Medicare and Employers with Less than 20 Employees/COBRA Pit-Fall

When employees reach age 65 they have decisions to make regarding Medicare.  These decisions could have serious consequences.

Employers with less than 20 employees

Employees participating in the company health insurance MUST enroll in Medicare Part B when turning 65. In groups with less than 20 employees the government considers Medicare the employee’s primary insurance and the employer provided insurance as secondary coverage.

The employer can subsidize the cost of an employee’s Medicare Part B and Medicare subsidy. This has typically proven to be less expensive than the insurance companies individual group health rate.

How can COBRA trip up Medicare enrollment?

Employees older than age 65 who deferred Medicare enrollment typically receive an eight-month special enrollment period, starting the month after employment ends or their group health insurance ends, whichever happens first. Employees should beware that if after ending employment they elect to use COBRA for their insurance for more than eight months (and COBRA coverage is generally available for up to 18 months), then the penalties for missing the special enrollment period and enrolling late are significant and, in the form of higher premiums, continuous.

Supreme Court Blocks Vaccine-or-Testing Rule

 The U.S. Supreme Court today blocked the Occupational Safety and Health Administration's (OSHA’s) emergency temporary standard requiring businesses with at least 100 employees to ensure workers are vaccinated against the coronavirus or wear masks and undergo weekly COVID-19 testing. But it allowed the federal government to require COVID-19 vaccination for health care workers at Medicare- and Medicaid-certified providers and suppliers.

The first decision criticized OSHA’s rule as a “blunt instrument” that “draws no distinctions based on industry or risk of exposure to COVID-19.” It also called the rule a “significant encroachment into the lives—and health—of a vast number of employees.”

In the second decision, the court noted that “health care workers around the country are ordinarily required to be vaccinated for diseases.” The Occupational Safety and Health Act does not plainly authorize the rule, the court stated.

Shrm 1-13-22 

Prepare for Upcoming ACA Reporting Deadlines in 2022

 

Update: IRS Offers Extension for Delivering Employee Forms The IRS, after initially saying there would be no automatic deadline extension for delivering Affordable Care Act (ACA) 1095 reporting forms to employees at the start of 2022, has now proposed a permanent, automatic 30-day extension, until March 2, for furnishing employee forms. The proposal says employers and insurers may take advantage of the extension for 2021 reporting forms before the rule is finalized. The proposal does not change the due dates for filing these forms with the IRS.

Employers should ensure that they and their service providers are prepared to furnish health care reporting forms to employees and file these forms with the IRS in this first quarter of 2022 as required under the Affordable Care Act (ACA), as the IRS will no longer grant penalty relief upon showing good-faith efforts to comply.

The ACA requires applicable large employers (ALEs)—employers that during the prior year had 50 or more full-time employees or the equivalent when part-time employees' hours are combined—to submit reporting forms to the IRS and to distribute these forms to employees by the following deadlines:

ACA Requirement	Deadline
1095 forms delivered to employees	Jan. 31, 2022 (proposed automatic extension to March 2)
Paper filing with IRS*	Feb. 28, 2022
Electronic filing with IRS	March 31, 2022

*Employers that file 250 or more information returns with the IRS must file the returns electronically.

Source: IRS.

Biden Administration’s Vaccine Policy for Health Care Workers Blocked Nationwide

 On Nov. 30, a federal district court in Louisiana ruled that the directive for health care workers is temporarily blocked nationwide, following a decision on Nov. 29 from a federal district court in Missouri that blocked the Biden administration's vaccine directive for health care workers in 10 states. 

However, also on Nov. 29, Supreme Court Justice Stephen Breyer denied a request from workers for a Massachusetts hospital system to suspend the system's COVID-19 vaccine requirement. We've gathered articles on the news from SHRM Online and other outlets.

States Argued the Directive Would Lead to Staffing Shortages

U.S. District Court Judge Matthew Schelp in Missouri appeared persuaded by the 10 states' argument that the mandate would lead to staffing shortages. "The scale falls clearly in favor of health care facilities operating with some unvaccinated employees, staff, trainees, students, volunteers and contractors, rather than the swift, irremediable impact of requiring health care facilities to choose between two undesirable choices—providing substandard care or providing no health care at all," Schelp wrote in a 32-page order.

(The Hill)

Federal Government Overreach?

In a lawsuit filed Nov. 10 against the Centers for Medicare & Medicaid Services (CMS), 10 states—Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota and Wyoming—claimed that the federal government has overreached its authority to dictate what happens in their states. "This case illustrates why the police power over compulsory vaccination has always been the province of—and still properly belongs to—the states," they said in the lawsuit. 

(The New York Times) 

Judge: Congressional Approval Needed to Require Vaccinations

The CMS did not get approval from Congress to require vaccinations for health care workers, Schelp wrote. He asserted this was necessary given the directive's "vast economic and political significance." He also noted the rules were issued without a standard period for public comment. 

"CMS seeks to overtake an area of traditional state authority by imposing an unprecedented demand to federally dictate the private medical decisions of millions of Americans," the judge wrote. "Such action challenges traditional notions of federalism."

(Springfield News-Leader)

Health Care Providers Preparing for Staff Shortages

Some hospitals, nursing homes and other health care providers are preparing to operate without up to one-third of their staff at the start of next year if those workers don't comply with the federal vaccine directive.

