In addition to $600 checks for most Americans, the year-end COVID-19 stimulus package signed by the President on December 27, 2020, includes a new round of changes that employers will need to track for their employee benefit plans. The Consolidated Appropriations Act, 2021 (H.R. 133) (the “Act”) is the fourth major legislative attempt to provide relief to businesses and individuals facing economic hardship due to the COVID-19 pandemic. Although lacking a catchy acronym (like the “CARES” and “SECURE” Acts), this legislation makes the most significant changes to health plans since the Affordable Care Act, offers employers and employees additional flexibility for cafeteria plan benefits, and provides additional retirement plan relief.
As part of its ongoing response to the coronavirus (COVID-19) outbreak, the IRS has released new guidance (Notice 2020-29) providing increased flexibility with respect to mid-year election changes under Section 125 cafeteria plans during the 2020 calendar year. The Notice also provides increased flexibility with respect to grace periods that will allow participants with unused amounts in their health or dependent care flexible spending accounts (FSAs) to apply those amounts to expenses incurred through December 31, 2020. Generally, employers may adopt the changes immediately (in some cases retroactive to January 1, 2020), so long as the plan is amended by December 31, 2021.
A frequently overlooked portion of the CARES Act offers employers the ability to give their employees some immediate – and cost-free – financial assistance. The Act opens the door for employees to use pre-tax dollars to purchase over-the-counter drugs and menstrual care products. Employers will need to modify health FSAs, HSAs, and HRAs to take advantage of this relief.
As we are all now intimately aware, the coronavirus pandemic has changed the nature of the workplace, and all of the benefits, rights, and responsibilities arising out of employment. We are operating under a new set of rules, and those rules are changing daily. Employers’ efforts to manage their workforce in order to maintain fiscal viability while protecting the health of employees also affect benefits. The cascading effect of these factors raises many thorny benefits questions. We will summarize – and attempt to answer – a few of those questions here (based on the legal landscape as of March 31, 2020).
On Friday, June 26, 2015, the Supreme Court published its ruling in Obergefell v. Hodges, holding (by a 5 to 4 margin) that the Fourteenth Amendment requires a state to license marriages between two people of the same sex, and to recognize any such marriage that is lawfully licensed and performed out-of-state. As a result, all (remaining) state laws or constitutional amendments banning same-sex marriage are now invalid.
When it comes to health coverage, many employers draw a distinction between full-time and part-time employees. To be eligible to enroll in the employer’s health plan, an employee must work a minimum number of hours per pay period. But many of those same employers then allow even part-time employees to contribute to a health flexible spending account (“health FSA”). After all, doing so costs the employer nothing (and even saves a modest amount in employment taxes), and why not at least give those employees an opportunity to pay some of their medical expenses on a pre-tax basis? Unfortunately, this paternalistic approach may now subject an employer to substantial daily penalties under the Affordable Care Act (“ACA”).