposing increased cost sharing or pre-authorization requirements upon the insureds. Any cost sharing imposed upon the insureds for these services will be treated the same way they are treated if applied towards services provided by in-network providers (such as counting towards out-of-pocket maximums or in-network deductibles).
Insurers and plans can negotiate with the out-of-network providers on the price they will pay for the emergency services. The out-of-network providers bill the plan or insured for the services and the plan or insured has 30 days to either make an initial payment or deny the payment. The initial payment (or “qualifying payment”) is an amount determined to be the median payment amount for the same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the geographic region in which the item or service is furnished. HHS is charged with promulgating rules for determining qualifying payments by July 1, 2021. Regardless of whether a payment is made or denied, the parties have 30 days to negotiate the price that the plan or insurer will ultimately pay for the item or service and, if that fails, the parties may also arbitrate. Once an arbitrator is agreed upon, then the arbitrator has 30 days to determine the price. The arbitrator cannot consider benchmark or government reimbursement rates when determining a price.
The prohibition against balance billing will not apply to providers who provide services to patients (that are not considered “ancillary” services) if:
- the patient receives an oral and written notice 72 hours in advance of the appointment for the service that explicitly states that the provider is out-of-network;
- consent to receive the service out-of-network is optional and the same service can be obtained by an in-network provider;
- the provider provides a good faith estimate of the amount that the patient will be charged for the service if they consent;
- the facility provides a list of any in-network providers who can provide the same service (if the out-of-network provider in question works out of an in-network facility); and
- the patient consents to the notice in writing and receives a copy of the signed consent.
For purposes of this law, “ancillary services” include: emergency medicine, anesthesiology, pathology, radiology and neonatology; items and services provided by assistant surgeons, hospitalists and intensivists; diagnostic services that are not exempted by rule; and items and services provided by non-participating providers if there are no participating providers at the same facility who can furnish such items or services.
Among other items of note, the legislation also imposes a requirement that all insurance ID cards must include plan deductibles for both in- and out-of-network services, out-of-pocket maximums and plan telephone number and web address. It also requires plans to provide, upon request of a participant or provider, an explanation of whether a particular provider or facility is in- or out-of-network for the service to be provided, the contract rate for that service and whether that service can be obtained in-network.
States are charged with enforcing these provisions and they can additional obligations on out-of-network providers that go beyond those established by this law. If the states do not want to enforce these provisions, then HHS can do so.
The law encourages price transparency by prohibiting health plans and insurers from entering into agreements with providers that prohibit the provision of provider-specific cost or quality of care information; electronic access to de-identified claims and encounter information for each enrollee in a plan; or sharing of the above information/data with business associates in accordance with HIPAA standards.
Beginning one year after the passing of the law and every June 1 thereafter, group health plans and issuers must submit a very detailed report to the DOL and Department of the Treasury that includes, among other things: the number of enrollees in the plan; the plan year; the states in which they offer coverage; the top 50 brand drugs dispensed by pharmacies for claims under the plan and the total claims paid for each drug; the top 50 by total annual spending and the annual amount spent for each of those drugs; and total spending by the plan (broken down by types of cost, such as hospital and primary care, specialty care, provider and clinical service costs, prescription drugs, wellness and plan and enrollee spending on prescription drugs).
We have highlighted some of the major benefits-related provisions in this article, but the law (when passed) will be brand new. In the next edition of Compliance Corner, we will provide additional details on the various provisions that impact employee benefit plan sponsors.
EEOC Provides Guidance on Employer-Mandated COVID-19 Vaccinations
On December 16, 2020, the EEOC updated its FAQs that cover a variety of COVID-19-related issues by adding several new FAQs directly addressing issues relating to employer-mandated COVID-19 vaccinations. The EEOC does not mandate that employers require vaccinations; however, it does allow employers to do so if they follow applicable laws. Keep in mind that employees who refuse to take the vaccine may not be excluded from the workplace, unless the employer determines that there is a direct threat to health and safety at the worksite and no other reasonable accommodation with the employee can be made. The FAQs provide more detail concerning issues surrounding employees who refuse to get vaccinated due to a disability or for religious reasons.
The EEOC states that an employer-mandated vaccination is not a “medical examination” under the ADA. However, if the employer follows CDC (Centers for Disease Control) guidelines and asks pre-screening questions of employees to figure out whether they have medical reasons for not taking the vaccine, then those questions are subject to the ADA, which requires the employer to show that the questions are “job-related and consistent with business necessity.” If the vaccinations are voluntary (and the pre-screening questions are also voluntary) then the employer does not have to make that showing. Similarly, if the employee obtains the vaccination from a third party that is not contracted to supply the vaccine by the employer, then the employer would not have to make that showing.