(The Wall Street Journal)

Louisiana District Court Judge's Opinion

"There is no question that mandating a vaccine to 10.3 million health care workers is something that should be done by Congress, not a government agency," Judge Terry Doughty of the U.S. District Court for the Western District of Louisiana wrote. He added, "It is not clear that even an act of Congress mandating a vaccine would be constitutional."

(The New York Times)

By Allen Smith, J.D.

November 30, 2021

Eligible Employers Have More Time to Apply for PPP Loans

Employers that need help covering payroll costs during the pandemic will have an additional 60 days to file a Paycheck Protection Program (PPP) application under a bill President Joe Biden signed into law on March 30.

The application period was set to close on March 31, but the PPP Extension Act of 2021 gives eligible employers until May 31 to apply.

The PPP is designed to help struggling businesses with 500 or fewer employees keep workers employed during the COVID-19 crisis by providing loans that are forgivable if certain criteria are met. The program aims to "provide a direct incentive for small businesses to keep their workers on payroll," according to the U.S. Small Business Administration (SBA), which oversees the program.

Employers should note that the American Rescue Plan Act (ARPA), which was signed into law on March 11, added $7.25 billion to the PPP and expanded the program to cover more nonprofits and digital media companies.

Michael Mahoney, an attorney with Ogletree Deakins in Morristown, N.J., said the intent behind ARPA is to expand eligibility and enable access to loans for businesses that continue to be severely impacted by the COVID-19 pandemic.

ARPA "also affords some recipients of Shuttered Venue Operator [SVO] grants eligibility for PPP loans, and on a more technical note, makes changes to payroll cost exclusions," explained William Eck and Stanley Jutkowitz, attorneys with Seyfarth Shaw in Washington, D.C.

Expanded Coverage

"The American Rescue Plan Act expands the types of tax-exempt organizations eligible for PPP loans," Eck and Jutkowitz noted. Under the act, all types of tax-exempt organizations are eligible for PPP loans, except certain social-welfare organizations, such as homeowners' associations. Tax-exempt organizations are subject to size and lobbying limitations. Depending on the organization type, the size limit is 300 or 500 employees per physical location. ARPA also extended eligibility for PPP loans to certain internet news publishers.

The act revised prior legislation to allow businesses that receive a PPP loan after Dec. 27, 2020, to apply for an SVO grant if conditions are met. SVO grants are also administered by the SBA and apply to small theaters, museums, live venue operators and some additional businesses.

"Specifically, if a PPP borrower receives a first draw or second draw PPP loan after Dec. 27, 2020, the amount of any subsequently approved SVO grant will be reduced by the amount of the first draw or second draw PPP loan," Eck and Jutkowitz said. "If a borrower receives both a first draw and second draw PPP loan after Dec. 27, 2020, the amount of any subsequently approved SVO grant will be reduced by the combined amount of both PPP loans."

Mahoney noted that ARPA focused on providing funding to smaller businesses that had not previously received relief. "This includes the lifting of an eligibility bar on small-business owners convicted of non-fraud felonies."

Loan Eligibility

Most businesses are eligible for a first loan if they employ 500 or fewer employees. However, businesses that employ more than 500 workers may be eligible if they meet the SBA's size standards for their industry.

Employers may be eligible for a second draw if they: 

Have no more than 300 employees.

Received a first draw PPP loan and used the full amount only for authorized uses.

Can show at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.

Patrick Dennison, an attorney with Fisher Phillips in Pittsburgh, noted that the latest FAQs make clear that applicants may not use the SBA's established size standards or the alternative size standard to qualify for a second draw PPP loan, though there are a few, narrow exceptions for specific business types. 

"In general, the size eligibility requirement for Second Draw PPP Loans are narrower than the size eligibility requirement for First Draw PPP Loans," the SBA said. "With some exceptions, an applicant is eligible for a Second Draw PPP Loan only if it, together with its affiliates (if applicable), employs no more than 300 employees."

Loan Forgiveness

The covered period for loan forgiveness begins on the date the loan was originally disbursed and ends on a date selected by the borrower that is at least eight weeks—and not more than 24 weeks—after the date of loan disbursement, he explained.

Employers can apply for loan forgiveness if the following criteria are met during the covered period:

Employee headcount and pay levels are maintained.

Loan funds are spent on payroll costs and other eligible expenses.

At least 60 percent of the funds are spent on payroll costs.

For the second draw, employee headcount and compensation levels must be maintained in the same manner as required for the first draw.

First draw and second draw PPP loans "can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations," according to the SBA. Some payroll expenses are excluded, such as federal employment taxes and payments to independent contractors.

Mahoney recommended that businesses start compiling the information needed to submit a loan forgiveness application during the covered period. "This will streamline loan forgiveness and ensure that the business is able to make informed business decisions over the course of its loan."

Employers should carefully review information on the SBA and Treasury Department websites. "The most common mistake employers make concerning PPP loans is failing to keep up with the changes in rules or guidance," Dennison noted.

Excerpt for SHRM article dates 3-31-21

New Covid Legislation to provide COBRA subsidies

One of the more pertinent provisions in ARPA is the impact it has on COBRA subsidies moving forward. The legislation offers federal subsidies for COBRA premiums at 100 percent coverage. These subsidies apply from April 1 to September 30, but they are not retroactive.

