HomeResourcesArticles
April 7, 2021

COVID-19 Legislative Updates: March 2020 – April 2021

Donna Wilkinson
Donna Wilkinson
General Counsel

IRS approved PPE as 213(d)

The IRS issued new guidance clarifying that the purchase of personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, are qualified medical expenses if used for the primary purpose of preventing the spread of coronavirus. The announcement applies to expenses incurred on or after January 1, 2020. This will permit these expenses to be paid tax-free with HSAs, Archer MSAs, health FSAs, and HRAs.  The announcement also allows employers and plan administrators to amend their plans to include these expenses. Announcement 2021-7 will appear in IRB 2021-15, dated April 12, 2021.

The IRS and the Treasury Department also announced that the 2020 federal income tax filing and payment due date is extended to May 17, 2021.  The IRS also clarified that this date is the deadline for making HSA contributions for 2020.


American Rescue Plan Act of 2021 (ARPA)

On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act of 2021 (ARPA). The legislation goes into effect April 1, 2021 and contains provisions for a COBRA subsidy and an increase to the annual dependent care FSA contribution limit for 2021.

COBRA Premium Subsidy 
The ARPA includes a 100% COBRA premium subsidy for eligible individuals and their family members. Details about the subsidy and criteria are included below.


Action Items for Ameriflex Clients

March 29, 2021 – April 30, 2021: Review COBRA Records – Employer Responsibility

  1. Ameriflex is unable to determine if a previously-terminated employee was terminated voluntarily or involuntarily without the employer providing and confirming such information. As the custodian of employment records, the employer is responsible for reporting this information accurately; therefore, it is crucial employers review their COBRA records to ensure those employees who were terminated beginning November 1, 2019 to present were marked correctly as involuntary or voluntary.
    1. ​​​​​R​​​eview COBRA records and confirm that individuals who were terminated involuntarily or had a reduction in hours are marked as Termination-Involuntary or Reduction in Hours under Event Type. View instructions for this here.
    2. If there are any changes that need to be made to an individual’s status in the COBRA system, contact your Client Relationship Team. You can access their contact information in the Ameriflex Employer Portal.
    3. To ensure all individuals who are eligible for the subsidy receive their notices in the required timeframe, please notify your Client Relationship Team of any changes by April 30.


Action Items for Ameriflex and Department of Labor

April 10, 2021 – Department of Labor Responsibility

May 14, 2021* – May 31, 2021 – Ameriflex Responsibility

April, 25, 2021 – Department of Labor Responsibility

May 31, 2021* – September 15, 2021 – Ameriflex Responsibility

Employers will be able to offset the cost of the COBRA subsidy through a payroll tax credit against the Section 3111(b) Medicare tax. The credit will include the entire COBRA premium, including the 2% administrative fee. More information and guidance on the tax credit procedures will be forthcoming as the IRS and DOL work to determine the exact procedure.

Dependent Care FSA Limit Increase
The legislation also includes a voluntary one year increase to the annual dependent care FSA contribution limit. Employers who want to offer the limit increase to their employees must amend their plan documents.

IMPORTANT NOTE for NON-calendar year DCA plans: The total DCA contributions for the calendar year 2021 would need to be monitored by the employer so employees do not contribute more than $10,500 within the 2021 calendar year, even if the plan year overlaps 2021 and 2022. Ameriflex would need to be notified of any contribution changes to the 2022 plan year if the employee has contributed $10,500 for 2021, so employees’ accounts are not overfunded starting 2022 or in 2021. If employers with NON calendar year DCA plans wish to increase the 2021 maximum, employers will strongly want to consider prorated reimbursement limits for expenses incurred during the 2022 portion of the 2021-2022 plan year. The employer will be responsible for ensuring that no employee exceeds the maximum amount for the year as any excess contribution would need to be reported as taxable income. For these reasons, Ameriflex does not recommend NON-calendar year plans adopt this increase since it places additional risk and monitoring by the employer to remain in compliance with the regulations.

