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Compliance Corner


FAQ: How do the ARPA COBRA subsidies interact with the extension of certain timeframes relief?

April 13, 2021

While both types of relief could apply to an employee who has experienced a reduction in hours or involuntary termination, the application of the provisions differ.

The COBRA subsidies provided through the American Rescue Plan Act of 2021 (ARPA) allow certain individuals to elect COBRA coverage and have that COBRA coverage 100% subsidized by the federal government from April 1, 2021, to September 30, 2021. (We first discussed this provision in the March 16, 2021, edition of Compliance Corner.) The extension of certain timeframes for employee benefit plans, participants and beneficiaries required plans to disregard the period from March 1, 2020, until 60 days after the end of the National Emergency (known as the “Outbreak Period”) for certain deadlines, including the deadlines applicable to COBRA notices and payment. (We first discussed this provision in the May 12, 2020, edition of Compliance Corner.)

Employees who were due an offer of COBRA under the extensions of certain timeframes continue to have the opportunity to elect COBRA based on the date of their termination or reduction in hours. Specifically, the most recent guidance on this subject (which was discussed in the March 2, 2021, edition of Compliance Corner) indicated that the relief under these extensions will continue until the earlier of a) one year from the date an individual or plan is first eligible for relief or b) 60 days after the announced end of the national emergency (the end of the outbreak period). Since the national emergency has yet to end, some individuals will be entitled to this relief at the same time that they are entitled to elect COBRA under the ARPA.

There are a few distinctions to be made, though. First, the extensions of certain timeframes applies to all COBRA-qualified beneficiaries, while the ARPA COBRA subsidies only apply to those who were involuntarily terminated or experienced a reduction in hours. So while individuals whose COBRA was triggered by divorce, death or aging off of the plan continue to have an extended time period by which they can elect COBRA, they are not eligible for the COBRA election and subsidies provided by the ARPA.

Second, the election of COBRA under the two provisions takes effect differently. Under the ARPA, individuals who were involuntarily terminated or had their hours reduced going back as far as October 2019 may now elect COBRA (even if they waived it, or elected and dropped it before). As long as they are not eligible for Medicare or other group health plan coverage, the relief provided through ARPA will allow for them to elect that COBRA prospectively, and receive a subsidy from April 1, 2021, through September 30, 2021, as long as there are still months left in their 18-month COBRA maximum duration period.

On the other hand, individuals who are eligible for relief under the extension of certain timeframes could potentially elect COBRA, but would need to elect and pay for the coverage retroactively back to the date of their COBRA-triggering event. In other words, the relief provided under that guidance allows employers to require that the coverage be instated retroactively. Individuals who are eligible for this relief also can likely elect COBRA through the end of the outbreak period even if they are eligible for Medicare or other group health coverage.

Third, the DOL’s most recent guidance on the ARPA COBRA subsidies makes it clear that the extensions of timeframes guidance does not affect the COBRA notice requirements under the ARPA. As discussed in an article in this edition of Compliance Corner, employers only have until May 31, 2021, to notify assistance-eligible individuals (AEIs) of their right to elect COBRA and receive subsidies under the ARPA. That time is not extended by the extensions of timeframes. Likewise, AEIs only have 60 days to elect COBRA under the ARPA; if they do not do so, they waive their opportunity to elect COBRA and receive subsidies.

So while it is possible for both pieces of guidance to apply to certain individuals, their effect and application will be different. Consider the following example of an employee who was terminated in December 2020:

Amy was involuntarily terminated in December 2020 and would have the right to elect COBRA, effective beginning January 2021. She does not elect COBRA.

Under the extension of certain timeframes, Amy would have until the earlier of the end of the outbreak period or one year from the date she was first granted relief (January 2022) to elect COBRA. If she chose to do so, she would have to pay for COBRA going back to January 2021.