Organizations will be required to cover the monthly premium expense but will be able to reimburse these expenses through a quarterly credit against payroll taxes. If the overall amount an employer pays for subsidized coverage is greater than its quarterly tax liability, it may claim a refund. One major component of this subsidization that sets it apart from a normal COBRA-election period is that it allows qualified individuals to make a prospective COBRA election for the period beginning April 1 without requiring payment of premiums retroactive to the original loss of coverage.

In regards to eligibility, any employee who lost health coverage for qualifying reasons between November 1, 2019, and September 31, 2021, could take advantage of COBRA subsidies. More specifically, these subsidies will be available to any previously covered employee or family member who may have lost coverage due to involuntary termination or reduction of hours and are still within their 18-month eligibility period. Any individual who loses their job from now until September will be able to instantly elect to stay on their employer’s health plan. However, as previously mentioned, an individual is only eligible if their termination was involuntary. It is also available to those who did not elect COBRA when initially eligible, or anyone who elected but subsequently dropped coverage. 

Subsidized coverage will terminate if the qualified individual exhausts the 18-month COBRA period prior to September 30. It could also end if the individual becomes eligible for coverage under another group health plan during the subsidy period or becomes eligible for Medicare. Additionally, since COBRA-election deadlines were already extended as a result of the pandemic, many individuals are still within their original COBRA-election periods. 

Those who are eligible under these parameters can sign up during a 60-day SEP beginning April 1. Plan administrators will be required to amend existing COBRA notices and share a separate document with forms necessary for the employee to establish eligibility, but they must act quickly due to the relatively short timeframe. For efficacy’s sake, organizations should begin identifying potentially eligible employees as soon as possible.

Several details of the rollout of this will be decided in regulatory guidance from the relevant federal agencies. We anticipate this federal guidance to include precisely how to set up these provisions, likely prior to the implementation date of April 1. Specifically, the Treasury Department may permit an advance credit for employers, while the Department of Labor is expected to issue model COBRA notices addressing the subsidy.  

Excerpt from NAHU Article dated March 12, 2021

Sign-ups for Biden's Obamacare special enrollment period nearly triple

 More than 206,000 people signed up for Affordable Care Act policies on the federal exchange in the first two weeks of the special enrollment period ordered by President Joe Biden, federal data released Wednesday shows.

Uninsured Americans who want to buy 2021 coverage on healthcare.gov could start doing so on February 15, thanks to an executive order Biden signed in January. Special enrollment runs until May 15. Most states that operate their own marketplaces are also extending their enrollment seasons.

"These numbers are an encouraging sign — but we can't slow down until every American has the security and peace of mind that quality, affordable health coverage provides," Biden said.

Typically, signing up for coverage outside of the traditional enrollment period in the fall is restricted to those who lose their job-based policies or have a change in status, such as a divorce. Last year, only 76,000 people picked Obamacare plans during the second half of February, according to the Centers for Medicare and Medicaid Services, which runs the federal exchange.

Excerpt from article By Tami Luhby / CNN

COVID relief bill will let businesses seek second PPP loan

 Some American small businesses will be able to seek a second government-backed loan to help them get through the coronavirus pandemic.

The $900 billion stimulus bill that’s headed to President Trump’s desk includes about $284 billion in additional funding for the Paycheck Protection Program, which offered small employers forgivable loans meant to keep their staff on the payroll.

The Small Business Administration has already distributed 5.2 million PPP loans worth more than $525 billion. Businesses that are still struggling may be able to get another round of help — but they’ll have to meet stricter criteria than in the spring.

For one, only companies with 300 or fewer employees will be eligible for second loans, down from a limit of 500 in the program’s first iteration, according to text of the stimulus legislation Congress passed Monday.

Additional loans will be capped at $2 million instead of the previous limit of $10 million. And applicants seeking a second loan will have to show that their sales in at least one quarter of this year dropped by 25 percent or more from the prior year’s levels.

Additionally, the new law bars publicly traded companies from seeking PPP funds, a provision that was added after outrage about hundreds of such firms snagging millions of dollars in loans. Some big names such as Shake Shack and Lindblad Expeditions have returned the money.

The bill also simplifies the process for forgiving loans of less than $150,000. Those small borrowers will just have to sign a one-page form attesting that the money was used for its intended purpose.

That’s a win for banks, which had expressed concerns that the initial forgiveness process was too burdensome for small companies receiving little loans.

The stimulus package also gives the SBA $50 million to conduct audits and take up other efforts to tackle fraud in the massive program, according to the New York Times. The agency and the Treasury Department have already pledged to audit all loans larger than $2 million, but that will encompass less than 1 percent of the loans and only about 20 percent of all the money that’s been given out.

From New York Post, 12-22-20

Pfizer’s COVID-19 Vaccine First to be Granted Emergency Use Authorization by the Food and Drug Administration

 On December 11, 2020, the FDA authorized the emergency use of the first COVID-19 vaccine, manufactured by Pfizer. Although details are rapidly evolving, we want to share what we know now to help you answer questions from your employer groups.

Initial supplies of the vaccine will be limited. Most states will distribute it in phases, with high-risk populations like healthcare workers and nursing home residents addressed first. As the vaccine becomes more readily available, each state will communicate when and where it is being offered. 

Once it is available to the general public, CareFirst members will pay nothing for any authorized COVID-19 vaccine. 

Initially, the federal government will purchase and distribute all COVID-19 vaccinations. During this period, employer-sponsored plans will only be responsible for the administration costs rather than the entire cost of the vaccines.

