Compliance Corner Archives

On December 17, 2021, the US Court of Appeals for the Sixth Circuit lifted the stay on the enforcement of the Occupational Safety and Health Administration's emergency temporary standard (ETS) on vaccination and testing. The ETS covers private employers with 100 or more employees. Although the court's ruling was promptly appealed to the Supreme Court, for now, the mandate has been reinstated and is in full effect.

In response, the DOL announced that OSHA would delay the enforcement of the mandate to give employers time to comply. Accordingly, OSHA will not issue citations for noncompliance with any requirements under the ETS until January 9, 2022, and will not issue citations for noncompliance with the standard's testing requirements before February 9, 2022. Our original article on the mandate can be found in the November 9, 2021, edition of Compliance Corner.

Note that separate vaccine mandates apply to federal contractors and healthcare providers, and those orders remain under court review, with enforcement suspended in the meantime.

Sixth Circuit Order on Emergency Motion to Dissolve Stay »
DOL Announcement »

On October 22, 2021, the IRS provided COVID-19-related guidance regarding qualified pension plan distributions. The guidance, in the form of two new frequently asked questions (FAQs), addresses the rehiring of retirees and in-service distributions.

The first FAQ focuses upon the situation in which an individual retires and then commences benefit distributions from a qualified pension plan. The plan does not provide for in-service distributions to active employees, and due to unforeseen COVID-19 related hiring needs, the employer (and plan sponsor) rehires the individual.

The specific question posed is whether the individual's prior retirement will no longer be considered a 'bona fide retirement' because of the rehiring. For plans that do not permit in-service distributions, IRS rules for plan qualification to include a bona fide retirement requirement for the individual to receive retirement benefits. Neither the Code nor the IRS defines bona fide retirement, so the determination would typically be based on the facts and the circumstances surrounding the employment termination (and whether it was potentially designed to circumvent the distribution rules).

The IRS answer indicates that a rehire due to unforeseen circumstances that do not reflect any prearrangement will not cause the individual's prior retirement to no longer be considered a bona fide retirement under the plan. Therefore, if the plan terms permit, benefit distributions could continue after the rehire. However, the guidance advises employers to review any plan terms that may prohibit the rehire of a retiree within a specified timeframe, suspend distributions upon rehire, or otherwise impact the pension benefit of a rehire.

The second FAQ asks whether a qualified pension plan can allow a working individual to commence in-service distributions. The IRS response explains that the plan terms may generally allow an individual to commence in-service distributions upon attainment of either age 59-½ or the plan's normal retirement age. However, distributions commencing before age 59-½ may be subject to a 10% additional premature withdrawal tax, unless an exception to the tax applies.

Retirement plan sponsors, particularly those facing unanticipated pandemic-related labor shortages, may find this guidance helpful.

Coronavirus-Related Relief for Retirement Plans and IRAs Questions and Answers »

The DOL's Occupational Safety and Health Administration (OSHA), released its long-anticipated emergency temporary standard (ETS) requiring employers with a total of 100 or more employees to institute written mandatory vaccination policies for their employees. The ETS is effective November 5, 2021. The ETS pre-empts state law and regulation concerning COVID-19 vaccinations, testing and face coverings, unless the state has a plan that has been approved by the federal government.

Because this mandate primarily involves employment and labor law, employers should consult with legal counsel regarding employer compliance with the new requirements.

All employees (temporary, seasonal, part-time, full-time, remote workers) working in the US are counted for purposes of determining if an employer is subject to the ETS. Workers employed by a temporary staffing agency are counted by the agency, not the host employer. Employer size is determined on November 5, 2021. Once an employer is subject to the requirement due to size, they remain subject for the entire ETS period.

Covered employers must establish, implement and enforce the written vaccination policy, although they can provide their employees with the choice of either becoming fully vaccinated or providing proof of regular COVID-19 testing and wearing a face covering. Note that employers must provide reasonable accommodations for employees who cannot be vaccinated due to the vaccine being medically contraindicated or a disability, or when doing so conflicts with a sincerely held religious belief, practice or observance. Neither the vaccine mandate nor the testing applies to employees who do not report to a worksite with customers or other coworkers, or to employees who work exclusively outdoors.

In addition to the policy, employers subject to the ETS must provide all workers up to four hours of paid time, including travel time, for each of their primary vaccination doses received during normal work hours at the employee's regular rate of pay. Employers must provide reasonable time and paid sick leave to each employee for recovery from side effects following any primary vaccination dose. Two days of paid sick leave is considered reasonable.

Employers must determine each employee's vaccination status and maintain records of that status. Examples of acceptable proof of vaccination status include COVID-19 vaccination record cards, copies of records of immunization provided by a healthcare provider, and a signed attestation from the employee that they are vaccinated (if they cannot provide one of the other forms of proof). These vaccination records are confidential medical records, and the employer must maintain them accordingly.

Employees who are not fully vaccinated must be tested for COVID-19 at least weekly (if the worker is in the workplace at least once a week) or within seven days before returning to work (if the worker is away from the workplace for a week or longer). The ETS does not require employers to pay for testing, although other laws, regulations, collective bargaining agreements or other collectively negotiated agreements may require it. Employers are also not required to pay for face coverings.

If an employee tests positive for COVID-19 or receives a COVID-19 diagnosis, they must provide prompt notice to their employer. Employers must then remove the employee from the workplace, regardless of vaccination status. Employers must not allow them to return to work until they meet required criteria, which includes a negative COVID-19 test, meeting the CDC's return to work criteria or a recommendation from a licensed healthcare provider.

