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HR Rundown

By Christine Walters

March 22, 2021

While specific dates vary, January marked the one-year anniversary of the first reported case of COVID-19 in the United States and a declaration by the World Health Organization of this outbreak as an international public health emergency. This article provides a high-level overview, looking back and to the future, of what employers need to know about changes to benefits-related programs like group health, retirement, flexible spending accounts (FSAs), and student loan assistance, as well as nonbenefits-related like managing leave and time off, vaccinations, working from home, and more.

Benefits-Related

Last February, many AICC members who sponsor employee benefit plans were quite comfortable having settled into Affordable Care Act compliance (if applicable) for group health plans and were slowly beginning to think about implementation efforts of the SECURE Act for retirement plans. But then COVID hit, which brought a firestorm of legislation—the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March and the Consolidated Appropriations Act of 2021 (CAA) in December—and accompanying regulations impacting employee benefit plans. The information below focuses on the legislative takeaways.

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Retirement Plans – Distributions and Partial Terminations

The CARES Act introduced new ways for participants to access funds from retirement plans, including special distribution rights, enhanced loan limits, and suspension of loan repayments for one year. AICC members should ensure that they amend for these changes by the last day of the plan year beginning in 2022.

The CAA authorizes “qualified disaster distributions” (up to $100,000), enhanced loan limits (up to $100,000 or 100% of vested balance), and loan suspension relief for individuals whose principal residence during the incident period of a qualified disaster is in a qualified disaster area and who has sustained a related economic loss. Qualified disaster distributions are not subject to an early withdrawal penalty and can be taxed and/or repaid over a three-year period. Additionally, eligible participants who received hardship distributions to purchase or construct a principal residence in a qualified disaster area, but who did not use the funds due to the qualified disaster, can now repay such a distribution. These provisions are optional, and because they are relatively similar to prior initiatives, recordkeepers should be ready to implement.

width=300The CAA also provides relief from partial terminations. In general, a retirement plan may be partially terminated if more than 20% of participants were laid off in a particular year. In such an event, participants must be fully vested. The new law provides that a partial termination will not occur if the number of participants as of March 31, 2021, is at least 80% of the active participants as of March 31, 2020. AICC members who had layoffs during 2020 should review this relief against their facts and document reliance.

Health Plans – Participant Protections

The CARES Act had certain provisions impacting group health plans, including requiring group health plans to cover COVID testing and to cover vaccines as “preventive care” (in each case, without any cost-sharing), allowing telemedicine coverage at no cost without frustrating health savings account eligibility and authorizing over-the-counter medications without a prescription. Plan sponsors should ensure that they made the required changes and considered the permissible changes.

The CAA went further with respect to changes to group health plans, including numerous protections to curb “surprise billing.” For instance, individuals covered by a group health plan receiving non- emergency services at a network facility cannot be balance-billed by a nonnetwork provider (subject to certain exceptions for ancillary services), absent notice and consent requirements. If a plan covers emergency services, it must cover nonnetwork emergency services without prior authorization and subject to in-network cost-sharing rules. Other features include independent dispute resolution processes, price comparison tools, and provider databases, among other items.

The recent law also provides a number of transparency-focused initiatives, including:

  • Prohibiting group health plans from entering into agreements that prevent the disclosure of provider-specific cost and quality information.
  • Mandating disclosures from brokers and consultants, including a description of services and all direct and indirect compensation (similar to retirement plan disclosures already in effect).
  • Requiring that plans file a report with the Department of Labor (DOL) by December 27 (and annually) that includes information about prescription pharmacy benefits and costs.

Most plan-level mandates are not required until plan years starting on or after January 1, 2022, but there are data collection items that require immediate attention. AICC members, with the help of legal counsel, should be monitoring vendor efforts to ensure that compliance obligations are being met.

FSAs – Flexibility

Similar to earlier guidance, the CAA allows AICC members to provide greater flexibility for FSAs by amending their plans by the end of the plan year in which the change takes effect. The following changes are authorized:

  • Midyear election changes. For plan years ending in 2021, a plan may allow participants to change contributions to FSAs prospectively, without regard to any change in status.
  • Carryovers. A plan may allow participants to carry over any unused amounts from the 2020 plan year to the 2021 plan year, or the 2021 plan year to the 2022 plan year.
  • Grace period. For plan years ending in 2020 or 2021, FSAs may extend their grace period to 12 months and allow employees who terminate participation in a health care FSA during 2020 or 2021 to continue to receive reimbursements through the end of the plan year.
  • Dependent care age. For dependents who aged out of eligibility on or before January 31, 2020, plans may extend the maximum age from 13 to 14.

Student Loans – Tax Code Relief

The CARES Act introduced tax code relief for employer student loan assistance by utilizing long-recognized tuition reimbursement rules. Specifically, employers could reimburse employees for qualified education loans up to a maximum of $5,250 per employee through the end of 2021. The CAA extends this feature for five years, through 2025, and there is speculation that this will become a permanent feature.