Administration costs are based on the Centers for Medicare and Medicaid Services rates and are estimated to be about $17 for the first dose and $28 for the second, for a total cost of approximately $45. As additional vaccines are authorized and become available, different rates may be determined. 

Carefirst-12-14-2020

IRS Issues Instructions for 2020 Reporting Forms 1094-1095

 

 

The Internal Revenue Service (IRS) has issued further instructions for 2020 reporting forms 1094-B, 1094-C, 1095-B, and 1095-C. The instructions are as follows: The due date for providing Form 1095-C to employees has been extended from January 31, 2021, to March 2, 2021. If certain conditions are met, the IRS will not impose a penalty for failure to furnish Form 1095-C to any employee enrolled in an Applicable Large Employer (ALE)(50 or more Full Time Equivalent Employees) member's self-insured health plan who is not a full-time employee for any month of 2020. The IRS will not impose a penalty for failure to file Form 1095-C with the IRS or failure to furnish Form 1095-C to employees if you make a good faith effort to comply with the information reporting requirements. Form 1095-C has been modified with new codes for reporting offers of individual coverage HRAs (ICHRAs) and new lines for reporting required information. The plan start month is required for the 2020 Form 1095-C. The ALE must enter a two-digit number. Group Benefit Services can also help with this requirement for a fee.  If you need assistance, please do not hesitate to contact me at 410-239-5009. Use the links below to access copies of the instructions. 1094-B/1095-B 1094-C/1095-C

 

Administration extends COBRA enrollment period for laid-off workers

People who’ve been laid off or furloughed from their jobs now have significantly more time to decide whether to hang on to their employer-sponsored health insurance, according to a recent federal rule.

Under the federal law known as COBRA, people who lose their job-based coverage because of a layoff or a reduction in their hours generally have 60 days to decide whether to continue their health insurance. But under the new rule, that clock doesn’t start ticking until the end of the COVID-19 “outbreak period,” which started March 1 and continues for 60 days after the COVID-19 national emergency ends. That end date hasn’t been determined yet.

By extending the time frame to sign up for COBRA coverage, people have at least 120 days to decide whether they want to elect COBRA, and possibly longer depending on when they lost their jobs.
Take the example of someone who was laid off in April, and imagine that the national emergency ends Aug. 31. Sixty days after that date takes the person to the end of October. Then the regular 60-day COBRA election period would start after that. So, under this example, someone whose employer coverage ended at the beginning of May could have until the end of December to make a decision about whether to sign up for COBRA, with coverage retroactive to the beginning of May.

Some health policy experts question the usefulness of the change, given how expensive COBRA coverage can be for consumers, and how limited its reach: It isn’t an option for people who are uninsured or self-employed or who work for small companies.

“For ideological reasons, this administration can’t do anything to expand on the Affordable Care Act’s safety net,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms. “So they’re using these other vehicles. But it’s really a fig leaf. It doesn’t do much to actually help people.”

What does this rule change mean for workers? If you have lost your job, here are some things to consider.

Playing a waiting game
Under the new rule, workers can keep their COBRA options open far longer than before. It’s always been the case that people could take a wait-and-see approach to signing up for COBRA during the first 60 days after losing their coverage. If they needed care during that time, they could elect COBRA, pay the back premiums and continue their coverage. But if they didn’t need care during that time, they could save a chunk of money on premiums before opting for other coverage to kick in after the 60-day period.

Now, people have even more time to wait and see. Under the rule, once the administration declares the national emergency over, laid-off workers would get 120 days to decide whether to purchase their job-based insurance — 60 days under the new rule and the regular 60 days allowed as part of the COBRA law.

“It becomes a long-term unpaid insurance policy,” said Jason Levitis, a nonresident fellow at the Center for Health Policy at the Brookings Institution. “There’s no reason to enroll until something bad happens.”

This is not without risk, consumer advocates point out. Someone who has a serious medical emergency — a car accident or a stroke — might not be able to process their COBRA paperwork before they need medical care.

Waiting too long could also affect people’s ability to sign up for other coverage. When people lose job-based coverage, it triggers a special enrollment period that allows them to sign up for new coverage on their state health insurance marketplace for up to 60 days afterward.

“You could miss your opportunity to enroll in the [insurance] exchange” created under the Affordable Care Act, said Katy Johnson, senior counsel for health policy at the American Benefits Council, an employer advocacy group.

Don’t count on the boss to clue you in
Employers are not mandated to tell people promptly about their eligibility for COBRA. The same federal rule that gives workers more time to sign up for COBRA also pushes back the notification requirements for employers.

“Once an employer lays you off, they don’t have to notify you that you’re eligible for COBRA until after the emergency period,” said Karen Pollitz, a senior fellow at KFF, the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)

For many employers, especially large ones that outsource their benefits administration, notifications are routine and are continuing despite the federal change, said Alan Silver, a senior director at benefits consultant Willis Towers Watson. However, for smaller companies with fewer than 200 workers, getting the information out might be an issue, Silver said.

Costs can be jaw-dropping
Opting for COBRA is expensive because workers have to pay both their portion of the premium and their employer’s share, plus a 2% administrative fee. A 48-year-old paid $599 a month on average for individual COBRA coverage last year, according to a KFF analysis.

In addition, if people elect COBRA several months after losing their coverage, they could be on the hook for thousands of dollars in back premiums.

The upside for former employees is that sticking with their previous employer’s plan means they don’t have to start from scratch paying down a new deductible on a new plan. Nor do they have to find new doctors, as often happens when people switch health plans and provider networks change.