Employers must comply with most requirements within 30 days of the effective date and with testing requirements within 60 days of the effective date. This means that the written policy, leave and face covering requirements must be in place by December 5, 2021. Employees must either be fully vaccinated or subjected to regular testing by January 4, 2022. Note that there is a 30-day comment period that began on the effective date as well. Comments submitted in that time will be considered by the agency and may lead to changes in the ETS.

Note that this ETS does not apply to government contractors, which are subject to their own mandates. The Biden administration issued an executive order that requires government contracts to include language instituting vaccine mandates for government contractors. This mandate applies to all employees working on or in connection with a government contract and requires them to be vaccinated. Although employers must provide reasonable accommodations, government contract employees do not have the option to be tested weekly instead of getting vaccinated. The original due date for vaccinations under this ETS was December 8, 2021, but that has been extended to January 4, 2022, to be in line with the other mandates. Information on this mandate can be found here.

In addition to the ETS, CMS issued an interim final rule (effective starting November 5, 2021) that applies to certain Medicare and Medicaid-certified providers and suppliers, which includes hospitals, home health agencies, and long-term care facilities. The rule requires staff of those providers and suppliers have their second dose of the vaccination by January 4, 2022 (although they are not required to complete the two week waiting period). The rule does not provide a weekly testing option. The rule can be found here.

Note: On November 6, 2021, the US Court of Appeals for the Fifth Circuit issued a stay on the enforcement of the ETS, citing 'grave statutory and constitutional issues with the mandate.' This stay is the result of action brought by private actors and several states, including Texas, Louisiana and South Carolina, and is effective until the court takes further action. The federal government must file a response to the petitioners' request for a permanent injunction by the end of the day on November 8, 2021. The order can be found here.

ETS (unpublished version) »
Fact Sheet »
FAQs »
NFP's FAQs Sheet »
OSHA COVID Vaccination and Testing ETS »
OSHA ETS Landing Page »
OSHA ETS Summary »

On October 4, 2021, the Departments of Health and Human Services, Treasury, and Labor (collectively, the departments) issued guidance in the form of FAQs clarifying HIPAA nondiscrimination rules applicable to certain vaccine-related wellness programs, as well as vaccine coverage. With the ongoing COVID-19 pandemic and the availability of vaccines, many employers are considering ways to incentivize their employees to get vaccinated. This recent guidance clarifies how HIPAA nondiscrimination rules impact wellness programs that offer vaccine-related premium surcharges and incentives.

In Q3 of the FAQs, the departments confirm that a group health plan is permitted to offer participants a premium discount for receiving a COVID-19 vaccination if the design of the program complies with federal wellness program rules. This includes HIPAA wellness plan rules applicable to health-contingent, activity-only wellness programs, the Americans with Disabilities Act (ADA), and other rules such as the ACA's employer mandate affordability rules.

The HIPAA nondiscrimination rules require, among other things, that the program is reasonably designed to promote health or prevent disease, additionally:

• The reward (together with any other rewards for other health-contingent wellness programs) must not exceed 30% (or 50% for tobacco-related wellness programs) of the total cost of employee-only coverage.
• A reasonable alternative standard be available to those who show that it is unreasonably difficult to comply due to a medical condition (or medically inadvisable to satisfy the otherwise applicable standard).
• Disclosure of the reasonable alternative in all plan materials describing the wellness program.

Furthermore, HIPAA prohibits excluding COVID-19 treatment for unvaccinated participants, as doing so would constitute discrimination based on a health factor. Q4 of the FAQs clarifies that while there is an exception to the prohibition on discrimination based on a health factor for compliant wellness programs, such exception cannot be used to deny eligibility for benefits or coverage based on a health factor. The wellness plan exception applies only to premium discounts and similar cost-sharing modifications.

Further, Q5 of the FAQs explains the impact of any premium discount or surcharge related to COVID-19 vaccination status on ACA employer mandate affordability calculations. The guidance provides that since COVID-19 vaccination is not tied to tobacco use, the employer must use the higher premium amount for affordability purposes. In other words, the employer must treat all employees as if they are not vaccinated when calculating whether the offered coverage is affordable under the employer mandate.

Lastly, the guidance also confirms that plans and issuers must cover COVID-19 vaccines and their administration without cost-sharing once a vaccine is authorized under an emergency use authorization or approved under a Biologics License Application.

Employers seeking to adopt a wellness program providing incentives or surcharges related to COVID-19 vaccination status should be mindful of this guidance and consult with employment law counsel to ensure they are compliant with all applicable laws.

FAQs About Affordable Care Act Implementation Part 50, Health Insurance Portability and Accountability Act and Coronavirus Aid, Relief, and Economic Security Act Implementation »

On September 30, 2021, the Department of Health and Human Services' (HHS) Office for Civil Rights (OCR) released guidance clarifying how HIPAA applies to disclosures and requests for information regarding an individual's COVID-19 vaccination status.

The guidance reminds the public that HIPAA privacy provisions apply only to covered entities (e.g., health plans, certain health care providers, and health care clearinghouses) and business associates. These provisions determine when covered entities and business associates are permitted to use and disclose protected health information (PHI) that covered entities and business associates create, receive, maintain, or transmit.

As such, HIPAA does not prohibit employers from asking whether employees have received a COVID-19 vaccine. In addition, HIPAA does not prevent individuals from disclosing whether they have received a COVID-19 vaccine, as HIPAA does not apply to individuals' disclosures about their own health information. The guidance further provides that HIPAA does not prohibit an employer from requiring employees to disclose COVID-19 vaccination status as HIPAA generally does not regulate what information can be requested from employees per terms of employment. Importantly, though, other federal and state laws may require certain privacy compliance measures (e.g., requiring documentation be kept confidential).