Under the ARPA, Amy should receive a notice from her previous employer by May 31, 2021, notifying her of the right to elect COBRA and receive a subsidy from April 1, 2021, through September 30, 2021. As long as Amy is not eligible for Medicare or other group health plan coverage, she could elect COBRA prospectively and receive 100% subsidized COBRA for the entirety of the subsidy period (since her COBRA maximum duration period would not be over until June 30, 2022).

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FAQ: What are the penalties if an employer failed to timely file or distribute Forms 1094/95 B&C? Is there an obligation to self-report the violation or is there an IRS-approved self-correction process?

March 30, 2021

If an employer missed the deadline by which they should’ve reported under Sections 6055 or 6056, they should follow the normal procedures for filing forms as outlined in the IRS Instructions for Forms 1094-B, 1095-B, 1094-C and 1095-C. Those instructions require employers to file Forms 1094/95-B&C with the IRS electronically via the IRS’s AIR filing system (if filing 250 or more forms) or by paper/mail to the IRS address in the Instructions (if filing fewer than 250 forms). In addition, employers must distribute a copy of Forms 1095-B or -C to their employees (as applicable) (See our reminder regarding IRC 6055 and 6056 Reporting Deadlines in this edition of Compliance Corner for more information on reporting requirements.) The employer would then just have to wait and see if the IRS will assess penalties for the late filings, as there is no requirement to self-report the violation.

As an example: employers should have already filed their 2020 forms with the IRS (by March 1, 2021, if filing by paper, and by March 31, 2021, if filing electronically), and should have distributed a copy of 1095-C to FT employees by March 2, 2021. Note that while there was relief that allowed an employer not to distribute Forms 1095-B to employees if they placed a notice on their website, there’s an argument that employers would not be able to avail themselves of that relief if they actually failed to file or even draft Forms 1095-B on a timely basis. If an employer missed those deadlines, the employer may be at risk for a penalty up to $280 per form for failure to distribute to FT employees, and an additional $280 per form for failure to timely file with the IRS (capped at $3,392,000 for 2021 filings). That said, since there is no obligation to self-report the untimely filing, the employer should not submit payment with filing. Rather, the employer would just file the forms (and distribute a copy of Forms 1095-B&C to employees, if applicable), and then the IRS has discretion in assessing penalties and will notify the employer if they are going to do so. The result would be the same for any missed filings from prior years.

Penalties may be waived if the failure was due to reasonable cause and not willful neglect. Note that special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements. Thus, if the employer has knowledge of their responsibility and delinquency, the employer should correct as soon as possible.

Although there is not an official self-correction program (like the Delinquent Filer Voluntary Correction Program for Forms 5500), there are two potential ways that a penalty could be reduced if the error is corrected within a certain period following the due dates. The first way is the “thirty-day rule:” if a failure is corrected within 30 days after the required filing date (or the deadline for furnishing individual statements), the penalty is reduced to $50 per return or statement, and the calendar-year cap is reduced to $565,000 ($197,500 for smaller entities) for filings made in 2021. The second way is the “August 1st rule:” if a failure is corrected after the 30-day rule described above but on or before August 1, the penalty is reduced to $110 per return or statement, and the calendar-year cap is reduced to $1,696,000 ($565,000 for smaller entities) for filings made in 2021. These rules may help for this year's filings (due in 2021) but would not apply to last year’s or any previous years’ filings, since they would be too late to take advantage of those exceptions.

Ultimately, employers who have failed to timely file and distribute these forms should likely consult with legal counsel. Counsel will be best suited to assist with filing delinquent forms and, potentially, negotiating with the IRS on any assessed penalties. The IRS Instructions are helpful in outlining the process and penalty information.

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FAQ: An employee heard that the eligibility for premium tax credits in the health insurance exchange has been expanded. Does that impact an applicable large employer's (ALE's) obligation to offer minimum value coverage meeting the affordability threshold?

March 16, 2021

While the eligibility criteria for premium tax credits (PTCs) was changed by the American Rescue Plan Act (ARPA), this does not change large employers' obligations under the employer mandate.

