The Consolidated Appropriations Act, 2021 (CAA) was signed into law on December 27, 2020. This major funding bill included the COVID-Related Tax Relief Act of 2020 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Following are highlights of the provisions affecting employer-sponsored benefit plans:
Flexible Spending Arrangements (FSAs)
The CAA allows for certain relief pursuant to health care and dependent care FSAs as follows:
- Carryovers — All unused benefits in plan years ending in 2020 may be carried over into the plan year ending in 2021. Similar relief is also available for unused FSA benefit carryovers for plan years ending in 2021 into the plan year ending in 2022.
- Grace periods — FSAs that provide for a grace period for plan years ending in 2020 or 2021 are allowed to extend that grace period from 2.5 months to 12 months following the end of the plan year.
- Reimbursements — An employee who stops participating in an FSA midyear in plan years 2020 and 2021 may be reimbursed for unused contributions through the end of the applicable plan year.
- Midyear election changes — For plan years that end in 2021, FSA plans may allow employees to make a prospective election change to modify their FSA contributions without a status change.
- Dependent care coverage –Extends the ability to submit claims reimbursement in 2021 for expenses related to a child who attained age 13 during the plan year and who has an unused balance.
Surprise Medical Billing
The CAA included a measure entitled the “No Surprises Act” to restrict medical providers from sending consumers surprise medical bills. Once the CAA goes into effect in 2022, consumers will not receive balance bills for the following:
- Emergency care;
- Transport by air ambulance; or
- Non-emergency care at an in-network facility, when patients are unknowingly treated by an out-of-network doctor or lab
In these situations, consumers would only be responsible for paying their deductibles and co-payments per the terms of their in-network health insurance plans. Under the CAA, medical providers are prohibited from making patients responsible for the difference between their deductibles/co-payments and any higher fees that the provider wants to charge. The CAA also provides a 30-day period for insurers and providers to negotiate the payment of out-of-network charges. If no resolution is reached, these claims may be submitted to an independent dispute resolution process where an arbitrator makes the final decision.
Under the CAA, individuals who have suffered losses from federally “qualified” disasters other than COVID-19 become eligible for retirement plan distributions of up to $100,000 that will not be subject to the 10% early distribution tax. Eligible plans include 401k, 403b, 457b, and money purchase pension plans. The CAA defines “qualified disasters” as those that were declared between January 1, 2020, and February 25, 2021. For employers, plan amendments implementing the following disaster relief provisions must be adopted by the end of the plan year beginning on or after January 1, 2022.
Student Loan Repayment
Employers with qualified educational assistance programs may extend a temporary provision that allows employees to repay education loans. The current CARES Act provision on student loan repayments was set to expire on January 1, 2021, but is now extended to January 1, 2026. This extension does not change the maximum nontaxable benefit of $5,250.
Partial Plan Termination Safe Harbor
The CAA provides a temporary safe harbor for partial plan terminations, stating, “A plan shall not be treated as having a partial termination (within the meaning of 411(d)(3) of the Internal Revenue Code of 1986) during any plan year which includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021, is at least 80% of the number of active participants covered by the plan on March 13, 2020.”
The CAA provides for the temporary removal of the 50% limit on business meal deductions if the expense is for food and/or beverages provided by a restaurant and the expense is incurred between December 31, 2020, and January 1, 2023.
Mental Health Parity Compliance
The CAA requires group health plans to evaluate compliance with the Mental Health Parity and Addiction Equity Act (MHPAEA) regarding particular types of treatment limits imposed on mental health and substance use disorder benefits. Plans are also required to maintain written documentation of the analysis performed to ensure compliance under MHPAEA. Beginning February 10, 2021, group health plans will be required to make this compliance documentation available to federal regulators upon request.
Medical Expense Deductions
Under the Affordable Care Act (ACA), the threshold for deductible medical expenses increased from 7.5% to 10% of adjusted gross income. Later legislative action restored the 7.5% threshold for 2017-2020. The CAA instituted a permanent threshold of 7.5%.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.
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