Finally, HIPAA generally prohibits covered entities and business associates from using or disclosing an individual's PHI, except when an individual authorizes such disclosure (or otherwise permitted by HIPAA), which can include information about whether the individual has received a COVID-19 vaccine.

This guidance serves as a reminder to employers regarding the applicability of HIPAA to certain disclosures related to COVID-19 vaccination status. Employers should be mindful that although HIPAA rules often do not apply to certain disclosures, other federal and state laws may be applicable.

FAQs »
Press Release »

On October 6, 2021, the IRS issued Notice 2021-58, clarifying the application of the extensions of timeframes related to COBRA. As a reminder, 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. Subsequent guidance clarified that the relief is available from the earlier of a) one year from the date an individual or plan is first eligible for relief or b) the end of the outbreak period.

Notice 2021-58 clarifies that the disregarded period for an individual to elect COBRA continuation coverage and the disregarded period for the individual to make initial and subsequent COBRA premium payments generally run concurrently. This means that individuals who take advantage of the extension of certain timeframes by electing COBRA continuation coverage outside of their initial 60-day COBRA election timeframe will have one year and 105 days after the date the COBRA notices was provided to make the initial COBRA premium payment. (The 105 days represents the number of days until the first payment must be made under normal COBRA rules - an initial 60 days to make an initial COBRA election plus the 45 days to make the initial COBRA premium payment.)

Alternatively, individuals who make their COBRA election within their initial 60-day COBRA election period will have one year and 45 days to make the initial COBRA premium payment.

However, the notice also provides additional relief stating that initial COBRA premium payments will not be due before November 1, 2021, as long as the individual makes their initial COBRA premium payment within one year and 45 days after their election date. They provided this relief because some individuals might not have realized that the disregarded period to make a COBRA election and the disregarded period to make an initial COBRA premium payment run concurrently. In order to avoid inequitable outcomes, in no event will an individual be required to make the initial COBRA premium payment before November 1, 2021, even if November 1, 2021, is more than one year and 105 days after the date the election notice was received.

The notice also discusses the interaction of the extension of certain timeframes with the COBRA premium assistance provided under the American Rescue Plan Act (ARPA). Specifically, the extension of certain timeframes did not provide additional time for individuals to elect ARPA extended coverage. However, individuals will still be able to access the extension of timeframes relief to pay for any COBRA coverage that they receive after the ARPA COBRA premium assistance ends.

The notice goes on to provide a number of examples of how this guidance applies. Employers should review this notice to understand the relief it provides to individuals who will elect COBRA through the end of the outbreak period.

Notice 2021-58 »

On September 9, 2021, the Biden administration announced that the federal government will require employers with 100 or more employees to ensure that those employees are either fully vaccinated against COVID-19 or test negative for COVID-19 on a weekly basis. The federal government will also require that most federal workers, federal contractors, and healthcare workers be vaccinated, without the option to test.

The DOL's Occupational Safety and Health Administration (OSHA) is charged with promulgating rules to provide authority for this mandate as well as additional details. As a first step, OSHA is expected to issue an Emergency Temporary Standard (ETS) that will stand until formal rules are issued. The ETS is expected to provide the authority for the mandate and to require employers to provide paid leave to employees who need to get vaccinated or recover from any side-effects of the vaccination. OSHA is expected to release the ETS in the next few weeks.

Unfortunately, there are still many unanswered questions. For instance, it is not known how testing will be paid for, how the paid leave should be administered, and how penalties for noncompliance will be calculated. For further discussion, please check out episode 109 of our podcast entitled 'Biden's Vaccine Mandates & Testing Alternatives.' Employers should consult with legal counsel about their obligations to comply with these regulations once they are issued.

President Biden's COVID-19 Action Plan »
NFP's Employer Considerations: Biden Administration Mandates Vaccination or Testing for Most Employees »

On June 25, 2021, the IRS released a letter regarding health FSA forfeitures in response to a congressman's inquiries on behalf of a constituent. The letter reiterates IRS guidance regarding health FSA forfeitures, including recent temporary legislation due to the ongoing COVID-19 public health crisis.

Under the 'use-or-lose' rule, health FSA 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. To help reduce forfeitures, a plan can choose to include a carryover or grace period provision (one or the other, but not both). Carryovers are limited to $550 (indexed) that can be carried over into the next plan year and grace periods are limited to extending the period in which claims can be incurred up to two and a half months following the close of the plan year. In addition, an individual whose employment terminates can elect to continue health FSA participation through COBRA coverage.

The letter clarifies that due to temporary relief during plan years 2020 and 2021 (as provided by the CAA and IRS Notice 2021-15), an employer can choose to permit:

• A carryover of any unused amounts from the 2020 and 2021 plan years.
• A grace period (i.e., the period for incurring claims) extension up to 12 months for plan years ending in 2020 and 2021.
• Post-termination reimbursements from health FSAs (which would allow an individual to continue to be reimbursed from unused health FSA funds through the end of the plan year in which participation ceased).

The IRS reiterates that any of the above changes are optional for employers. For more detailed information regarding the temporary relief available, see our article from the March 2, 2021, edition of Compliance Corner, 'IRS Provides Guidance on CAA Changes to FSAs and DCAPs.'

As a reminder, if an employer chooses to implement any relief available, plan amendments are required by the last day of the first calendar year after the end of the plan year in which the amendment is effective.

Although the letter does not provide any new guidance, it serves as a good reminder of the health FSA general rules regarding forfeitures as well as the temporary relief available.