Ten percent of workers laid off or furloughed because of the coronavirus pandemic reported they had COBRA coverage, according to a survey conducted last spring by the Commonwealth Fund.

The COBRA extension is available only to people who worked at firms with 20 or more employees and had job-sponsored coverage before being laid off or furloughed. If the company goes out of business, there’s no health insurance to continue to buy.

Might hospitals step in to pay premiums?
Employers are typically not big fans of the program. Workers who elect COBRA are typically older and sicker than others with employer coverage, the KFF analysis found. They may have serious medical conditions that make them expensive to cover and raise employer costs.

Some policy experts are concerned that giving people more time to sign up for COBRA leaves the door open for hospitals or other providers to offer to pay sick patients’ back premiums in order to increase their own payment above what they’d receive if someone were on Medicaid or uninsured. Doing so could be a boon for some patients but raise health care costs for employers, said Christopher Condeluci, a health care lawyer who does legal and policy work around the Affordable Care Act and ERISA issues.

“Employers are worried,” said Pollitz. After getting laid off, “what if you’re uninsured and you wind up in the hospital six months in, and then the hospital social worker learns you’re eligible for COBRA and offers to pay your premium?”

KHN (Kaiser Health News) is a nonprofit news service covering health issues. It is an editorially independent program of KFF (Kaiser Family Foundation), which is not affiliated with Kaiser Permanente.

By Michelle Andrews, Kaiser Health News | July 20, 2020 at 10:41 AM

IRS Allow Mid-Year Election Changes-Covid 19

When employees made their annual health plan enrollment decisions last fall, no one was expecting the chaos of the COVID-19 pandemic. Many consumers are rethinking the choices they made (or finally giving the elections the proper amount of attention employers have been urging for years). And in light of the current situation, the IRS is giving employers and employees a one-time do-over.

This week, heeding the requests of employer groups, the IRS announced that it would allow employees to make mid-year changes to their health plan. Those who originally opted not to enroll in a plan can now do so, or those who are enrolled in a plan drop it, provided they have alternative coverage options. Alternatively, an employee can decide to switch from one type of plan to another.

The latter could be particularly meaningful to employees who are dealing with a significant decrease in their income and looking for a cheaper alternative.

In addition to changing their health insurance coverage, employees will also be able to change their FSA contributions. Unused FSA contributions are forfeited at the start of the next plan year, which could be a problem for consumers who had previously budgeted for elective care but are now putting it off until the pandemic has subsided.

The IRS is also allowing employers to increase the carryover limit from $500 to $550–or 20% of the maximum FSA contribution limit–and also offer an extended grace period for employees to use up their 2019 carryover balance.

None of these changes are mandatory, and it’s up to an employer to decide whether they will offer any or all of the increased flexibility options to employees.
The latest updates follow other tweaks to FSAs and HSAs included in the CARES Act, which expanded eligible items for use with these accounts to include over-the-counter drugs.  

Excerpt from Benefits Pro May 2020

Disaster Relief Payments—Tax-Efficient Assistance to Employees Impacted by Covid-19

President Trump’s national emergency declaration on March 13 triggered tax code Section 139, which allows employers to exclude disaster assistance payments from employees income.

Tax code Section 139 enables employers to make non-taxable qualified disaster relief payments to employees for reasonable and necessary expenses resulting from the coronavirus pandemic.

Generally, payments made by an employer to, or for the benefit of, an employee must be included in the employee’s gross income under Section 61 and cannot be treated as a nontaxable gift under Section 102(c). Prior to the enactment of Section 139, various types of disaster payments made to individuals have been excluded from gross income under a general welfare principle, but no specific statutory exclusion was available for disaster payments from employers to employees.

Section 139 was enacted in the aftermath of the September 11 terrorist attacks. When triggered, it overrides the broad income inclusion principles of Section 61 and allows employers to provide direct financial assistance to employees impacted by a qualified disaster without adverse tax consequences.

Defining a Qualified Disaster
Most advisers understandably focus on Section 139’s application to losses incurred as a result of terrorist attacks and natural disasters such as hurricanes, tornadoes, wildfires, and flooding. However, Section 139(c)’s gatekeeping requirements are much broader and were triggered on March 13, 2020, when President Donald Trump declared a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act due to the spread of the coronavirus. Employers may now provide tax-favored financial assistance to employees who are affected by the coronavirus.

Reimbursable Expenses
Reinbursable expenses associated with the coronavirus may take many different forms, such as:

Unreimbursed medical expenses including co-pays, deductibles, vitamins, and supplements
Increased expenses associated with being quarantined at home (e.g., increased utilities and home office expenses, as discussed below)
Expenses associated with setting up or maintaining a home office such as enhanced internet connections, computer monitors, laptops, printers, office supplies, etc. (even if such expenses would not otherwise satisfy the home office deduction requirements)
Housing for additional family members, (e.g., transportation and living expenses for college students returning home including duplicative meal expenses)
Nonperishable food purchases/reserves
Increased childcare expenses
Expenses to enhance mental health and physical well-being from social distancing such as meditation apps and home health fitness
Alternative commuting means in lieu of mass transit

Nonreimbursable Expenses
Three broad categories of nonreimbursable expenses are:

Payments for expenses that are not reasonable and necessary
Payments that constitute an income replacement program (i.e., a payment for lost wages, lost business income, or unemployment benefits)
Payments that are reimbursed or reimbursable by insurance or otherwise
No Expense Substantiation
Due to the extraordinary circumstances surrounding a qualified disaster, employees are not required to account for or substantiate actual expenses in order to qualify for the exclusion, provided that the amount of the payments can be reasonably expected to be commensurate with the expenses incurred. Significantly, the reasonable belief provisions found in Subtitle C of the tax code do not apply to Section 139 payments; however, Section 139’s reasonableness provisions and the lack of a substantiation requirement have much the same effect as the reasonable belief provisions.