Prior to the ARPA, individuals were eligible for a PTC to purchase individual coverage through the exchange if these two conditions applied:

  • They had household income between 100% and 400% of federal poverty level (FPL).
  • They were not eligible for minimum value coverage from an employer where the self-only coverage cost 9.5% (adjusted annually) or less of household income.

Since an employer does not typically know an employee's household income, an ALE's responsibility under the ACA's employer mandate is to offer minimum value coverage to full-time employees and their children. The employee's required contribution for the employer's lowest cost option self-only coverage cannot be more than 9.5% (adjusted annually, and 9.83% in 2021) of the employee's earnings, as determined under one of the three affordability safe harbor options (FPL, rate of pay, Form W-2).

The ARPA made two changes to the PTC eligibility conditions for calendar year 2021. First, the 400% of federal poverty level maximum household income limit has been removed. In other words, U.S. taxpayers who have household incomes greater than 400% of FPL will now be eligible for a PTC. Second, individuals receiving unemployment compensation for any week in 2021 may receive a PTC even if they have income below 100% of FPL.

Importantly, if an individual is eligible for qualified coverage from an employer (meeting both the minimum value and affordability standards) they are not eligible for a PTC, regardless of income. Further, ALEs are still required to offer qualified coverage to full-time employees or be at risk of a penalty under the employer mandate. If a full-time employee who is eligible for qualified coverage from an employer purchases coverage in the exchange, they would not receive a PTC, would be required to pay the full premium in the exchange, and could not trigger a penalty for the ALE.

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FAQ: If a participant is reimbursed more than $5,000 in a calendar year for dependent care FSA (DCAP) expenses due to an extended grace period or carryover provision, is the amount above $5,000 subject to taxation?

March 02, 2021

In short, no. The American Rescue Plan Act of 2021 (ARPA), passed by Congress on March 10, 2021, temporarily increases the allowable exclusion for DCAPs.  

Generally, a participant’s DCAP reimbursement amount in a calendar year is limited to $5,000 if the employee is married and filing a joint return or if the employee is a single parent (or $2,500 if the employee is married filing separately). Further, any account balances available at the end of the plan year are forfeited (unless the DCAP permits a grace period). 

The Consolidated Appropriations Act of 2021 (CAA), passed by Congress in December 2020, provides employers with relief options related to administering health FSAs and DCAPs. One such option provided by the CAA is that employers are permitted, if they choose, to allow up to the full year-end DCAP account balance to carry over into the subsequent plan year (a feature otherwise limited to health FSAs and capped at $550 as indexed). The CAA also permits an extended grace period up to 12-months (otherwise limited to 2.5 months) after the end of the plan year. Both the carryover and extended grace period provisions are applicable to plan years ending in 2020 and 2021. 

Then the IRS released Notice 2021-15 in February 2021, clarifying much of the guidance provided in the CAA and confirming that unused DCAP amounts carried over from prior years or made available during an extended period for incurring claims are not considered when determining the annual limit applicable for the following year. This means that a participant who takes advantage of an extended carryover or grace period can still contribute up to the annual limit in the subsequent plan year. However, neither the CAA nor Notice 2021-15 amend the annual DCAP limit permitted to be excluded from income.  

The ARPA addresses this issue by providing a temporary increase for this exclusion to $10,500 (or $5,250 if the employee is married filing separately) for taxable years beginning after December 31. 2020, and before January 1, 2022. This new increase in the DCAP limit should provide relief for employees whose employers choose to permit the temporary extended carryover and grace period DCAP provisions provided by the CAA. Accordingly, the amounts in excess of $5,000 that are reimbursed through a DCAP during a taxable year will not be treated as taxable income for participants (for the taxable year beginning after December 31, 2020, and before January 1, 2022). 

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FAQ: Can employers provide employees an incentive, such as a gift card or other cash payment, to receive the COVID-19 vaccine?