IRS Letter »
IRS Notice 2021-15 »

On July 29, 2021, the IRS issued Information Release 2021-160, clarifying that eligible employers can claim tax credits available under the American Rescue Plan Act of 2021 (ARPA) for providing leave to employees to accompany a family or household member or certain other individuals to obtain immunization relating to COVID-19 or to care for a family or household member or certain other individuals recovering from the immunization.

The tax credits, introduced and made mandatory by the FFCRA until December 30, 2020, and extended and made optional by the CAA and the ARPA to September 30, 2021, are available to employers with 500 or fewer employees who provide those employees with emergency paid sick leave and expanded FMLA for reasons relating to COVID-19. These tax credits reimburse those employers for the wages paid to employees who use this leave. The FAQs contain information about how to calculate and apply for these credits. The original FAQS were discussed in the June 22, 2021, edition of Compliance Corner.

Employers who chose to extend the emergency paid sick leave or the expanded FMLA should be aware of these clarifications.

IRS Information Release 2021-160

On May 18, 2021, the IRS published Notice 2021-31 (the “notice”), providing guidance and clarification on the premium assistance and tax credits available for COBRA and state continuation health coverage per the American Rescue Plan Act of 2021 (ARPA). In addition to a summary overview, the notice provides clarification on many issues regarding administering the premium assistance and tax credits, via 86 questions and answers.

AEI Eligibility

The notice states that an individual is not eligible for premium assistance if they do not meet the definition of a qualified beneficiary under federal COBRA. For reference, a “qualified beneficiary” is defined as someone who was a beneficiary under the plan on the day before the qualifying event. COBRA premium assistance is available to individuals who have elected and remained on continuation coverage due to disability, a second qualifying event or an extension under state continuation coverage, so long as the original qualifying event was a reduction in hours or an involuntary termination of employment and to the extent the extended period of coverage falls between April 1, 2021, and September 30, 2021. This supports the idea that spouses and dependents are also eligible for the subsidy, as they are also COBRA qualified beneficiaries.

However, COBRA premium assistance does not apply to the portion of the premium related to continuation coverage for individuals who are not qualified beneficiaries. This means that premiums paid for a spouse or dependent who was not a beneficiary under the plan before the qualifying event are not eligible for premium assistance (since such spouse or dependent is not a qualified beneficiary). In other words, a spouse (or dependent) added to the plan at open enrollment by a COBRA qualified beneficiary is not eligible for premium assistance. Likewise, a domestic partner is not eligible for premium assistance since they are not qualified beneficiaries under federal COBRA.

The notice also touches on an important circumstance that would cause an individual to be ineligible for premium assistance. An individual is not eligible for premium assistance if they are eligible for other group coverage. The notice states that eligibility for other group coverage impacts eligibility for the premium assistance only if the individual is permitted to enroll in that other coverage mid-year. If the individual is locked out of enrollment mid-year due to the lack of a qualifying event, the eligibility for the other coverage is disregarded and the individual is eligible for premium assistance. It is important to note, however, that an individual who lost eligibility for the employer’s plan within the last year due to termination of employment or reduction of hours would still have a HIPAA special enrollment right to enroll in their own or a spouse’s group health plan and would therefore be ineligible for premium assistance.

The notice also states that any late or unpaid premiums for retroactive COBRA continuation coverage elected pursuant to the extension of certain timeframes does not impact an individual’s eligibility for ARPA COBRA premium assistance.

In order to establish that an individual is an assistance eligible individual (AEI), employers may require individuals to provide certification or attestation of their eligibility, although other documentation, such as records showing an individual’s involuntary termination or reduction of hours, may suffice. The notice states that the employer should retain such certification, attestation, or other documentation in order to claim the payroll tax credit.

The notice states that the penalty due from an AEI who fails to provide notice of their eligibility for other coverage under a group health plan or Medicare is not payable to the employer, plan or issuer who receives the premium assistance credit. However, the notice does not provide any additional guidance on how to report this failure or what the procedures will be for investigating or enforcing this violation.

Involuntary Termination

One of the qualifications for eligibility for premium assistance is that an individual must have had a reduction in hours or been involuntarily terminated. Previous guidance did not define what “involuntary termination” meant, other than emphasizing language from the ARPA that excluded instances of voluntary termination. This notice drills down on the concept, providing a definition and several examples to clarify this qualification.

The notice defines involuntary termination as a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services. To determine whether termination is involuntary, a facts and circumstances test is used. The notice provides an example that explains that termination is involuntary, even if it is designated as voluntary, when the facts and circumstances indicate that the individual was willing and able to continue working and but for the voluntary termination, the employer would have terminated the individual (and the individual was aware that the employee would be terminated). Involuntary termination also includes situations where an employee quits because the employer initiates a reduction in hours. Further, it applies to a reduction of hours due to an individual’s choice to be furloughed due to an impending furlough.

The notice applies this definition to various employment agreements. An individual is involuntarily terminated when they volunteer to be terminated and enter into a severance agreement as an alternative to an imminent termination. This analysis applies to retirement too, when the individual chooses to retire as an alternative to an imminent termination. An employer’s decision not to renew an employee’s contract is an involuntary termination if the employment is willing and able to continue the employment relationship. However, it is not considered to be an involuntary termination if all parties always understood that the contract was for specified services over a set term and would not be extended.

The notice applies this analysis to other common situations. Absence from work due to disability or illness is not an involuntary termination unless the employer has taken action to terminate employment (the question of whether a reduction in hours applies will depend on whether the absence causes a loss of coverage). Termination due to general concerns about workplace safety, the health condition of the employee or a family member, or other similar issues, generally will not be an involuntary termination. This is because the actual reason for the termination is unrelated to the action or inaction of the employer.