No Dollar Limit
Section 139 does not impose a dollar limit. An employer could provide an affected employee with a six-figure payment as long as the expenses in question are reasonable and necessary with respect to the coronavirus.

No Discrimination Testing
Payments are not subject to discrimination testing. Unlike various Section 132 provisions, Section 139 does not impose any discrimination rules under Section 139.

No Payroll Taxes or Reporting
Qualified disaster relief payments are excluded from gross income and wages for payroll tax purposes. In addition to being exempt from payroll taxes, such payments are not subject to information reporting on either Forms W-2 or Forms 1099-MISC.

No Deduction Limitations
Qualified disaster relief payments should be fully deductible. Even though the payments are neither taxable wages nor gross income, employers may reasonably take the position that the payments remain fully deductible to the same extent that they would have been if they were otherwise included in gross income or taxable wages. However, Section 139(h) denies “double benefits” with the likely result that self-employed individuals and other owner-employees may find their tax deductions limited if they are actually a recipient of a qualified disaster relief payment.

Cash Advances and Reimbursements
Although some tax advisers believe that qualified tax relief payments only apply to reimbursements, the better position is that Section 139 also encompasses cash advances to pay for covered expenses that the employer reasonably expects the employee to incur.

Section 132 Fringe Benefit Rules
Section 139 should override the provisions of Section 132 (regarding fringe benefits) to the extent that the provisions might otherwise cover the same payment.

Plan Documentation
A written plan document is not required or recommended. Nevertheless, given the benefits of tax-free status for qualified disaster relief payments, employers consider adopting an administrative system that validates such payments meet the Section 139 requirements. Such a system can include an application form and an affirmative statement from the employee that the requested funds are necessary for expenses associated with the coronavirus and confirms that such expenses are not reimbursable by insurance.

Audit Outlook
The IRS is not likely to audit a program that clearly limits payments to reasonable and necessary payments incurred as a result of the coronavirus. Similarly, although the vast majority of states follow the federal exclusion by defining state taxable income with reference to an individual’s federal taxable income, in the handful of states where a technical reporting requirement may exist for qualified disaster relief payments, we have not encountered any adverse audits that refuse to extend the same treatment at the state level.

Summary
Section 139 qualified disaster relief payments may be the most generous and easily administered of the various employee benefits provisions found in the tax code. In addition to some of the most favorable income and employment tax treatment of any provision of the tax code, the reasonableness provisions, the broad nature of reimbursable expenses, and the lack of any onerous substantiation requirement necessarily make Section 139 payments the first benefit that any employer should examine when trying to respond to the adverse financial impact that the coronavirus has on its employees.

David Fuller and Rick Stepanovic of McDermott, WIll & Emery/Bloomberg March 27, 2020

Qualifying health plan expenses may result in larger employment tax credits under the FFCRA and the CARES Act

Both the Families First Coronavirus Response Act (the FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act provide for payroll tax credits for the payment of certain employee wages until Dec. 31, 2020. Under both laws, the amount of these wages include "qualifying health plan expenses," which may result in a larger payroll tax credit.

Under the FFCRA, an employer is typically eligible for a fully refundable payroll tax credit that is equal to the qualified sick leave wages and the qualified family leave wages, plus allocable qualified health plan expenses paid between April 1, 2020 and Dec. 31, 2020.

Under the CARES Act, an employer whose operations is fully or partially suspended may be eligible for a payroll tax credit up to 50 percent of the wages paid (up to $10,000) between March 12, 2020 and Jan. 1, 2021. Again, these wages include allocable qualified health plan expenses.

Employers may offset the amount of their anticipated payroll tax credits under the FFCRA and the CARES Act against their deposit of employment taxes (including income tax withholdings) with the IRS. Since many employers are required to make these deposits with the IRS on a semi-weekly basis, employers should start determining their qualified health plan expenses as soon as possible.

Technical Jargon

Both the FFCRA and the CARES Act include the following provisions:

That the amount of the credit (under the FFCRA) or the amount of qualified wages (under the CARES Act) includes the employer's allocable "qualified health plan expenses.")
"Qualified health plan expenses" means "amounts paid or incurred by the employer to provide and maintain a group health plan (as defined in the Internal Revenue Code), but only to the extent that such amounts are excluded from the gross income of employees by reason of section 106(a) of the code.
The FFCRA and the CARES Act direct the Secretary of the Treasury to prescribe how qualified health plan expenses are allocated but also state that, "[e]xcept as otherwise provided by the Secretary, such allocation shall be treated as properly made if made on the basis of being pro rata among employees and pro rata on the basis of periods of coverage (relative to the periods such wages relate)."

Practical Advice

The provisions related to determining qualified health plan expenses for purposes of claiming payroll tax credits under either the FFCRA or the CARES Act are difficult to interpret. The following sections break these provisions down so that they are better understood. The first step is to determine which health plan expenses are eligible for a payroll tax credit. The second step is to allocate these expenses to the appropriate employees.