We are actively working on the operational procedures to accommodate the ARPA legislative updates and will communicate next steps to our clients and partners soon.

FAQ:

Would the subsidy cover only during the period listed (04/01/2021 to 09/30/2021) 
Yes, the subsidy will only be for that time period.

What if an individual has a qualified life event in the middle (Example: 07/01/2021): 
They would only have a subsidy for the remaining period (07/01/2021 to 09/30/2021)

Is the COBRA subsidy available to people who declined COBRA before? For example, if I was eligible for COBRA in August of last year and declined, will I get a new notice with the option to re-enroll + the ability to receive the subsidy?
Yes, if a person initially declined COBRA but was still within their election period, they could change their mind and choose to now elect coverage effective 4/1/2021 with the ability to receive the subsidy.

U.S. Department of Labor Guidance Regarding COVID-19 Related Extensions

On February 26, 2021, the Department of Labor, Department of the Treasury, and Internal Revenue Service (the “Agencies”) released EBSA Disaster Relief Notice 2021-01, which provides new information regarding COVID-19 related COBRA extensions.

Rewind to 2020: National Emergency Declaration
As we communicated in early 2020, the COVID-19 pandemic was declared a “National Emergency,” effective March 1, 2020. As a result of the National Emergency declaration, the Department of Labor, Internal Revenue Service, and Department of the Treasury extended certain COBRA continuation coverage timeframes and benefit claim timeframes in order to assist Americans during the pandemic.

What Was the Initial Guidance?
Under ERISA, the deadline extensions had a legal limit of one year, from March 1, 2020 to February 28, 2021. The initial guidance extended the following deadlines: For Participants:

 

For Employers/Plan Administrators:

These deadlines were originally expected to expire on February 28, 2021.

 

What Is The New Guidance?
On Friday, February 26, 2021, the Agencies released EBSA Disaster Relief Notice 2021-01, which, once again, changes the COBRA continuation coverage timeframes along with the timeframe in which an individual may submit a benefit claim.

Under the new notice, the one-year extension will be applied on an individual-by-individual basis. That means a deadline will be extended until the earlier of (i) One year from the date the individual was first eligible, or (ii) the end of the Outbreak Period (60 days after the announced end of the National Emergency). For example:

Ameriflex will continue to follow guidance from the issuing Agencies over the coming weeks and provide more details as they become available to us. You can also read the notice on the Department of Labor’s website here.


Reminder About COVID-19-Related Claims Run-Out Extension

In 2020, the Department of Labor (DOL), the Employee Benefits Security Administration (EBSA), and the Internal Revenue Service (IRS) issued a joint notice providing emergency relief specifically to those employee benefit plans which are subject to the Employee Retirement Income Security Act (ERISA).

The notice applies to flexible spending accounts (FSA) and health reimbursement arrangements (HRA), as well as some Individual Coverage HRAs (ICHRA), giving participants enrolled in those plans additional time to file claims past the standard run-out period.

Reminder: A run-out is a period of time after the end of a plan year during which participants can submit claims to get reimbursed for expenses incurred during the previous plan year.

How long is the claims run-out extension?
For any FSA and HRA plans with a claims run-out period that ended on or after March 1, 2020, the run-out period is extended until 60 days after the end of the National COVID-19 Emergency (the IRS, EBSA and DOL will announce this date). The extension is retroactive back to March 1, 2020.

Does this only apply to plans subject to ERISA?
Yes. The extension does NOT apply to governmental entities, churches or plans which are maintained solely to comply with applicable workers comp, unemployment or disability laws.

Are there any steps Ameriflex clients need to take?
No, Ameriflex has updated our administrative process to accommodate the claims run-out extension.
For more details about the claims runout extension, go here.