Note that employees who quit because they don’t have childcare would not be AEIs. However, if they take leave for that reason (while remaining employed), and lose coverage as a result, then they have experienced a reduction in hours that would make them an AEI.

Affected Coverage

The notice also delves into the types of coverage that can be paid for with premium assistance. An individual who is eligible for other standalone group dental or vision coverage remains eligible for premium assistance for medical coverage. However, whether retiree health coverage will impact eligibility for premium assistance depends on whether the retiree health coverage is offered under the same group health plan as COBRA continuation coverage or under a separate group health plan. An individual is not eligible for premium assistance if offered retiree health coverage that is not COBRA continuation coverage and is coverage under a separate group health plan from the plan under which the COBRA continuation coverage is offered. However, if the retiree health coverage is offered under the same group health plan, the offer of said coverage does not impact eligibility for premium assistance.

The notice clarifies that, even if an employer allows AEIs to enroll in different coverage than what they had the day before the qualifying event, COBRA premium assistance will not be available for coverage with a greater premium. The AEI does not have an option to elect the higher cost coverage and pay the difference.

The notice states that employers must place an AEI in a plan like that provided to active employees if the plan the AEI was enrolled in is no longer offered. It should be noted that those employers who had a decrease in employees such that they are not subject to federal COBRA this year still have to offer COBRA premium assistance based on their status as a larger employer in 2020 (for AEIs who were due an offer of COBRA in 2020).

Duration of Premium Assistance

The ARPA COBRA premium assistance period is generally from April 1, 2021, through September 30, 2021. The notice clarifies that COBRA premium assistance is available, for those who qualify, through the last day of the last period of coverage beginning on or before September 30, 2021, even if the period of coverage extends into October. For example, the last two-week period of coverage for September 2021 is from September 19, 2021, through October 2, 2021. In this case, COBRA premium assistance is available through October 2, 2021.

Extended Election Period

The extended COBRA election period granted by the ARPA has been a source of confusion. However, the notice confirms that an AEI may decline to elect the COBRA continuation coverage under the original COBRA election period and instead elect COBRA continuation coverage only for the extended period of coverage that begins on or after April 1, 2021. In the alternative, if the AEI elects COBRA continuation coverage retroactively, no COBRA premium assistance is available for periods of coverage beginning prior to April 1, 2021.

The notice clarifies that a qualified beneficiary who had a reduction in hours or involuntary termination may elect additional coverage during the extended election period (i.e., medical plan plus standalone vision) if they were enrolled in that coverage prior to the COBRA triggering event. They would qualify as an AEI with respect to all types of coverage elected (i.e., those elected prior to and during the extended election period).

The notice also states that an individual who otherwise would be an AEI except for eligibility for other group coverage or Medicare still has the right to enroll during the extended election period. However, they would not receive premium assistance.

The extensions of certain timeframes available pursuant to last year’s emergency guidance do not apply to the ARPA extended election period notice or the ARPA extended election period. As such, AEIs only have 60 days to elect COBRA and premium assistance under the ARPA provision. And once they have done so, they no longer have the option to elect retroactive COBRA under the extensions of certain timeframes relief.

Entities Entitled to the Tax Credit

The notice reiterates previous guidance that the ARPA COBRA tax credit is claimed by the person to whom premiums are payable (referred to in the notice as the “premium payee”). Generally, the premium payee is the employer for a self-insured plan and for a fully insured plan subject to federal COBRA, the carrier for a fully insured plan subject only to state continuation, and the plan for a multiemployer plan.

The notice discusses the relationship between the employer and the insurer when it comes to the premium subsidy and the tax credit. Notwithstanding an agreement between an employer subject to federal COBRA and its insurer for the insurer to collect COBRA premiums directly from the qualified beneficiaries, the employer remains obligated to pay the premium to the insurer for the months of COBRA premium assistance with respect to an AEI. An employer may not receive the premium assistance credit associated with an insured plan subject solely to state continuation law (e.g., very small fully insured plans) with respect to the requirement to provide continuation coverage, even if the employer pays the full premium to the insurer.

Unless specific circumstances apply, the premium payee receives the premium subsidy tax credit even if it engages a third-party payer (such as a PEO or a reporting agent) to report and pay its federal employment taxes. However, the premium payee must file its own Form 7200 to obtain an advance payment on the credit.

If a third party, such as a charity, pays an AEI’s premium that should have been covered by the subsidy, then the premium payee should reimburse the AEI for the premium, unless the premium payee is aware that the individual assigned the right to the reimbursed premium to the third party.

Whoever the premium payee is, if that premium payee reimburses an AEI for premiums that should have been covered by the subsidy, then the premium payee is entitled to the premium subsidy tax credit on the date the premium payee reimburses the AEI. In addition, the premium payee can get an ARPA COBRA premium subsidy tax credit, but cannot also claim the same premiums as qualifying wages under the FFCRA.

Calculation of the COBRA Premium Assistance Credit Amount

The notice states that the credit amount is generally 102% of the COBRA applicable premium, assuming the employer does not subsidize the COBRA premium for similarly situated qualified beneficiaries who are not AEIs. If the employer does subsidize such cost for non-AEI qualified beneficiaries, then the amount of the credit is 102% minus the amount provided to non-AEI qualified beneficiaries (i.e., the credit does not include the amount of subsidy that the employer would have otherwise provided).

If a plan previously charged less than the allowable 102% COBRA applicable premium rate, the plan may increase the charged amount to 102% of the COBRA applicable premium rate, and the plan can claim a credit for the full 102% amount. This is true even if the employer also provides a taxable severance benefit to the AEI.