Eligible Health Plans

A "group health plan" under the Internal Revenue Code includes all plans that are subject to the continuation of coverage requirements under COBRA. As a result, the following employer-sponsored plans are included for purposes of determining the payroll tax credit under both the FFCRA and the CARES Act:

Medical/prescription drugs.
Dental.
Vision.
Medical flexible spending accounts (medical FSAs).
Health reimbursement arrangements (HRAs), except for qualified small employer HRAs (QSHRAs).
Employee assistance plans (other than referral-only EAPs).
Onsite medical clinics.
Eligible Expenses

Expenses incurred as a result of providing one of the above group health plans are only included for purposes of determining the payroll tax credit under the FFCRA and the CARES Act to the extent these amounts are excluded from the gross income of employees under the tax code. This includes amounts paid by the employer. It also includes amounts that are paid by employees through pretax salary reductions under a Section 125 Cafeteria plan. Amounts paid by employees on an after-tax basis, such as COBRA premiums, are not included for purposes of determining the payroll tax credit.

Allocating Expenses

The IRS issued a series of FAQs regarding the payroll tax credits under the FFCRA. The IRS also issued FAQs on the payroll tax credits under the CARES Act, but those FAQs don't address qualified health plan expenses. Since the statutory provision regarding the allocation of qualified health plan expenses is the same under the FFCRA and the CARES Act, it appears reasonable that the FAQs on how to allocate these expenses under the FFCRA would apply equally to the CARES Act.

Fully Insured Group Health Plans

The IRS's FAQs give the following three allocation methods with respect to fully insured group health plans:

The COBRA applicable premium for the employee typically available from the insurer (while the FAQs are silent on this, we do not recommend including the 2 percent administrative fee).
One average premium rate for all employees.
A substantially similar method that takes into account the average premium rate determined separately for employees with self-only and other than self-only coverage.
The FAQs only give an example of the second allocation method. Here is that example:

An Eligible Employer sponsors an insured group health plan that covers 400 employees, some with self-only coverage and some with family coverage. Each employee is expected to have 260 work days a year. (Five days a week for 52 weeks.) The employees contribute a portion of their premium by pre-tax salary reduction, with different amounts for self-only and family. The total annual premium for the 400 employees is $5.2 million. (This includes both the amount paid by the Eligible Employer and the amounts paid by employees through salary reduction.)

For an Eligible Employer using one average premium rate for all employees, the average annual premium rate is $5.2 million divided by 400, or $13,000. For each employee expected to have 260 work days a year, this results in a daily average premium rate equal to $13,000 divided by 260 or $50. That $50 is the amount of qualified health expenses allocated to each day of paid sick or family leave per employee.

Self-Insured Group Health Plans

With respect to self-insured group health plans, the FAQs give the following two allocation methods:

The COBRA applicable premium for the employee typically available from the administrator (again, while the FAQs are silent on this, we do not recommend including the 2 percent administrative fee).

Any reasonable actuarial method to determine the estimated annual expenses of the plan.

The FAQs do not, however, give any examples of the allocation methods for self-insured group health plans.

Exerpt from SHRM Artcile by: Tripp VanderWal © Miller Johnson
April 23, 2020

Carrier Links to On-Line Physician Visits

Below is a list of carriers and links to their respective on-line physician access to meet with a doc in the comfort of your own home.  With an expanded list of illness’ they are able to diagnose, treat and prescribe medications for, it’s one more way to keep you out of harm’s way.  In addition they will send the RX directly to your pharmacy. 

Carefirst: Video Visit

United Healthcare: Virtual Visits

Aetna: Telemedicine

Cigna: Telehealth

Kaiser Permanente: Video Visit

Hope you all are well.  And please share the link with your employees, familes, friends.

Thanks,

Ben 

MD Health Connection Emergency Enrollment Period Available Now!

MD Health Connection
Emergency Enrollment Period Available Now!

In an effort to prioritize health and safety and in response to Coronavirus, Maryland Health Connection opened an emergency special enrollment period for uninsured Marylanders.

You can enroll in a health plan through Wednesday, April 15, 2020. Coverage will be effective April 1, 2020, regardless of when a health plan is selected during that time period.

Medicaid enrollment is available all year.

How to enroll: 

Visit MarylandHealthConnection.gov or download the free "Enroll MHC" mobile app. When enrolling, consumers should request or select "Coronavirus Emergency Special Enrollment Period."

The online application is available daily from 6 a.m. to 11 p.m.

Free consumer assistance is available by calling 855-642-8572 weekdays from 8 a.m. to 6 p.m. Deaf and hard of hearing may use Relay.

While free, in-person assistance is still available in some areas of the state, we strongly encourage you to apply using the website, mobile app or by phone.

Is Coronavirus testing covered under a Maryland Health Connection plan or Medicaid? 

Yes. Health insurance companies are required to waive cost-sharing, including lab fees, co-payments, coinsurance, and deductibles for any visit to test for coronavirus at a doctor's office, urgent care center, or emergency room.

Can I qualify for the Coronavirus Emergency Special Enrollment Period even if I'm not sick?

Yes. All eligible, uninsured Marylanders may qualify for this emergency special enrollment period.

What do I need to apply?

Have these items ready when you apply. 