February 17, 2021

Many employers are considering doing this, but they will need to be mindful of the compliance obligations that would come with such a decision.

The biggest concern with an employer offering an incentive to employees who obtain the vaccine is that doing so is likely considered offering a group health plan. This would make the reward subject to many benefits-related laws. Specifically, when an employer offers an incentive to employees who receive medical care (in the form of a vaccine in this case), they are creating a wellness program that will need to comply with ERISA, COBRA, HIPAA, the ACA, etc.

If the incentive is provided only to employees on the major medical plan, then the employer is already meeting most of those compliance obligations through that plan and could simply tack on the vaccination reward as a part of the pre-existing plan. However, if it is also offered to employees who are not enrolled on the major medical plan, then the employer is creating a stand-alone wellness program and compliance becomes much more difficult (and virtually impossible for the program to meet the ACA’s requirements prohibiting annual and lifetime limits).

It is possible that the IRS and DOL will choose not to enforce the rules surrounding COVID-19 vaccination wellness programs in the interest of public health; however, the agencies have made no public announcement to that effect. If an employer wishes to offer an incentive to employees who aren’t on the medical plan they should consult with their own legal counsel about their options.

You can find more information on this and related topics in a recent seminar hosted by NFP.

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FAQ: If the individual mandate penalty is zero, do I still need to provide the Form 1095-C to employees? If so, can these forms be provided electronically?

February 02, 2021

Yes; the Form 1095-C must still be distributed to employees.

ALEs with an average of 50 or more full-time employees (including full-time equivalent employees) during the preceding calendar year must report to the IRS how they complied with the employer mandate. Specifically, under Code Section 6056, ALEs must complete a Form 1095-C for each full-time employee and report whether that full-time employee was offered coverage meeting the minimum value and affordability requirements. This reporting obligation applies regardless of whether the plan is insured or self-funded.

Additionally, as required by Code Section 6055, an ALE must report to the IRS those who were covered by the plan and for which months. A self-insured ALE would include this information in Part III of the Form 1095-C. The carrier would report this information for an insured plan.

The 2020 1095-C forms must be filed with the IRS by March 1 (if filing by paper) or March 31 (if filing electronically). These fillings should be submitted to the IRS with the transmittal Form 1094-C. As in past years, the deadline for distributing the forms to individuals is extended from January 31 to March 2, 2021.

Congress reduced the federal mandate penalty to zero, so individuals will not pay a federal tax penalty for failing to have coverage. However, the Form 1095-C is used to determine if an ALE is complying with the employer mandate and to determine if an individual is eligible for a premium tax credit for coverage purchased on the exchange. So the form still needs to be filed AND distributed to employees.

Furthermore, if the employer has employees residing in DC, CA, NJ, RI or MA, these regions have individual mandates that would rely upon the information reported in the Form 1095-C. Although the federal individual mandate penalty was reduced to zero, employees residing in these states could face state penalties for failing to maintain coverage. An employer with employees residing in these states may also be subject to additional state filing requirements.

The Form 1095-Cs must be mailed or hand-delivered, unless the recipient affirmatively consents to receive the statement in an electronic format. If mailed, the statement must be sent to the employee’s last known permanent address, or if no permanent address is known, to the employee’s temporary address.

For electronic delivery, the recipient’s affirmative consent must relate specifically to receiving the Form 1095-C electronically. An individual may consent on paper or electronically, such as by email. If consent is on paper, the individual must confirm the consent electronically. This affirmative consent requirement is designed to ensure that statements are furnished electronically only to individuals who can access them. Once an individual provides such affirmative consent to receive the Form 1095-C electronically, the form may be furnished either by email or by informing the individual how to access the statement on the employer’s website.

An ALE’s failure to file the Form 1095-C with the IRS, or to distribute it to employees, could result in significant penalties. The penalty is $280 per failure. For example, if an employer failed to file the form with the IRS and to distribute it to one employee, the penalty could be $560. Accordingly, if the employer fails to file or distribute the Form 1095-C for numerous employees, the potential liability could be substantial.

