COVID-19: Recent Official Notices for Employer Benefit Plans
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Recently there have been multiple regulatory announcements regarding Section 125 Cafeteria Plans, Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs). Please be mindful that not every announcement applies to every plan type, nor to all configurations of a given plan type.
Recent announcements include:
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Notice or Announcement |
Date Released |
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The CARES Act |
3/27/2020 |
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EBSA Disaster Relief Notice 2020-01 |
4/29/2020 |
|
IRS Notice 2020-29 |
5/12/2020 |
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IRS Notice 2020-33 |
5/12/2020 |
New Implications – Some Automatic, Some Needing Plan Sponsor Adoption
Some of the measures in these notices have expanded the options employers can adopt under their plans, and some apply to plans automatically without any action on the part of employers. The optional provisions that can be amended into an employer’s plan appear in IRS Notice 2020-29 – one applies to mid-plan year election changes and the other allows for additional coverage periods for incurring FSA expenses. The changes that will automatically apply to plans appear in IRS Notice 2020-33 –which announced a permanent, index linked, increase to the amount that can be rolled between plan years via the Health FSA Carryover Provision, and in EBSA Notice 2020-01 – an extended claims filing relief period defined for all plans subject to ERISA (Health FSAs, Limited Purpose FSAs and HRAs).
Changes that require a Plan Document Amendment
1. Mid-Year Election Changes
2. Extended Period to Incur Expenses Option
In order to offer one or both of the two new options to employees, an employer must have ABG amend their Section 125 Cafeteria Plan & FSA Plan Documents. Per the official notices, an employer will have until the end of next calendar year, 12/31/2021, to adopt amendments to their plans incorporating any of these specific changes.
Per a client’s signed Administrative Services Agreement with ABG, there is a plan amendment fee associated with changes to the documents (if multiple changes are implemented all at once, they will be covered by a single fee).
To put any of the optional changes into practice, an employer must:
• Determine that their plan qualifies for the change they are requesting
• Identify and select the specific amendments options they wish to adopt
• Sign our Plan Document Amendment Options – Pursuant to IRS Notice 2020-29 (Pandemic Relief Measure) and submit the form to processing@amben.com
1. IRS Notice 2020-29 – Mid-Year Election Change Options
When determining whether a plan qualifies for the newly introduced non QLE Mid-Year Election Change options which would be permitted during calendar year 2020. It is advisable that the employer identify a limited, restricted period during which they will permit their employees to make such changes. There are a number of things an employer must consider if they adopt this change. The Mid-Year Election Change option in addition to being applied to FSA plans can also be chosen by an employer to apply to employer-sponsored health plans. If the options of allowing these additional (non-QLE) mid-year election changes to employer sponsored health plans is adopted by an employer, that group’s employees could be permitted to (at the discretion of the employer):
Employer-Sponsored Health Coverage (Medical Insurance)
- New Election if Initially Declined:
Make a new election for employer-sponsored health coverage on a prospective basis, if the employee initially declined to elect employer-sponsored health coverage; - Revoke Medical Insurance Election in Favor of Different Employer-Sponsored Coverage:
Revoke an existing election for employer-sponsored health coverage and make a new election to enroll in different health coverage sponsored by the same employer on a prospective (“going-forward only”) basis (including changing enrollment from self-only coverage to family coverage or vice versa); - Revoke Medical Insurance Election with Attestation of Outside Coverage:
Revoke an existing election for employer-sponsored health coverage on a prospective basis, provided the employee attests in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer.
Flexible Spending Accounts (FSAs)
- FSA Election Changes:
Revoke an election for, make a new election for, or decrease or increase an existing election of a Health FSA, a Limited Purpose FSA (“LPF”) or a Dependent Care FSA (DCAP – Dependent Care Assistance Plan). IMPORTANT: Under this FSA election change option, employees may not reduce their election to an amount lower than the amount they have been reimbursed from that election as of the date of the change. Although only future salary reductions may be changed under the revised elections, amounts contributed to the FSA Accounts after the revised election may be used for any expenses incurred on or after January 1, 2020.
The initial three bullet points above are optional measures that relate to employer-sponsored health coverage (medical insurance). When determining if they will adopt any or all of the first three options related to their medical insurance, it is very important that an employer consult with their insurance brokers, and insurance carrier(s). In addition, an employer who is using an HRIS system or integrated eligibility file, should confirm with their HRIS, enrollment, payroll or eligibility file vendors how these changes would be implemented.