The premium assistance credit does not apply to non-AEI COBRA qualified beneficiaries, and the notice has examples of how to calculate the credit where a non-AEI COBRA qualified beneficiary is covered through an AEI.

Claiming the COBRA Premium Assistance Credit

The notice describes the process by which a premium payee claims the tax credit. A premium payee claims the credit by reporting the credit and the number of AEIs receiving the COBRA premium assistance on the designated lines of Form 941, Employer’s Quarterly Federal Tax Return. In anticipation of the credit to which it is entitled, the premium payee may reduce the deposits of federal employment taxes (including withheld taxes) that it would otherwise deposit, up to the amount of the anticipated credit. If the anticipated credit exceeds the federal employment tax deposit amount, then the payee requests an advance of that amount by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.

A premium payee files Form 941 at the end of each quarter but can file a Form 7200 (requesting advance payments) after the end of the payroll period in which the payee became entitled to the credit. However, they cannot file Form 7200 for a period of coverage that has not begun. The notice includes examples, including how to claim premium assistance credit if the payee has no employment tax liability.

A premium payee can still claim the premium assistance credit even if the AEI fails to provide notice that the individual is no longer eligible for the COBRA premium assistance (e.g., the individual is eligible for other group health plan coverage or Medicare), unless the payee has knowledge of the disqualifying coverage/Medicare.

Employers should be aware of the explanations and examples provided by the notice, for them to better understand the requirements placed upon them by the ARPA.

IRS Notice 2021-31 »

On May 10, 2021, the IRS published Notice 2021-24, Relief from Penalty for Failure to Deposit Employment Taxes. The IRC imposes penalties upon employers who fail to timely deposit employment taxes with the IRS. Previous guidance provided relief from those penalties when it came to tax credits allowed under the FFCRA, among other credits. The new guidance extends that relief and includes relief to tax credits allowed under the American Rescue Plan Act (ARPA).

The IRC generally requires deposits of employment taxes to be made on a monthly or semiweekly basis. Employers that accumulate $100,000 or more of employment taxes on any day within a deposit period are required to deposit those liabilities with the IRS the next banking day. However, this guidance stated that an employer may reduce without a penalty under the IRC the amount of a deposit of employment taxes by the amount of the paid sick or family leave credit anticipated for the calendar quarter prior to the required deposit if the employer does not also seek an advance credit with regard to the same amount. This relief applies to the FFCRA extension granted under the CAA, as well as that granted under the ARPA.

Similarly, an employer may reduce without a penalty the amount of the deposit of employment taxes by the amount of the employer's COBRA continuation coverage premium assistance credit anticipated for the calendar quarter prior to the required deposit, as long as the employer does not also seek an advance credit with regard to the same amount. The reductions due to the premium subsidy can be added to any reductions due to the paid sick or family leave.

Employers should be aware of this penalty relief and should consult with their payroll or tax advisors if they have further questions regarding the application of this relief.

Notice 2021-24 »

On April 21, 2021, the IRS released a fact sheet that provides details concerning the tax credits permitted by the American Rescue Plan Act of 2021 (ARPA) when paid leave is provided for reasons relating to receiving the COVID-19 vaccine.

The ARPA allows employers and tax-exempt organizations with fewer than 500 employees and certain governmental employers to receive tax credits as reimbursement for the cost of providing paid sick and family leave for certain reasons due to COVID-19, which now includes leave taken by employees to receive or recover from COVID-19 vaccinations. These tax credits are available for eligible employers who choose to provide paid sick and family leave from April 1, 2021, through September 30, 2021.

The fact sheet provides an overview of who is eligible for the tax credits, when leave applies, and how employers can claim such credits. Specifically, the IRS reiterates that the ARPA tax credits are applied against an employer's share of the Medicare tax and can be claimed quarterly on the federal employment tax return (generally Form 941). If the credit amount exceeds the employer's share of the Medicare tax, employers are entitled to a refund. (This process is similar to claiming paid leave FFCRA tax credits.)

Employers opting to provide paid sick and family leave through September 30, 2021, should be aware of the guidance provided in the fact sheet and work with their tax advisers to claim the credits. For more information on the paid leave and tax credits provided under the ARPA, see our prior Compliance Corner article from the March 16, 2021, edition, Congress Passes the American Rescue Plan Act of 2021.

IRS Fact Sheet »
IR 2021-90 Press Release »

On April 1, 2021, the Congressional Research Service (CRS) updated its Payroll Tax Credit for COVID-19 Sick and Family Leave report, providing details regarding the payroll tax credits associated with the extended paid leave originally provided by the Families First Coronavirus Response Act (FFCRA) available through the American Relief Plan Act of 2021 (ARPA).

The report summarizes the history of the payroll tax credits, noting the requirements under the FFCRA, the Consolidated Appropriations Act of 2021 (CAA) and the ARPA. As background, the FFCRA required certain employers to provide paid leave via emergency paid sick leave (EPSL) and expanded FMLA for specified reasons. The CAA extended the tax credits related to EPSL and expanded FMLA through March 31, 2021, but extending the FFCRA leave was optional for employers. The ARPA further extended the FFCRA-related tax credits now through September 30, 2021 (again, if an employer chooses to allow such leave).

In particular, the report highlights a few modifications provided by the ARPA related to the payroll tax credits, including:

• The 80-hours of EPSL resets for leave taken after March 31, 2021.
• Expanded FMLA per-employee limit is increased to $12,000.
• Payroll tax credits are available for sick leave taken to receive a COVID-19 vaccine (or for leave taken while waiting for COVID-19 test results).
• State and local governments, as well as certain non-profits, can claim the payroll tax credit.
• Payroll tax credits are claimed against the Medicare (HI) tax.
• If paid leave is permitted, it must be provided to all employees who qualify.