We encourage all residents to closely follow the Centers for Disease Control and Prevention (CDC) and the Maryland Department of Health (MDH) for all health-related coronavirus questions.

Congress Repeals the Cadillac Tax and Health Insurance Tax

Congress overwhelmingly passed an end-of-year spending bill and a companion tax extenders measure that contain several agenda items, including full repeal of the so-called Cadillac tax on high-cost health plans. The SECURE Act, a measure to promote savings by easing compliance burdens on defined-contribution and defined-benefit retirement plans, was attached to the appropriations bill.

E-Verify also was extended for another year, along with other workplace-immigration programs.

The House approved these measures on Dec. 17 and Senate passage followed two days later. President Donald Trump is expected to sign the bills into law.

Some of the items in the package that were previously passed by the House were consolidated in the new bills to facilitate the Senate's consideration and approval.


'Cadillac Tax' Repeal

The spending bill includes full repeal of the so-called Cadillac tax on high-cost health plans, which the House passed in July but the Senate had yet to consider. The spending bill also repeals two other Affordable Care Act (ACA) taxes not paid directly by employers: the health insurance tax (HIT) on fully insured health plans and the ACA's tax on medical devices.

The Cadillac tax, included in the ACA but delayed several times from taking effect, is a 40 percent excise tax on the cost of employer health plans in excess of annual cost thresholds. While the excise tax was intended to target high-value plans, without repeal "modest plans will also be impacted, meaning millions of Americans and their families could face higher co-pays and deductibles, causing some to decline employer-provided health care," wrote Johnny C. Taylor, Jr., SHRM-SCP, president and CEO of SHRM, in a letter sent in July to Congress.

Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, commended congressional leaders for "setting the stage for permanently repealing the Cadillac tax, the HIT and the [medical device tax], which would finally put an end to the higher health costs that come from the taxes and would improve access to more affordable coverage."

AHIP, a national association of health insurers, said that because insurers passed along the cost of the HIT to employers in the form of higher premiums, "families in the small-employer market could see their premiums go up an additional $7,000 over the next 10 years because of this tax," absent repeal.

HR consultancy Mercer noted: "By axing the ACA's Cadillac, health insurance (repealed effective 2021) and medical device (repealed effective 2020) taxes, the spending package removes nearly all of the law's major funding provisions, except the employer shared-responsibility assessments."

Excerpt from Stephen Miller, CEBSDecember 19, 2019

5th Circuit Says ACA Individual Mandate Is Unconstitutional

A panel of the U.S. Court of Appeals for the 5th Circuit ruled Dec. 18, in Texas v. United States, that the Affordable Care Act's (ACA's) individual coverage mandate, effectively repealed as of this year, is unconstitutional. But the appellate panel then sent the case back to the district court to adjudicate whether the individual mandate's removal leaves the rest of the law standing.

On Dec. 14, 2018, district court judge Reed O'Connor ruled that because Congress eliminated the penalty on individuals without ACA-compliant health coverage effective in 2019, the ACA's individual mandate requiring people to have health insurance "can no longer be sustained as an exercise of Congress's tax power." O'Connor, who sits in the Northern District of Texas, then struck down the ACA in full, concluding that the individual mandate is so connected to the law that Congress would not have passed the ACA without it. His ruling, however, left the ACA in place pending an appeal to the Fifth Circuit.

On appeal, the split panel of the Fifth Circuit instructed the district court to rehear the matter and to provide additional analysis on whether the rest of the law passes constitutional muster without the individual mandate.

Excerpt from SHRM article By Stephen Miller, CEBSDecember 19, 2019

New Overtime Rule Raises Salary Cut-Off to $35,568

Employees who make less than $35,568 are now eligible for overtime pay under a final rule issued today by the U.S. Department of Labor (DOL). The new rate will take effect Jan. 1, 2020. To be exempt from overtime under the federal Fair Labor Standards Act, employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek. The new rule will raise the salary threshold to $684 a week ($35,568 annualized) from $455 a week ($23,660 annualized). A blocked Obama-era rule would have doubled the threshold, but a federal judge held that the DOL exceeded its authority by raising the rate too high. The new rule is expected to prompt employers to reclassify more than a million currently exempt workers to nonexempt status and raise pay for others above the new threshold. excerpt from SHRM article dated 9/24/19

PREVENTATIVE CARE BENEFITS ENHANCED FOR HSA PARTICIPANTS

The Internal Revenue Service (IRS) has issued a notice that expands preventative care benefits for high deductible health plans.  Prior to this notice, care and services for an existing or chronic condition were not included as preventative. The IRS and the Department of Health and Human Services (HHS) determined that certain medical care services received and items purchased, including prescription drugs for certain chronic conditions, should be classified as preventative care.

These medical services and items are limited to the specific medical care services or items listed for the associated chronic conditions specified in Notice 2019-45. The treasury has noted that each medical service, when prescribed for an individual with the related chronic condition, should be characterized by the following:

• The service or item is low-cost.
• There is medical evidence supporting high-cost efficiency (a large expected impact) of preventing exacerbation of the chronic condition or the development of a secondary condition.
• There is a strong likelihood, documented by clinical evidence, that with respect to the class of individuals prescribed the item or service, the specific service or use of the item will prevent the exacerbation of the chronic condition or the development of a secondary condition that requires significantly higher-cost treatments.

Any medical care previously recognized as preventive care for these rules is still treated as preventive care.

From BenefitMall August 7, 2019