COVID-19 Relief Bill –
The Impact on Employers and Employees
Date: December 22, 2020
Late last night, Congress passed a nearly $900 billion COVID-19 stimulus deal (the “Bill”) that includes assistance for struggling Americans and businesses and includes significant provisions impacting employee benefit plans. We expect the president to sign the Bill into law. In addition to provisions providing for continued funding of the government, a number of tax extenders and other provisions designed to implement certain policy priorities, some provisions of the Bill – described below – are designed to soften the financial blow of COVID-19 for the American workforce, allow greater flexibility to employee benefit plan sponsors as a result of the impact of COVID-19 on their plans and their employees, and eliminate surprise medical billing.
The Bill will temporarily extend existing pandemic unemployment insurance programs created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act set to expire at the end of this year. The Pandemic Unemployment Assistance program, which provides aid to the self-employed, temporary workers, independent contractors and gig workers, has been extended and will continue to provide additional weeks of unemployment insurance and an extra benefit of $100 per week for some workers who are both self-employed and have salaried jobs. The Bill also extends the Pandemic Emergency Unemployment Compensation program and provides an additional 13 weeks of benefits to those who exhaust their regular state benefits in addition to a supplemental federal unemployment benefit of $300 per week for up to 10 weeks from December 26, 2020 to March 14, 2021. The benefits are not retroactive.
The Bill also adds program integrity provisions to require documentation of earnings and employment – versus just self-certification – and compels states to have processes for verifying an applicant’s identity to combat fraud and abuse in the unemployment programs. In addition, the Bill includes return-to-work reporting requirements for states to provide a reporting mechanism for employers to identify employees who turn down a job and to notify claimants of the requirement to accept suitable work, unless there is good cause for refusal.
Paycheck Protection Program
The Bill includes an extension of the small business Paycheck Protection Program (PPP), which has provided small businesses with forgivable loans to keep them afloat and leave employees on the books throughout the pandemic. The expansion includes more than $284 billion for forgivable PPP loans. The Bill also includes $15 billion in dedicated funding for live venues, independent movie theaters and cultural institutions.
Additionally, particularly hard-hit businesses that already received PPP grants will be eligible for a second round of funds. The Bill defines eligibility for the PPP second draw as small businesses that have no more than 300 employees and demonstrate at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020. The Bill also ensures that subsidies under PPP are not taxed.
Paid Sick Leave
The Bill provides a tax credit to support employers who offer paid sick leave to employees. Under the Families First Coronavirus Response Act (FFCRA), enacted in March of this year, many employers were required to provide their employees with two weeks of fully paid leave related to COVID-19, and up to 12 weeks of partially paid family and medical leave. FFCRA leave is no longer required as of December 31, 2020, but if covered employers voluntarily provide these leave benefits through March 31, 2021, they are eligible to take the tax credit for the leave.
The new Bill did not extend the requirement for certain employers to provide FFCRA leave, but it did extend refundable payroll tax credits and employee eligibility for such paid sick and family leave, enacted in the FFCRA, from December 31, 2020 to the end of March 2021. It also modifies the tax credits so that they apply as if the corresponding employer mandates were extended through the end of March 2021. This provision is effective as if included in FFCRA.
COVID-19 Liability Shield
While lawmakers were split over the inclusion of a federally mandated pandemic liability shield, the Bill does not include liability protection from COVID-19-related lawsuits for businesses, universities and health care centers.
FSA Forfeiture Relief
Not a moment too soon, the Bill provides relief with respect to flexible spending account (FSA) funds that went unused during 2020, giving plan sponsors the flexibility to allow funds to rollover and be used throughout 2021. Under this relief, rollover of unused funds is permitted for both health care and dependent care FSAs. For health care FSA plans that already apply a carryover design, the relief permits carryover of the full 2020 balance (i.e., the rollover is not subject to the standard carryover limit). For health care or dependent care FSA plans already applying a grace period design, the relief permits extension of the 2020 grace period through December 31, 2021, giving participants a full additional year to utilize 2020 funds. Similar relief is permitted for the 2021 plan year (allowing unlimited rollover to the 2022 plan year).
Other FSA relief allows plan sponsors to:
- Permit prospective mid-year election changes for any reason – even without a life event – during the plan year that ends in 2021. If adopting this relief, plan sponsors may wish to limit the number of changes or set other conditions, for example prohibiting election changes that would reduce contributions below amounts that have already been reimbursed under a health care FSA.