If an employee asserts an exemption from a mandatory vaccination requirement based on an ADA disability that prevents him from taking the vaccine, or if the employee’s sincerely held religious belief, practice or observance prevents him from taking the vaccine under Title VII of the Civil Rights Act, then the employer must (under most circumstances) provide reasonable accommodations for that employee. If the employer cannot provide such accommodation, then it should figure out whether the employee has other rights under federal or state law before terminating the employee.
The FAQs also cover some issues relating to GINA. According to the EEOC, the act of vaccinating by itself does not involve the use of genetic information to make employment decisions, or the acquisition or disclosure of genetic information, and does not implicate that statute. However, pre-screening questions may implicate GINA if they include questions about genetic information, such as questions about the immune systems of family members. As of the date of these new FAQs, it is unclear whether such information is needed to receive the vaccination.
Employers who are considering imposing a mandatory COVID-19 vaccination requirement on their workforces should be aware of these FAQs. Employers with questions concerning the implementation of a mandatory vaccination policy should consult with employment law counsel.
IRS Provides FAQ on Relief for Rule on Van Pools Affected by COVID-19
On December 3, 2020, the IRS released an FAQ about COVID Relief for Van Pools which explains temporary relief from certain conditions normally required for vanpooling benefits to be excluded from employees’ income as a fringe benefit.
As background, “vanpooling” refers to transportation in a commuter highway vehicle between an employee’s residence and place of employment. Further, a commuter highway vehicle is required to have the seating capacity of six or more adults (excluding the driver), and a minimum of 80% of the vehicle’s reasonably expected annual mileage must be used to transport employees between their residences and their place of employment. Importantly, commuting miles only count towards that 80% if the number of employees transported is at least 50% of the vehicle’s adult seating capacity (excluding the driver). This is commonly referred to as the “80/50 requirement.”
In light of the ongoing public health emergency, the IRS explains that if the employer reasonably expected at the beginning of the 2020 calendar year that at least 80% of the vehicle’s mileage would be used for vanpooling (meeting the 80/50 requirements mentioned above), but because of the ongoing COVID-19 emergency such requirements were not satisfied, the vehicle is still considered a commuter highway vehicle for the duration of 2020 so long as the seating capacity is at least six adults (excluding the driver). (For the purpose of this relief, the COVID-19 emergency commenced on the date of the president's emergency declaration, March 13, 2020.) Meaning, provided the other requirements of being a qualified transportation fringe benefit are met, up to $270 per month of the value of the van pool transportation provided by an employer and cash reimbursements from an employer to its employees for expenses related to an employee-operated van pool may be excluded from employees’ income. This relief applies to van pools using employer-operated or employee-operated vehicles.
Employers should be aware of this relief when administering fringe benefits.
New York Paid Family Leave Rates for 2021
New York State has announced its PFL changes for 2021. PPI's systems will be updated in time for the January bill cycle to bill accordingly, however the method of calculating the premium will not change. The year 2021 marks the 4th and final year of the phase-in period of Paid Family Leave benefits in New York.
Compared to rates in 2020, contributions and benefit amounts will increase in January 2021 as follows:
- Annual wage gap*: $75,408.84
- Average Weekly Wage (AWW)**: $1,450.17
- Duration: Maximum 12 weeks
- Maximum weekly benefit rate: 67% of AWW
- Max weekly benefit: $971.61
- Premium rate: 0.511% (includes a 0.005% risk adjustment for COVID-19 quarantine claims) of total weekly payroll up to $385.34
*The annual wage cap represents the wages reported per employee, not to exceed this amount per calendar year. Once the employee hits the annual wage cap, deductions should stop.
**The average weekly wage represents the annualized wage cap divided by 52 weeks. Example: 2021 – $75,408.84 divided by 52 weeks = $1,450.17.
For more information, visit the New York Paid Family Leave Web Site.
DOL Updates Q&As on Employee Leave Under the FFCRA
HR360, September 22, 2020
The U.S. Department of Labor (DOL) has released three new questions and answers (Q&As) and has updated six of its existing Q&As about emergency paid sick leave and expanded Family and Medical Leave Act leave under the Families First Coronavirus Response Act (FFCRA).
The changes reflect DOL revisions to FFCRA regulations, undertaken in response to a federal court decision that invalidated part of the original regulations. The regulatory revisions became effective Sept. 16, 2020.
The three new Q&As (Q&As 101-103) concern the applicability and timing of the court decision and the regulatory revisions. The six updated Q&As address:
- Documenting the need for leave (Q&A 16);
- Intermittent leave (Q&As 21 and 22);
- The definition of health care provider for purposes of the FFCRA leave exemption for those employees (Q&A 56); and
- Leave for “hybrid” school scenarios and voluntary remote learning options (Q&A 98-99).
Click here to read the DOLs Q&As.
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.