Consolidated Appropriations Act, 2021

On Sunday, December 27, President Trump signed a COVID-19 relief and government spending package called the Consolidated Appropriations Act, 2021. As part of the relief bill, the government has expanded upon earlier-provided relief for flexible spending accounts (FSA) and dependent care flexible spending accounts (DCA).

Employers may choose to adopt any or all of the following provisions; however they are not mandatory. These provisions do require plan amendments, which Ameriflex is prepared to accommodate.

  1. Rollovers – Allow employees to carry over all unused amounts in a FSA and/or DCA from the 2020 or 2021 plan year to the next plan year.
  2. Grace Periods – Extend the FSA grace period from 2 1/2 months to 12 months following the end of the plan years for those plan years that end in 2020 or 2021.
  3. Qualifying Dependent Age – Allow reimbursement for expenses incurred for a child through the 2021 plan year where the child attains age 14 (this helps address a situation where a child attained age 13 during the pandemic, therefore, the parent may not have been able to use the funds because school or daycare was closed).
  4. Election Changes – Permit prospective mid-year election changes without regard to a change in status in order to accommodate these updates.
  5. Reimbursements Post-Termination – Allow reimbursements through the end of 2020 or 2021 plan year in which participation ends, including any grace period or extended grace period even if those reimbursements were incurred after the employee was employed with the employer.


Deadline for Making Plan Amendments
Employers wanting to adopt one or more of the above provisions must amend their applicable plan documents by the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. This means changes for the 2020 plan year need to be adopted by December 31, 2021, and changes for the 2021 plan year need to be adopted by December 31, 2022.

Ameriflex clients can contact their dedicated Client Relationship Team for assistance with plan amendments. Please refer to our FAQ below for more information.

FAQ

How do we amend our company’s plan documents to allow for the FSA/DCA provisions included in the relief bill?
To make this process easier for you, Ameriflex will be providing a one-page amendment document shortly.

Is there a fee associated with the amendments?
There is a $150 charge for the amendments.

How do I make use of the amendment pages?
The amendment should be signed off on, known as adoption, by the Plan Sponsor and communicated timely via the regular means of plan document delivery to all participants.

Does the relief bill impact commuter reimbursement accounts?
The relief bill does not affect commuter reimbursement accounts.

Can a participant transfer funds from a transit/parking account to a dependent care account?
At this time, a participant may not transfer funds from a transit/parking account to another account; however, the participant may be able to modify the contribution into a transit/parking account while not commuting to and from work.


DOL COBRA Final Rule – Impact on CDH Accounts

The Department of Labor (DOL) Employee Benefits Security Administration (EBSA) issued a COVID-19 relief rule which extends the time periods in which individuals can submit claims for coverage, elect and pay for COBRA continuation coverage, enroll in group health plan coverage, and file appeals for benefit determinations. The extensions are known as the “Outbreak Period” which is defined as the period beginning March 1, 2020 and ending 60 days after the date on which the federal government declares the COVID-19 National Emergency has ended. The rule specifies that the Outbreak Period may not be longer than one year.

The extension the rule provides for applies to employee benefit plans subject to ERISA. The following FAQ provides the impact of this new rule on those benefit plans Ameriflex administers.

How does the rule apply to Flexible Spending Accounts (FSA) and Health Reimbursement Arrangements (HRA)?

How does the rule apply to Dependent Care Accounts (DCA)?

How does the rule apply to Commuter and/or Transit Accounts? 

How does the rule apply to Direct Bill or Retiree Plans?

How does the rule apply to State Continuation coverage?

DISCLAIMER
COVID-19 updates are occurring daily. The aforementioned is for informational purposes only. You should review the CDC, IRS and DOL websites for updated information. The information contained herein is not legal or accounting advice and should not replace consulting with your legal counsel or accountant.