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FAQ: What are the benefits compliance implications of lifestyle spending accounts?

January 20, 2021

Lifestyle spending accounts (LSAs) are reimbursement accounts in which employers deposit a set amount of money for employees to spend on certain benefits that are determined by the employer. These accounts generally allow for the reimbursement of various wellness activities such as fitness classes, gym memberships, fitness competition entries, nutritional coaching, food supplements, work-out equipment, or other items or activities that will promote health amongst their employees. Some employers even use LSAs to include other non-wellness benefits such as pet or child care benefits, financial services, travel or entertainment.

Keep in mind, though, that the nature of the LSA will determine the compliance aspects of such a program. The first compliance concern to be aware of is that LSA benefits will likely be taxable to the employee. As a reminder, any benefit provided to employees would be included in their taxable income unless the tax code provides an exclusion. Notable exclusions are in place for benefits provided through a Section 125 plan, transportation plan or education plan. However, LSAs generally don’t include benefits that would be excluded from gross income under any of those exceptions (in fact, employers sponsoring LSAs likely have other plans in place that provide pre-tax benefits under those exclusions). So it’s most likely that employees would be taxed on the benefits provided through an LSA.

Another big question we get about LSAs is whether these arrangements are subject to ERISA. LSAs are generally not subject to ERISA for the same reason that they are taxable; the fact that they do not offer medical care or any of ERISA’s enumerated benefits would not subject them to ERISA as a health and welfare benefit. Specifically, if the employer wants to offer the benefit without it being subject to ERISA, then the employer would need to make sure that they do not allow reimbursement for medical treatment that would make the wellness plan an ERISA-covered plan. For example, offering mental health/psychiatry services or reimbursement of medication would likely be considered medical care and make the plan one that would be subject to ERISA. This is important because many employers do not want to have to meet all the ERISA requirements (Form 5500 filing, SPD, COBRA, etc.) for these types of plans. So in designing the activities that can be reimbursed through the LSA, the employer would want to work with counsel to ensure that none of them would lend the LSA to becoming subject to ERISA.

One final compliance consideration is how the LSA would impact employees’ HSA eligibility. When it comes to offering these accounts and an HSA, it would just be important to make sure that the plan does not offer first-dollar reimbursement for medical care. (Notice the theme here in ensuring that medical care is not offered through the LSA.) The reason for that is that employees who have an HDHP and want to be eligible to contribute to an HSA cannot have impermissible coverage (which is generally any coverage for medical care that pays before the deductible is met). So employers would need to make sure that the employees could not use the LSA to pay for their medical care if they want to preserve their employees’ HSA-eligibility.

Outside of the concepts mentioned above, there would not seemingly be any other compliance issues with providing an LSA to employees. But to be sure that the benefit is designed, implemented and communicated in an appropriate manner, employers should work with an LSA vendor or legal counsel in establishing the LSA.

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FAQ: What are some group health plan compliance issues that employers should consider at the beginning of 2021?

January 05, 2021

There are some compliance items that apply in January and February each year regardless of the group health plan year start date. First, by January 31, employers must report the value of group health plan coverage on employees’ Forms W-2. (There is an exception to this reporting for employers that filed fewer than 250 Forms W-2 in the previous calendar year.) While most employers rely on payroll providers (as they prepare W-2s on behalf of many employers), it’s important to work closely with the provider in ensuring proper reporting.

Second, employers will have to prepare for employer mandate reporting (IRS Forms 1094/95-C and/or 1094/95-B). Due to IRS extensions, there are three different dates to consider for reporting, all in March. By March 1, 2021, employers must file 2020 Forms 1094/95-C with the IRS (if filing by paper). By March 2, 2021, employers must distribute 2020 Form 1095-C (or a similar statement) to employees. By March 31, 2021, employers must file 2020 Forms 1094/95-C with the IRS (if filing electronically, which is required if filing 250 or more forms). In connection with those three dates, during January and early February employers should work closely with payroll providers and filing vendors in gathering information relating to the reporting, including offers of coverage, enrollment, waivers and required employee contribution amounts.