- Allow participants who terminate employment in 2020 or 2021 to be reimbursed for health care expenses incurred after termination (during the same plan year and associated grace period, if applicable) without electing COBRA.
- Permit use of 2020 dependent care FSA funds (including funds rolled over from 2020 to 2021) for expenses incurred with respect to a 13-year-old child if the child turned 13 during 2020 or 2021.
Plan sponsors seeking to adopt all or a portion of this relief generally must amend their plans prior to 2022.
Surprise Medical Billing
Effective for plan years beginning on or after January 1, 2022, group health plans and health insurance issuers (collectively referred to as “health plans”) are required to take certain steps to protect covered persons from surprise medical billing, i.e., billing for costs incurred when an out‑of-network provider is unexpectedly involved in a participant’s care. The Bill requires health plans to treat the following services as if they were in-network services: out‑of-network emergency care, certain services provided by out-of-network providers at in-network facilities, and air ambulance services. Any cost-sharing payments made by a participant for these services must count towards the in‑network deductible and out-of-pocket maximum as if they were performed by in-network providers. The Bill also prevents out-of-network providers from balance billing the participant for such services.
By July 1, 2021, the Departments of Labor, the Treasury and Health and Human Services (the “Agencies”) must issue rules addressing how health plans must determine the appropriate amount of payment to be made to the non‑participating provider. If an out-of-network provider disagrees with the amount of its payment, the Bill requires that the provider and the health plan engage in informal discussions followed, if necessary, by binding arbitration.
Additionally, the Bill requires the Agencies to audit health plans to ensure compliance with these provisions.
The Bill imposes significant reporting and disclosure requirements on health plans to ensure that covered persons are aware of the different cost-sharing requirements for in-network and out-of-network services, to ensure that provider directories are up to date, and to ensure that participants are given an advance estimate of costs they can expect to pay for certain scheduled services. These requirements are effective for plan years beginning on or after January 1, 2022 and are in addition to the disclosure requirements imposed by the cost transparency regulations issued earlier this year.
The Bill also requires service providers providing brokerage or consulting services to a health plan to provide disclosures to the responsible plan fiduciary regarding their services and compensation; similar requirements have applied to retirement plan service providers since 2012. These requirements will be effective one year after the enactment of the Bill.
Additionally, one year after the enactment of the Bill and by June 1st of each year thereafter, health plans will be required to report certain information to the Agencies regarding prescription drug coverage and costs.
Mental Health Parity Compliance
Within 45 days of enactment of the Bill, health plans will be required to perform and document comparative analyses of the design and application of non-quantitative treatment limitations. Health plans will be required to submit these analyses to the Agencies upon request, and the Agencies will be required to request at least 20 analyses per year.
Student Loan Repayments
The CARES Act allows employers to make non-taxable student loan repayments on an employee’s behalf under a qualified educational assistance plan – but only until December 31, 2020. The Bill extends this provision for five years, allowing such non-taxable payments to be made until December 31, 2025.
Partial Plan Terminations
Generally, partial plan terminations are based on a facts-and-circumstances test but can occur when more than 20% of an employer’s workforce is involuntarily terminated during a plan year. Under the Bill, a partial plan termination will not occur during any plan year which includes the period of March 13, 2020 through March 31, 2021, if the number of active participants covered by the plan on March 31, 2021 is at least 80% of the number of active participants covered by the plan on March 13, 2020.
Qualified Disaster Distributions
The Bill extends certain provisions that permit distributions and loans from a qualified retirement plan in the event of a federally declared disaster. The Bill is clear that COVID-19 is not a disaster for this purpose.
Special In-Service Pension Distributions for Building and Construction Industry
A pension plan may currently provide a distribution to an employee who has attained age 59 1/2 but has not yet separated from employment. The Bill provides a limited exception allowing in-service distributions from a multiemployer pension plan at age 55 if certain conditions are met: (i) the employee must have been a participant in the plan on or before April 30, 2013, (ii) the trust must have been in existence before January 1, 1970, and (iii) the plan must have received a determination letter before December 31, 2011 when the plan provided an in-service distribution at age 55. While it’s likely that this provision applies to only one, or a small handful, of plans, it applies to distributions made before, on, or after the effective date of the Bill.
FOR MORE INFORMATION
For more information, please contact:
Nancy M. Barnes
Julia Ann Love
Edward C. Redder
Laura A. Ryan
M. Scott Young
Hannah E. Caldwell
Beth A. Mandel
Erin E. Shick
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