IRS issues guidance on FSAs, HDHPs, mid-year changes, and more

In response to the unexpected challenges Americans have faced due to COVID-19, the IRS announced temporary changes to section 125 (aka cafeteria) plans. These changes apply to flexible spending accounts (FSA), dependent care accounts (DCA), individual coverage HRAs (ICHRA), and high deductible health plans (HDHP). It is up to the employer to decide whether to allow these changes.

Here’s what’s changing: 
The temporary changes issued under Notice 2020-29 and Notice 2020-33 include:  FSA & DCA Grace Period Extension (TEMPORARY) An employer, although not required to do so, may amend their plans to allow employees to use unused amounts in their FSAs and DCAs to pay for expenses incurred before December 31, 2020 – thereby extending the grace period a full year. The extension for incurring claims is available to both cafeteria plans that have a grace period and plans that also provide a carryover. Note: This extension may impact an individual’s HSA eligibility during the extended period.

Mid-Year FSA & DCA Election Changes (TEMPORARY) An employer, although not required to do so, may amend its plan to allow employees to revoke an election, make a new election, or increase or decrease an election to an FSA or DCA.

FSA Carryover (PERMANENT)
The maximum amount of unused funds that may be carried over in FSA increased from $500 to $550. Employers must adopt a plan amendment by December 31, 2021, and this can be retroactive to the 2020 plan year.

ICHRA Reimbursements (PERMANENT)
Allows ICHRA to treat healthcare premiums as incurred on:

With this guidance, payment of the premium for coverage made before the beginning of the plan year can be reimbursed if the insurance coverage starts during the plan year.
HDHP Expenses (TELEHEALTH EXEMPTION – TEMPORARY) This applies earlier relief for HDHPs to cover expenses related to COVID-19, as well as a temporary exemption for telehealth services retroactively to January 1, 2020.

What to expect from Ameriflex: In the coming weeks, we will communicate additional information about how to make amendments to your plans. If you have any questions in the meantime, please don’t hesitate to contact your Ameriflex Client Relationship Specialist.


COBRA Deadlines Extended

On March 13, 2020, President Trump declared the COVID-19 pandemic a National Emergency. The National Emergency declaration resulted in emergency declarations for every state and territory of the United States effective March 1, 2020.

The U.S. Department of Labor, Internal Revenue Service, and Department of Treasury have jointly issued a final rule extending certain COBRA continuation coverage timeframes in order to assist Americans during this time.

What Relief Is Being Provided?
The following time period is disregarded for purposes of determining the standard COBRA timeframes:

Which Cobra Timeframes Are Affected?
For the Employer/Plan Administrator:

For the Qualified Beneficiary :

How Does The Relief Apply?
The following examples assume, for illustrative purposes, that the National Emergency ends on April 30, 2020. This would mean that the “Outbreak Period” ends 60 days later, on June 29, 2020.

COBRA Elections to be made by COBRA Qualified Beneficiaries
John works for ABC Company and participates in the group health plan. Due to the National Emergency, John loses his job and his group health plan coverage. He has no other coverage options. John is provided a COBRA election notice on April 1, 2020. What is the deadline for John to elect COBRA?

The Outbreak Period is disregarded for purposes of determining John’s COBRA election period. The last day for John to elect COBRA continuation coverage is 60 days after June 29, 2020 (the end of the Outbreak Period), which is August 28, 2020.

Initial COBRA Payment to be submitted by COBRA Participant
Assume the same facts as in the example above. John decides to submit his COBRA election notice on June 1, 2020. How long does he have to submit his first premium payment?

Normally, John would have 45 days from the date of his election to submit his first premium payment. However, since the Outbreak Period is disregarded for purposes of determining John’s initial payment due date, John now has until August 13, 2020 (45 days after the end of the Outbreak Period).

Ongoing Monthly Payment to be submitted by COBRA Participant
On March 1, 2020, Suzanne was receiving COBRA continuation coverage under a group health plan. She made a timely premium payment for the month of February, but did not make the March payment or any subsequent payments during the Outbreak Period. As of July 1, Suzanne has made no premium payments for March, April, May or June. Does Suzanne lose COBRA coverage, and if so, for which month(s)?