Third, employers will have to consider pandemic-related extensions to FFCRA leave tax credits and to COBRA elections and premium payments. On FFCRA tax credit extensions, end-of-2020 legislation allows (but does not require) employers to provide FFCRA-related leave and receive the associated tax credits through March 31, 2021. Employers will have to decide whether to extend FFCRA leave availability to employees, considering the continued availability of the tax credits. On COBRA election and premium payment extensions, as the end of the so-called “outbreak period” approaches (by statute, it will end on February 28, 2021), employers will need to work closely with COBRA vendors on any additional communications to affected employees (or former employees). The extension rules place the burden of employee notification on both the employer and the vendor (the employer, as plan sponsor, has the fiduciary obligation to ensure notification, though). Thus, employers should review whether the extensions were communicated properly to affected employees or former employees (at the time of the COBRA event), and whether additional communications are necessary.

Lastly, MEWA sponsors must file Form M-1 with the DOL by March 1. MEWA sponsors will need to work with their administrator and potentially with outside counsel in preparing and filing Form M-1.

For employers with calendar year plans (i.e., those with plan years beginning on January 1), there are additional items to consider in January. First, employers should review nondiscrimination tests (for self-insured plans, cafeteria plans, and both health and dependent care FSAs) to assess whether the plan will somehow favor the more highly compensated employees. While adjustments can be made at any point before the end of the plan year to bring the plan into compliance with the tests, knowing early whether adjustments are necessary will help with difficult conversations with those highly compensated employees (whose elections may need to be adjusted).

Second, and similarly, employers should double check their election and enrollment systems to ensure employees’ elections were properly administered. Catching errors earlier in the year helps avoid more difficult administrative problems (and employee conversations) later in the year.

Finally, employers should prepare their Medicare Part D disclosure to CMS form, which is due within 60 days of the plan year start date (March 1, 2021, for calendar year plans). The CMS disclosure is meant to notify CMS whether the employer’s prescription drug coverage is on par with Medicare Part D. Filing is straightforward and can be completed online.

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FAQ: We are an ALE and preparing our Forms 1095-C for the 2020 reporting year. Are there any special reporting codes or considerations for the months in which some employees were furloughed?

December 22, 2020

There are no codes specifically for furloughed employees. The answer depends upon whether the employer continued coverage during the furloughed period, whether the employee was enrolled in that coverage, the measurement method used by the employer, and the applicable affordability safe harbor, if any.

Furloughed employees who were still covered by the plan during a period of zero work hours would be reported as normal with the respective offer of coverage on Line 14 (for example 1E) and 2C (employee enrolled) on Line 16. Any employee who is enrolled in the employer’s coverage cannot trigger a penalty for the employer, regardless of the cost of coverage or affordability.

If an employer uses the monthly measurement method and the employee has a change of status from full-time to unpaid leave (a period of zero hours), the employee is no longer considered full-time at the end of the month in which the change occurs. A furloughed employee, under this method, who was still eligible for active coverage during the period of zero hours, but was not enrolled (due to a previous waiver), would not be reported as a full-time employee for the furloughed months. The employer would still report the offer of coverage on Line 14 and the employee’s required contribution on Line 15. Line 16 would indicate that the employee was not a full-time employee during the furloughed period (2B).

If an employer uses the look-back measurement method, an employee who has earned full-time status during an initial or standard measurement period is considered full-time during the entire stability period regardless of the number of hours worked (assuming there was not a termination of employment). A furloughed employee, under this method, who was still eligible for active coverage during the period of zero hours, but was not enrolled (due to a previous waiver), would be reported as a full-time employee for the furloughed months occurring during the stability period. The employer would report the applicable offer of coverage on Line 14 with the employee’s required contribution on Line 15. Line 16 would be the employer’s affordability safe harbor, if one applies. If none of the safe harbors apply, Line 16 would be left blank and would indicate potential risk under Penalty B for the employer.

