On Tuesday, May 18, 2021 the IRS issued Notice 2021-31 providing 86 FAQs related to premium assistance for COBRA benefits under the American Rescue Plan Act, 2021. The full text version of the FAQs is available below. These provide additional guidance on, among other things:

  • Whether an individual has had an “involuntary” termination, including employee-initiated terminations that could be considered constructive discharges under all of the facts and circumstances;
  • Whether an individual has had a “reduction in hours”, including voluntary or employee-initiated leaves that are not pandemic-related;
  • How the “Outbreak Period” relief applies to individuals who could also elect retroactive COBRA coverage for periods prior to April 1, 2021;
  • The extent to which employers can rely on self-certification or attestation of “assistance eligible individual” status;
  • The impact of retiree coverage on eligibility for COBRA premium assistance;
  • How premium payees can apply and calculate the refundable tax credit, including in the context of retiree coverage, severance benefits, or similar situations.

IRS Notice 2021-31

The IRS released 2022 cost-of-living adjustments for health savings accounts (HSAs) and high-deductible health plans (HDHPs) in Revenue Procedure 2021-25, which will be published in Internal Revenue Bulletin 2021-21 on May 24, 2021.

2022 HSA Contribution Limits. For 2022, individuals enrolled in a high-deductible health plan may make pre-tax contributions of up to $3,650 to an HSA if they have self-only coverage (an increase from $3,600 for 2021), or up to $7,300 if they have family coverage (an increase from $7,200 for 2021).

2022 HDHP Limits. For 2022, the minimum annual deductible for HDHP plans is $1,400 for self-only coverage (unchanged from 2020), and $2,800 for family coverage (unchanged from 2020).  The 2022 annual limit on out-of-pocket expenses (including deductibles, co-payments, and other amounts (but not premiums)) is $7,050 for self-only coverage (an increase from $7,000 for 2021) and $14,100 for family coverage (an increase from $14,000 for 2021).

On April 8, 2021, Washington Governor Jay Inslee issued Proclamation 20-46.3, which modifies proclamations issued in 2020 that provide employment and benefit protections during the COVID-19 pandemic emergency for “high-risk employees.” (For purposes of the Proclamation, a “high-risk employee” is any employee that the Centers for Disease Control defines as being more likely to get severely ill from COVID-19.) This is a new development since our July 2020 Client Update, “State of Washington Extends Existing Protections for “High-Risk Workers” Amid COVID-19.”

Among other modifications (e.g., with respect to medical verification of high-risk status), Proclamation 20-46.3 will no longer prohibit Washington employers from failing to fully maintain health insurance benefits for high-risk employees. Except to the extent benefits are otherwise required to continue (e.g., under FMLA or a collective bargaining agreement), an employer may now terminate health insurance benefits for an employee covered by the proclamation, provided that: (1) the employer gives the affected employee 14 calendar days’ advance written notice of the change; and (2) the coverage termination does not take effect before the first day of the calendar month after the month in which the 14-day notice lapses.

When it released Proclamation 20-46.3, Governor Inslee’s office also issued a set of Frequently Asked Questions discussing this and other modifications. Employers who are considering terminating health insurance coverage for any high-risk employees should consult with their legal counsel to ensure compliance with the Proclamation and other applicable laws, such as the Affordable Care Act, ERISA, and the NLRA.

On April 15, 2021, in response to the ongoing COVID-19 situation, the U.S. Internal Revenue Service (IRS) issued a temporary deviation from the handwritten signature requirement for a limited list of tax forms, including elections under Section 83(b) of the Internal Revenue Code, allowing taxpayers and representatives to use electronic or digital signatures when signing such forms. The temporary deviation expires on December 31, 2021, and applies to forms signed and postmarked on August 28, 2020, or later. Read the full article.

In 2019, Washington passed the first law in the nation requiring employees to fund a state-operated long-term care insurance program. The program, codified at RCW 50B.04 and set to begin on January 1, 2025, will be funded by an uncapped payroll tax starting at 0.58% on all employee compensation beginning January 1, 2022.

Although changes to the law are subject to final approval, Governor Inslee is expected to sign the final bill (HB 1323) shortly. If signed into law, the amendments will require employees who wish to opt out of the tax to purchase long-term care insurance by November 1, 2021. Accordingly, employers should act now if they want to offer employees long-term care options prior to the anticipated deadline. Read the full article.

On April 14, 2021, the U.S. Department of Labor (DOL) released three-part guidance on cybersecurity issues for employee benefit plans, marking its first significant commentary on the issue since its comprehensive but nonbinding report in late 2016.

The DOL’s guidance provides tips and best practices for ERISA plan sponsors, responsible fiduciaries, recordkeepers, service providers, and participants in appropriately safeguarding nonpublic plan and participant information against cybersecurity threats. The DOL also issued a tip sheet for ERISA plan participants to best protect their own information when interacting with plan data online.

Though the DOL’s guidance is described in terms of tips and best practices, this guidance raises a number of practical implications for ERISA plan sponsors and responsible fiduciaries. Plan sponsors and responsible fiduciaries should consider evaluating, implementing, and documenting actional responses for their own information systems and cybersecurity controls against points raised in the DOL’s guidance. Read the full article.

The American Rescue Plan Act of 2021 includes a 100% federal subsidy of COBRA premiums (including the up-to-2% administrative fees) during the period of April 1, 2021, through September 30, 2021. Earlier this week, the Employee Benefits Security Administration published clarifying FAQs and model notices related to the COBRA subsidy. This update discusses the guidance most relevant to employers and highlights areas where additional guidance is still needed. Read the full article.

The American Rescue Plan Act of 2021 (ARPA) includes a 100% federal subsidy of COBRA premiums (including the up-to-2% administrative fees) during the period of April 1, 2021, through September 30, 2021. The subsidy applies to group health coverage typically subject to COBRA, except for health flexible spending accounts. This update summarizes the ARPA’s COBRA subsidy provisions and flags key implementation considerations to assist employers and plans with planning as we await critical additional guidance from the U.S. Department of Labor and Internal Revenue Service. Read the full article.

The multiemployer pension plan system is facing a funding crisis with over 100 plans projected to become insolvent in the next 10 to 20 years. This rate of plan insolvency was projected to cause the collapse of the Pension Benefit Guaranty Corporation’s (PBGC’s) multiemployer benefit insurance fund. Insolvency of both underfunded multiemployer pension plans and the PBGC would have left millions of Americans without retirement benefits.

The American Rescue Plan Act of 2021 (ARPA) creates a new PBGC special financial assistance fund for troubled multiemployer pension plans, as well as several other relief provisions that will assist multiemployer pension plans in weathering the loss of contributions and financial distress caused by the COVID-19 public health emergency.

This update examines in detail each form of multiemployer pension plan relief under the ARPA, as well as potential impacts of the ARPA on employers participating in underfunded multiemployer pension plans. Read the full article.

In late December, Congress passed the Consolidated Appropriations Act, 2021 that included cafeteria plan relief but left many open questions regarding how the relief provisions should be implemented and administered. The IRS issued Notice 2021-15 on February 18 to provide much needed clarification on the CAA’s cafeteria plan provisions. In this update, we discuss some of the key takeaways from the IRS’s clarifying guidance. Read the full article.