Suzanne would typically have a 30-day grace period in which to submit monthly premium payments. However, since the Outbreak Period is disregarded, the payments for March, April, May, and June are all deemed to be timely if they are made within 30 days after the end of the Outbreak Period. Accordingly, premium payments for these four months are all due by July 29, 2020. If, by July 29, Suzanne only submits payments for the months of March and April, she will not be entitled to coverage for the months of May and June.

Individual to Notify Plan of Secondary Qualifying Event
On March 1, 2020, Julie, along with her covered spouse, was receiving COBRA continuation coverage under a group health plan and has been making timely monthly payments. On June 15, Julie and her spouse get a divorce. By when must Julie notify her employer/plan administrator of this qualifying event?

Typically, Julie would have 60 days to notify her employer/plan administrator of her divorce, allowing her ex-spouse an opportunity to elect COBRA continuation coverage. However, since the Outbreak Period is disregarded, Julie has until August 28, 2020 to notify her employer/plan administrator of this secondary qualifying event.

Ameriflex Has You Covered
Ameriflex will automatically handle these changes for all of its COBRA clients, in addition to notifying eligible COBRA qualified beneficiaries of their expanded rights. We will also keep clients apprised of any new guidance and requirements, as necessary.

Important Considerations
With the stroke of a pen, all ERISA (and COBRA) plans are now required to abide by this new regulation. This means that if, hypothetically, the Outbreak Period should end on September 30, 2020, applicable COBRA periods would extend 60 days beyond that date. Since we do not know when the Outbreak Period will end (and there is also a possibility that different regions of the country are subject to different timeframes), your responsibility to offer COBRA continuation rights to eligible individuals dating back to March 1, 2020 extends as well.

As a broker, consultant, employer, or plan administrator, it’s important that you work closely with your vendors (insurers, ASOs, stop-loss carriers, etc.) to accommodate extended retroactive enrollment and termination. As an example, if the government has not ended the state of emergency by September 1, 2020, an employee that experienced a loss of coverage on February 29, 2020 could elect and pay for COBRA continuation coverage after October 15, 2020, and still be entitled to retroactive coverage all the way back to March 1, 2020.


List of FSA Eligible Over-the-Counter Items Expanded During COVID-19 Crisis

On March 27, 2020, President Trump signed into law two permanent changes that will affect the way you use your FSA card. These changes are retroactive to January 1, 2020. One amazing change that has been implemented due to the CARES Act allows Over-The-Counter (OTC) drugs and medications to be purchased using your FSA account.
During the Affordable Care Act, OTC drugs and medications required a prescription from your healthcare provider. This new act removes the requirement for a prescription and puts you in control and relieves the added pressure of going into the doctor’s office, while they are overwhelmed with other healthcare needs.

Another awesome benefit of the CARES Act is women can utilize their FSA funds to purchase menstrual products. This means the pads, tampons, liners, cups, sponges or similar products can be purchased with pre-tax dollars withheld from your check.

Some of the acceptable items now include, diagnostic products like thermometers, blood pressure monitors, cholesterol testing and oximeters. They have also included items such as diabetic care products, juvenile diapers, incontinence protection, night mouth guards, nasal medications, washes and sleep apnea nasal strips, prenatal vitamins, reading glasses, sunscreen with UVA/UVB protection and SPF 15+, acid controllers, acne medications, allergy & sinus products, cold sore remedies, contraceptives, baby rash ointments/creams, eye drops, food care treatments, hemorrhoid creams, laxatives, smoking deterrents and medicated respiratory treatments. This is just a sampling of the newly added list.

During a transition period, this will require that you submit a claim in order to be reimbursed while merchants are working diligently to get their systems updated with the newly eligible codes.
SIGIS provided this list to merchants on April 15, 2020. If you attempt to use your card and are unable to purchase an item, please review the list of eligible products attached to this message to see if it is an eligible item.