The report further explains that under the FFCRA, payroll tax credits were not available to state and local government employers (including school districts and public colleges), even though such employers were required to provide leave. However, ARPA allows certain government employers access to the payroll tax credits if they voluntarily choose to provide paid leave described above.

While the report does not provide any new guidance, it serves as a reminder of the payroll tax credits available for employers who choose to permit paid leave through September 30, 2021.

Payroll Tax Credit for COVID-19 Sick and Family Leave »

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.

Announcement 2021-7 »

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.

IR-2021-59 »
IRS Notice 2021-21 »
IR-2021-43 (on extension for winter storm victim states) »

On February 26, 2021, CMS, in partnership with the DOL, HHS and Treasury, issued a set of 14 FAQs that address FFCRA and CARES Act issues. Specifically, the FAQs cover issues relating to the requirement that plans and issuers cover COVID-19 testing and vaccinations without cost sharing and other requirements. The FAQs also discuss the circumstances under which an employer can offer COVID-19 vaccines through an EAP or an on-site medical clinic. Finally, the FAQs include information about how providers may seek federal reimbursement when delivering COVID-19 related services to the uninsured.

The FFCRA includes a requirement (as amended by the CARES Act), that group health plans and health insurance issuers offering group or individual health insurance coverage, including grandfathered health plans, provide benefits for certain items and services related to diagnostic testing for COVID-19, without imposing any cost-sharing requirements, prior authorization or other medical management requirements. The CARES Act also requires non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage to cover, without cost sharing, qualifying coronavirus preventive services, including recommended COVID-19 vaccines.

Coverage of previous FAQs on this topic can be found in NFP's Latest Insights page COVID-19-Related Benefits Compliance Resources Available (nfp.com)

This document stresses that these requirements apply when an individual seeks and receives a COVID-19 diagnostic test from a licensed or authorized healthcare provider, or when a licensed or authorized healthcare provider refers an individual for a COVID-19 diagnostic test. Under these circumstances, plans and issuers must assume that the receipt of the test reflects an 'individualized clinical assessment,' and the test should be covered without cost sharing, prior authorization or other medical management requirements.

The FAQs further apply this concept by pointing out that the requirement covers such testing for asymptomatic persons who are not known to be exposed to COVID-19, but it does not cover such testing when it is done for public health surveillance or employment purposes (which are not administered under the same conditions as an 'individualized clinical assessment'). However, plans are encouraged to cover such testing and to clearly communicate with plan participants when the testing is covered and when it is not, and to implement programs to prevent fraud and abuse.

The FAQs point out that the FFCRA and the CARES Act make no distinction between point-of-care and other tests, and that the statutes make no distinction as to where the tests are administered; if they are 'individualized clinical assessments' then they must be covered.

The requirements also apply to:

'items and services furnished to an individual during healthcare provider office visits (including in-person visits and telehealth visits), urgent care center visits and emergency room visits that result in an order for or administration of an in vitro diagnostic product, but only to the extent that the items and services relate to the furnishing or administration of the product or to the evaluation of the individual for purposes of determining the need of the individual for that product.'

Plans are encouraged to implement (and document) policies and procedures that protect participants from inappropriate cost sharing. Similarly, plans are encouraged to provide information regarding providers and their rates to participants to minimize the risk that providers charge too much for these items and services.

In addition to testing, the FAQs also cover preventative services. Plans and issuers are reminded that the CARES Act requires that they provide coverage without cost sharing for all COVID-19 vaccines that have been recommended by the federal government as well as their administration. Plans and issuers must cover these preventive services without cost sharing starting no later than 15 business days (not including weekends or holidays) after the date the United States Preventive Services Task Force (USPSTF) or the Advisory Committee on Immunization Practices of the CDC (ACIP) makes an applicable recommendation regarding a qualifying coronavirus preventive service. Plans and issuers must cover these vaccines regardless of how the service is billed or how many shots it takes to complete the vaccination regimen. The FAQs also point out that the vaccines must be covered even if the recipient received it 'out of turn' (that is, if the recipient is not considered a priority recipient, such as a person with high risk of complications if they contract COVID-19).

The FAQs also remind plans and issuers that the DOL will not take enforcement action if they implement these requirements without providing participants 60-days' advance notice of the changes, as required by the ACA SBC provision. However, plans and issuers must provide such notice to participants as soon as reasonably practicable.

Finally, the FAQs stress that employers may offer COVID-19 testing and vaccinations through an EAP, if it meets certain requirements. These services are not considered excepted benefits if they are 'significant.' Benefits are considered significant based on the nature of the medical care, and the amount, scope and duration of covered services. However, the FAQs state:

'An EAP will not be considered to provide benefits that are significant solely because it offers benefits for COVID-19 vaccines and their administration (including when offered in combination with benefits for diagnosis and testing for COVID-19). However, there must be no cost sharing under the EAP for benefits under the EAP to constitute excepted benefits and the EAP must also comply with other applicable requirements.'

Employers can also provide COVID-19 vaccines through on-site medical clinics under all circumstances.

Employers should be aware of these clarifications of the FFCRA and CARES Act requirements.

FAQS about FFCRA and CARES Act Implementation, Part 44 »

On Friday, February 26, 2021, the DOL released EBSA Disaster Relief Notice 2021-01 (the 'clarifying notice'). The notice provides guidance on the duration of the COVID-19 relief that was originally provided in the Notice of Extension of Certain Timeframes for Employee Benefit Plans, Participants and Beneficiaries (the 'notice of extension'). (We discussed this notice in the May 12, 2020, edition of Compliance Corner.)