As a reminder on the affordability safe harbors, if the employer is using:

  • Rate of Pay, the code would be 2H on Line 16. The rate is affordable if it is not greater than 9.78% of the employee's monthly salary or 9.78% of the employee's hourly wage multiplied by 130 hours, regardless of how many hours are actually worked.
  • Federal Poverty Level, the code is 2G. The employee's required contribution would have to be $101.79 or less per month. This is the only safe harbor that is not based on the employee’s specific earnings.
  • Form W-2 safe harbor, the code is 2F. The employee’s cost of coverage is affordable if it is less than 9.78% of the employee's 2020 Form W-2 Box 1 earnings divided by 12. This will be the most difficult safe harbor to satisfy for furloughed employees. If the employee had a number of months with zero compensation, the cost of coverage very likely will not be affordable.

If an employee was terminated from the plan and offered COBRA, the coding is different based on whether the loss was triggered by termination of employment or reduction of hours. For termination of employment, the employee would be treated as any other terminated employee. COBRA coverage is not considered an offer of coverage for this purpose following a termination of employment. Line 14 would be 1H (no offer of coverage); Line 15 would be blank; and Line 16 would be 2A (not employed). If the employee was offered COBRA due to a reduction of hours, COBRA coverage would have to be reported as an offer of coverage. Please see IRS FAQ #23 for guidance on reporting this scenario.

Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C »

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FAQ: Will leave granted under the FFCRA end when the law expires on December 31, 2020?

December 08, 2020

Currently, the FFCRA is set to expire on December 31, 2020, and has not yet been extended. An individual who is currently on FFCRA paid leave as of December 31, 2020, and who has not exhausted said leave, will not be able to continue their leave into 2021. In other words, December 31 appears to be a hard stop.

As background, the FFCRA provides for temporary paid leave provisions – including emergency paid sick leave (EPSL) and expanded FMLA leave (EFMLA) – for specific circumstances related to COVID-19. To review, to qualify for EPSL, an employee must be unable to work or telework because the employee:

  • 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;
  • Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  • Is caring for an individual subject to an order described in item one or self-quarantine as described in item two;
  • Is caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19; or
  • Is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

In order to qualify for EFMLA, an employee must have been employed for 30 calendar days immediately prior to the day the employee’s leave would begin and they must be unable to work or telework due to a need to care for their son or daughter under 18 years of age whose school or place of care has closed, or whose childcare provider is unavailable, for reasons related to COVID-19, among other requirements.

These FFCRA provisions apply to private employers with fewer than 500 employees and public employers of any size, and provide up to 80 hours of EPSL and 10 out of 12 weeks of paid EFMLA for qualified employees. Additionally, employers who provide such leave are eligible for a federal tax credit. Note that the tax credit expires at the end of the year too.

With the FFCRA expiration quickly approaching, the following example illustrates how FFCRA paid leave can be impacted:

Tracy qualifies for both EPSL and EFMLA under the FFCRA because she is unable to work (or telework) due to a need to care for her children whose school is closed for reasons related to COVID-19. She qualifies for leave beginning December 7, 2020. The 80 hours of EPSL will expire on December 18, 2020. Although 10 additional weeks are permitted for EFMLA, Tracy’s FFCRA paid leave will end on December 31, 2020 (using less than two weeks of the benefit) because the FFCRA is set to expire at that time.

Importantly, many states have enacted their own COVID-19-related leave laws, which may provide for leaves into 2021, but they would not carry the federal tax credit. As a result, any related leave provided may be at employer cost.

Employers administering paid leave under the FFCRA should be mindful of the approaching expiration date and communicate with employees, especially if the expiration impacts the length of their leave. It remains to be seen whether Congress will extend the FFCRA beyond the end of the year; if they do, we will report that in Compliance Corner.

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