Spring 2021 Legislative Recap
The new administration has been busy in the first few months of 2021. We have seen a flurry of activity from the DOL, the EBSA and the IRS since January, with big changes being imparted to employer sponsored benefits plans.
IRS Notice 2021-15
Following its 2020 guidance, the IRS has extended optional FSA and DCA relief to employers in 2021. In addition to permitting mid-year FSA and DCA election changes absent life events ordinarily required by the Section 125 rules, Notice 2021-15 clarifies carryover and grace period extensions from the 2020 year end Consolidated Appropriations Act.
Beyond FSA and DCA relief, employers may also choose to allow mid-year election changes to medical and health plans anytime during their 2021 plan years. Since these changes are optional, employers that choose to adopt this additional flexibility with respect to their FSA, DCA and/or medical plans will need to update the plan documents by the end of the year.
EBSA Disaster Relief Notice 2021-1
In April, 2020 the EBSA, DOL and IRS issued joint guidance extending many deadlines associated with ERISA plans, including COBRA for employer sponsored plans. Under ordinary COBRA rules, terminated employees have 60 days to elect COBRA, and then 45 days to make an initial premium payment. Late payments of more than 30 days for ongoing premium would result in termination of COBRA coverage with no option for reinstatement. Under the joint guidance, the timeframe in which terminated employees could elect and pay their COBRA premiums was extended until 60 days after the date that the National Emergency ended, as declared by the federal government. As March 2021 approached with no end in sight, the statutory limitation on such deadline extension neared the one year expiration date leaving employers to speculate what action to take.
On the eve of the 1 year expiration, the EBSA issued Notice 2021-1 instructing plan sponsors to apply an individual 1 year extension to each qualified beneficiary’s COBRA election and ongoing premium payment deadlines. Under the current rule, each terminated employee will have until the earlier of 1) 1 year from their termination or late payment, or 2) 60 days after the National Emergency ends to elect COBRA, and pay all overdue premiums in order to receive COBRA coverage reinstatement.
PCORI Fee
As employers will recall, the 2019 year end budget bill removed the Cadillac tax but extended the PCORI fee for another ten year period. 2020 Calendar year plans (and those ending 10/31/20, and 11/30/20) will pay $2.66 per enrolled employee and per enrolled dependent for their self funded health plans by July 31, 2021. Employers will also pay this fee for the HRA plans, but will count employees only (not dependents) when calculating the fee for their HRA. Fully insured employer plans do not pay this directly, as the carrier will pay this fee. Non-calendar year plans (other than those listed above) will pay $2.54 per member.
American Rescue Plan Act (ARPA)
After several different drafts, the ARPA was signed into law on March 11. Notably for employers, the Act increases the Dependent Care FSA amount allowed for 2021, extends tax credits for optional FFCRA type paid leave, and includes a 100% COBRA subsidy for qualified beneficiaries whose COBRA event was an involuntary termination of employment, or reduction in hours only.
Voluntary Paid Leave for COVID-19
Employers that voluntarily continue to extend FFCRA type paid leave for employees impacted by COVID-19 may receive tax credits (against the employer’s Medicare Hospital Insurance taxes) for the leave through September 30, 2021. The law essentially offers a new allotment of FFCRA leave to employees, even if they previously exhausted leave entitlements under the 2020 FFCRA. But again, this is an optional extension for employers.
DCA Increase
The dependent care FSA (DCA) 2021 contribution limit will increase from $5,000 to $10,500 for married couples that file jointly. This is an optional change for employers to adopt and plan documents will need to be updated accordingly.
COBRA Subsidy
Involuntarily terminated employees and their dependents who have already elected, or could still elect to enroll in COBRA, are eligible for the 100% subsidy. These beneficiaries will pay 0% of the total COBRA premium for the plans in which they are enrolled (or the plans they are eligible to enroll in, based on their plan election as of the time of their termination*), with a 100% subsidy being paid by the employer. Employers will claim a quarterly tax credit against the Medicare payroll tax for the premium amounts they have paid. If the premiums paid exceed the quarterly Medicare payroll tax, the excess will be treated as an overpayment, refundable in accord with certain sections of the IRC.
Terminated employees who have not elected COBRA, and are still within their 18 month COBRA period, will receive a new COBRA election notice, and 60 days from April 1 to elect COBRA and receive the subsidy. The new 60 day special election allows these individuals to make a prospective COBRA election for the period beginning April 1, 2021, without requiring payment of premiums retroactive to the original COBRA event date. The coverage will in this case not be retroactive, and will extend prospectively only. The subsidy begins on April 1, and ends on September 30, or when the beneficiary’s maximum Federal COBRA coverage period ends (whichever is sooner). Additionally, the subsidy will end if the beneficiary becomes eligible for another group health plan, or becomes eligible for Medicare.
It is important to note that the maximum COBRA duration is not extended by the ARPA subsidy, and will still be measured from the date of the original COBRA event. The subsidy applies to the 18 month Federal COBRA period, as well as to any additional 18 month extension available under various state laws (note the subsidy does apply to small groups subject only to state mini-COBRA laws). Employers (or their COBRA administrators) will need to notify individuals that receive the subsidy, at least 15 days prior to the expiration of the subsidy (so no later than September 15, 2021, unless an individual's 18 month COBRA period ends sooner). The DOL has released Model Notices under the ARPA, as well as an FAQ, available on their site.
Looking Ahead to Fall 2021
Surprise Billing and Independent Dispute Resolution (IDR)
Under the 2020 year end Consolidated Appropriations Act (CAA), beginning in 2022, all health plans will include provisions to address surprise billing, and resolve billing disputes.
Emergency Services Provided by a Nonparticipating Provider
If the plan covers emergency services, the plan must cover emergency services provided by an OON provider or facility without requiring prior authorization, applying in-network cost sharing. Neither the ONN facility, nor the ONN provider can balance bill the individual.
Non-Emergency Services Provided by OON Providers at Participating Facilities
The plan must cover non-emergency services provided by an OON provider at a in network facility, applying the plan’s in-network cost share procedures. The ONN provider generally cannot balance bill the individual. The exception will be if the ONN provider provides ‘notice’ about the intent to balance bill in advance of services, and the individual agrees to pay the balance bill. The ‘notice’ exception to the prohibition on balance billing does not apply if the provider is considered an ‘ancillary provider’ such as an anesthesiologist. It also does not apply if there is no participating provider available, or the services are considered ‘urgent’ in nature. The plan will then make a payment, or provide notice of denial within 30 days after the ONN provider submits their bill. The plan and the ONN provider will have 30 days to negotiate before requesting IDR.
Broker and Consultant Compensation Disclosure
The CAA requires that all broker and consultant direct and indirect compensation earned in the scope of service to the health plan be disclosed to plan fiduciaries prior to the effective date (or renewal) of any services agreement for plan years beginning January 1, 2022.
With a full plate heading into the summer season, employers have a long list of compliance items to keep on their radar. Good record keeping for COBRA subsidy tax credits will be key, as will proper documentation of all related compliance.
*The law appears to offer employers the option to permit individuals to change their plan tier or plan election upon their special COBRA election. If an employer chooses to allow this, individuals could choose a different plan from what they were enrolled in when actively employed, when making their COBRA election. The law seems to indicate this tier change will only be permissible to the extent that the new plan choice is the same cost, or less expensive, than the original plan election. For example, if an employee was enrolled in single coverage at the time of their COBRA event, and now wishes to enroll in family coverage, the subsidy would only apply to the premium for single coverage and the individual would need to pay the premium difference for the family coverage.