Along with the acceptable products, there are also items that are not eligible, these include dual use products such as cosmetics, personal hygiene, weight loss supplements, vitamins (except glucosamine, prenatal and those that treat a medical condition), gloves, air purifiers, hand sanitizer and baby products (diapers and formula). Other items not covered include products used for cold, cough and flu that are coded as dietary supplements/support the immune system; however, those that lessen the severity or reduce the duration are covered.

If you have any questions, please don’t hesitate to contact us, Ameriflex is here to help.


Plan Amendment Required to Accommodate OTC Products

Now that expenses for menstrual care products and over-the-counter (OTC) drugs and medications can be purchased with a flexible spending account (FSA) or health reimbursement arrangement (HRA) without a prescription, employers will need to adopt a plan document amendment to accommodate this change.

Below are helpful questions and answers regarding the plan document amendment process.

How do we amend our company’s FSA or HRA Plan Document and Summary Plan Description to allow for the reimbursement of OTC drugs and femine products?
To make this process easier for you, Ameriflex has provided one-page amendment documents, which can be found on our website here for FSA plans, and here for HRAs.

Is there a fee associated with the amendments?
No. These amendment pages have no additional cost.

How do I make use of the amendment pages?
Simply sign the Plan Document amendment page and keep it on file along with your signed Plan Document. Next, sign the Summary Plan Description amendment page and forward a signed copy of that page to all employees participating in your company’s FSA and/or HRA plan.

Once the amendment pages are signed, do I need to return them to Ameriflex?
No. You are not required to return a copy to Ameriflex. However, please be sure to maintain your originals on file along with your existing plan documents.

Our company administers an HRA. Must we change our plan or can we continue to exclude OTC items?
No, your plan will continue to exclude OTC items at your discretion. However, if you wish to include OTC items as an eligible expense due to these recent changes, please reach out to your dedicated Client Relationship Specialist for more information.


Extending FSA or HRA “Run-Out” Period Could Provide Employees Needed Relief

With more businesses restricting or limiting hours due to COVID-19, we’ve heard many participants are struggling to get receipts for submitting claims for reimbursement.
To assist with this need, we are suggesting extending your 2019 flexible spending account (FSA) and/or health reimbursement arrangement (HRA) claim run-out period. This will provide some breathing room for employees to obtain receipts and better utilize their FSA or HRA benefits over the coming months.

Please note:

We’re in this together and, as always, appreciate your partnership. If you would like to extend the FSA and/or HRA deadline, submit the form on this page.

What’s in this article?

Other Recent Posts
Questions and Answers Following Our Telescope Health and the CAA Webinar
March 21, 2024
Following the success of our webinar, Telescope Health and the CAA, which delved into the implications of the Consolidated Appropriations Act (CAA) for employers, it became evident that attendees departed with a host of questions. In response, this article is dedicated to addressing those inquiries, to help foster a deeper understanding of the intersections of...
What does the Consolidated Appropriations Act (CAA) mean for employers?
October 18, 2023
The Consolidated Appropriations Act (CAA) was passed in 2021, and although it brought significant changes that will continue to impact employers offering group health insurance and their employees, many organizations still haven’t made changes to meet the mandates. What are the key requirements of CAA legislation that employers need to act on? Gag Clause One...
Illinois Passes Legislation Requiring Pre-Tax Commuter Benefits
August 31, 2023
What is the Transportation Benefits Program Act? The State of Illinois recently passed the “Transportation Benefits Program Act” that will go into effect January 1, 2024, and require employers with 50 or more employees located in specific areas to offer a pre-tax commuter benefit to “covered employees.” Employees who take advantage of the benefit can...
Stay Updated

Join us to stay on top of the latest healthcare news, legislation and product features from Ameriflex

We value your privacy
We will not rent or sell your information