ABG has developed a form to be used by your employees to communicate their Mid-Year Election Changes. They form should be submitted to your HR and forwarded to processing@amben.com once you process internally. IRS Notice 2020-29 Special (non QLE) Mid-Year FSA Election Change Form
2. IRS Notice 2020-29 – Extended Period to Incur Expenses Option
This option is not available to all FSA plans.
Which employer FSA plans can take advantage of the Extended Period to Incur Expenses option?
To choose this option, the employer’s plan must satisfy one of the below bullet points:
• Have a plan year that ends in 2020
• Have a plan year with a 2.5-month Grace Period that ends in 2020
What does this option provide?
If an employer’s plan qualifies and the employer adopts the Extended Period to Incur Expenses option, it means that employees will be able to use remaining FSA balances in certain plans that started in 2019 to pay for otherwise eligible expenses with dates of service through the end of this year – 12/31/2020.
Interaction of this Option with Health Savings Accounts (HSAs)
Selecting this option could have adverse consequences for employees who plan to actively contribute to a Health Savings Account (HSA) offered by their employer.
Example Scenario: An employer has a calendar year FSA plan with a 2.5-month Grace Period, and also offers and HSA-compatible High Deductible Health Plan (HDHP). They have employees who had a General Purpose Health FSA in 2019 and who wish to contribute to an HSA in the new year. Under existing rules, any employee who had a balance in their General Purpose Health FSA on 12/31/2019 would not be eligible to contribute to (or receive employer contributions to) an HSA until the first day of the month following the Grace Period (which for a calendar year FSA plan would mean on 4/1/2020). However, with the adoption of the Extended Period to Incur Expenses option, if they had a balance in a General Purpose Health FSA on 12/31/2019, they would not be eligible for HSA contributions for all of 2020!
Increases to Carryover Amounts—Notice 2020-33
automatic plan amendment
Commencing with all plans with a start/renewal date in 2020 that have adopted the carryover, there is a permanent increase to the carryover amount that will be equal to 20% of the federal maximum annual election for those plans. This increase will be index linked in the future. This initial increase will be to $550 for plans that start in 2020. You do not need to contact ABG to have your plan document amended to capture this change, ABG will be automatically updating their documents to capture this update. These amendments will be occurring over the next few months.
EBSA Disaster Relief notice 2020-01 provided claim filing relief for ERISA plan
no amendment
This relief does not require a plan amendment. This allows employees an additional period of time to submit claims for expenses incurred for health FSA plans, Limited purpose FSA plans and HRA plans (this relief does not apply to DCA benefits because they are not subject to ERISA). The relief extends the time period for filing claims past the “Outbreak Period” if the original claim filing deadline for that plan or individual fell within the “Outbreak Period”. The Outbreak Period is defined as the period that –starts with the announcement of the national emergency on March 1st 2020 and ends 60 days after the announcement end of the national emergency yet tbd.
HSA compatibility clarification
no amendment
Notice 2020-15 provides that a health plan that otherwise satisfies the requirements to be an HDHP under Section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. This notice clarifies that the relief provided in Notice 2020-15 regarding HDHPs and expenses related to testing and treatment of COVID-19 applies with respect to reimbursements of expenses incurred on or after January 1, 2020. This notice further clarifies that the panel of diagnostic testing for influenza A & B, norovirus and other coronaviruses, and respiratory syncytial virus (RSV) and any items or services required to be covered with zero cost sharing under section 6001 if the Families First Coronavirus Response Act (p.L.116-127, 134 Stat. 178 (March 18, 2020)), as amended by the CARES Act, are part of testing and treatment for COVID-19 for purposes of Notice 2020-15.
Previous Communications
ABG has already communicated via email to all employer groups and brokers about the implications of the CARES Act, and we have already touched upon some aspects of the EBSA Disaster Relief Notice 2020-01. If you need the content of those previous emails, you can find that information here:
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3/23/2020 |
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The president signed The CARES Act into law on Friday March 27th |
3/27/2020 |
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5/1/2020 |
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5/4/2020 |
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5/14/2020 |
Important Pandemic Relief Measure Forms
Employer: Plan Document Amendment Options – Pursuant to IRS Notice 2020-29
Employee: IRS Notice 2020-29 Special (non QLE) Mid-Year FSA Election Change Form
Submit forms to processing@amben.com
If you have any questions or would like additional information contact,
American Benefits Group | support@amben.com | Tel: 800-499-3539