Background

Recognizing the potential difficulties for group health plans to comply with certain notice obligations due to the COVID-19 public health crisis, and to minimize the possibility of individuals losing benefits due to a failure to timely meet requirements, the Departments of Labor and the Treasury extended certain timeframes for group health plans, disability and other welfare plans, and pension plans in May of 2020.

The relief provided that all group health plans, disability and other employee welfare benefit plans, and employee pension plans subject to ERISA or the Code were required 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 30-day (or 60-day, if applicable) deadline to request a special enrollment under HIPAA.
• The 60-day COBRA election period.
• The 30-day (or 60-day, if applicable) deadline to notify the plan of a COBRA qualifying event (and the 60-day deadline for individuals to notify the plan of a determination of a disability).
• The 14-day deadline for plan administrators to furnish COBRA election notices.
• The 45-day deadline for participants to make a first COBRA premium payment and 30-day deadline for subsequent COBRA premium payments.
• Deadlines for individuals to file claims for benefits, for initial disposition of claims, and for providing claimants a reasonable opportunity to appeal adverse benefit determinations under ERISA plans and non-grandfathered group health plans.
• Deadlines for providing a state or federal external review process following exhaustion of the plan's internal appeals procedures for non-grandfathered group health plans.

The statute that the DOL and IRS relied upon to provide these extensions appeared to allow for extensions of up to one year. As a result, many in the employee benefits industry concluded that the relief would only last until February 28, 2021 (which was one year from the March 1, 2020, effective date of the notice of extension).

EBSA Disaster Relief Notice 2021-01

However, in the clarifying notice the DOL stated that the extension of timeframes 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 pandemic is ongoing, and the president has not announced an end to the national emergency, the outbreak period has not ended.

The DOL's clarifying notice further explains that the duration of the relief provided under the notice of extension is statutorily limited to a period of one year from the date the individual action would otherwise have been required or permitted. So instead of the one-year limit being assessed from the effective date of the notice of extension, it is assessed based on when an individual or plan first needed to utilize the relief. This means that until the end of the outbreak period, the period that is disregarded will vary depending on when the triggering deadline occurs. For some purposes, this will result in a participant-by-participant analysis of the extension of certain timeframes.

Examples

Notably, this explanation of the relief clarifies how it will apply in different scenarios. Consider the following examples:

• Under normal circumstances, a COBRA-qualified beneficiary whose COBRA election period began January 2, 2020, would be required to make a COBRA election by March 1, 2020. However, because the disregarded period can only last one year, this individual had until February 28, 2021, to elect COBRA.
• A COBRA-qualified beneficiary whose COBRA election period began June 1, 2020, would have normally been required to make a COBRA election by July 30, 2020. However, due to the disregarded period, this individual now has until end of the outbreak period or July 29, 2021, whichever is earlier, to make a COBRA election.
• A COBRA-qualified beneficiary whose COBRA election period began February 15, 2020, would have their COBRA election period disregarded beginning on March 1, 2020. The disregarded period would last through February 28, 2021, and then they would receive the balance of their 60-day COBRA election period (roughly 45 days).
• An employee has a baby on August 20, 2020. The plan normally allows 30 days from the date of birth for the employee to request a HIPAA special enrollment. The disregarded period would last until the earlier of the end of the outbreak period or August 19, 2021, and then the 30-day special enrollment election period would begin.
• An employer's health FSA has a claims submission date of 90 days following the end of the plan year, which would have been March 31, 2020, for the 2019 plan year. The disregarded period began March 1, 2020, and continued for one year through February 28, 2021, after which FSA participants will have an additional 30 days to submit claims (the balance of their claims submission period).

Employer Action

Many employers must continue to honor the extended timeframes for individuals who become eligible to make certain elections in 2020 or 2021. Currently, only individuals who became eligible to make these elections at the very beginning of the COVID-19 pandemic will have exhausted their timeframes under this relief. So employers will need to work with their vendors and plan administrators to ensure that timelines are being administered in accordance with the new understanding of the DOL's guidance.

To avoid the possibility of individuals losing benefits, the DOL expects employers to notify plan participants or beneficiaries that their relief period has ended or will end. Additionally, employers should consider reissuing plan disclosures that were issued during the pandemic in order to provide accurate information regarding the deadline by which individuals will need to act. The DOL also encouraged employers to provide information about the opportunity to obtain coverage through the federal or state exchanges.

Since the pandemic continues to disrupt plans' operations, the DOL will continue to provide enforcement relief for fiduciaries who act in good faith and with reasonable diligence under the circumstances.

The NFP Benefits Compliance team will continue to review the new guidance and provide clarifying materials where possible. Employers should work with their service providers to continue to comply with this requirement.

EBSA Disaster Relief Notice 2021-01 »
Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak Final Rule »

On December 31, 2020, the IRS released Letter Number 2020-0027 that addressed a question concerning whether a person with unused funds in a DCAP can have those funds reimbursed to him because his child did not attend summer camp due to COVID-19 and he did not anticipate any further childcare expenditures for the rest of the year.

The IRS stated that, although 2020 COVID-19 relief did give plans flexibility in allowing mid-year changes in DCAP elections, it did not override the requirement that DCAP funds cannot be returned except to reimburse the participant for employment-related childcare expenses.

Information letters are not legal advice and cannot be relied upon for guidance. Taxpayers needing binding legal advice from the IRS must request a private letter ruling. While the letter does not provide any new guidance, this letter does provide general information that may be helpful to employers with questions on this topic.

Letter Number 2020-0027 »