Final Note

Given the litigious and regulatory environment, AICC members need to understand the changes impacting their employee benefit plans, document the decision-making, and ensure that the decisions are made by the appropriate party.

Nonbenefits-Related

As the nation, states, and local jurisdictions develop processes for distributing and administering vaccines, employers will be well served to consider these and other related .

Paid Leave and Time Off

The Families First Coronavirus Response Act (FFCRA) expired December 31. That law provided most employees of employers with fewer than 500 employees with job-protected, paid leave for any one of five reasons (the sixth never came to fruition). The CAA extended the FFCRA’s tax credit for employers but not the entitlement for employees. As a result, as of January 1, employers may choose to continue to offer the emergency paid sick or family leave provided under the FFCRA and still receive the tax credit through March 31.1 A few considerations:

  • Do you want to continue to offer the leave?
  • What will be the direct and indirect costs of doing so?
  • What liability might you have if you choose (not) to do so?
  • What other leave options are available for your employee that could be used concurrently with or in lieu of extended FFCRA leave: federal family and medical leave (FMLA); mandated state or local leave (sick, family, family responsibilities, medical, and others); or your company-offered vacation, sick, or paid time off (PTO) leave?
  • Watch for IRS guidance regarding any changes in the information you need to obtain and retain to receive the tax credits.2

width=300Vaccines

Many employers are asking if they should require employees to be vaccinated. The U.S. Equal Employment Opportunity Commission (EEOC) has not expressly stated that this is permissible but has inferred it. On December 16, the EEOC published3 updated related guidance. A few additional considerations include:

  • Contact your local health department for an estimate of when the vaccine will be available for your employees and how long it is expected to take for all eligible workers to get vaccinated once it is available. As of this writing, states are rolling out plans identifying who is eligible for the vaccine and in what order.
  • Develop your business case. Will your policy apply to all employees regardless of their job or only to those who have a greater risk of exposure?
  • Consider what policy or practice will be applied to others coming into the workplace such as visitors, vendors, and contractors.
  • As of this writing, the vaccines are free. If a charge becomes associated with a vaccine, check with the laws of your state and local jurisdictions to determine if you are required to pay the cost.

Work(ing) From Home

This is not a new concept, but the rate at which employees are working from home is new. Many AICC members as well as others in the manufacturing and service industries have been creative in determining when, how, and where employees work on-site and off. A few considerations:

  • Develop your business case for requiring an employee to return to work. If the job can be performed remotely and the employee has been successfully doing so, why change it now?
  • If a job can be performed remotely but the employee is not doing so successfully, try to understand why. If it is related to child (or parental) care, physical or mental health, then leave, flexible staffing, or some reasonable accommodation might be required. If it is a resource issue, see the next bullet.
  • If the employee does not have what he or she needs at home to get the job done, determine whether you can provide it. If the employee incurs an expense to working from home, you may have to pay those costs. As of this writing, at least 15 states and the District of Columbia have enacted a related law.
  • Recognize the wage and hour risks; ensure that you have processes in place for your nonexempt employees to properly record all time worked, including evenings and weekends. Consider guidance issued by the DOL.4
  • Check in on any tax withholding obligations for people who may work from home in other states.

Discrimination

As is often the case, the best of intentions can go awry. Age, pregnancy, and disability of the employee, a family member, or even a friend can all create legal liability. A few considerations:

  • It is generally permissible to make an exception to your policy or practice. However, be able to explain why your exception is equitable, job-related, and consistent with business necessity.
  • Do not try to predict the future. Focus on what an employee can or cannot do today. Remember that the Americans With Disabilities Act, Title VII, and other laws prohibit discrimination based on perception.

Other

Some other COVID-19-related policies that AICC members might consider include:

  • Using broad terms to reduce the need to update your policy every time the Centers for Disease Control and Prevention5 or another agency changes a definition, such as what constitutes “close contact.”
  • Using the same terms as used in your governor’s or local executives’ orders, such as physical rather than social distancing, or face coverings rather than face masks.
  • Including a statement that your policy is in consideration of, rather than in accordance with or following, federal, state, and local guidance. That may give you some flexibility, especially where agencies’ guidance varies, and your employees can understand that you might not follow every guidance, but you have considered it.

Monitoring

Watch these legal, legislative, and regulatory developments. If you are an AICC member, talk to fellow members in your region and across the country to share proactive practices and learn about the pitfalls you may want to avoid. Join one of the advisory groups and consider engaging your up-and-coming staff in the Emerging Leaders program. U.S., state, and local chambers of commerce and HR associations can also be a great resource.


width=63Christine Walters is founder and independent consultant at FiveL Co. She can be reached at christine@fivel.net.


width=63Adam Meehan is a partner at Smith & Downey, P.A. He can be reached at ameehan@smithdowney.com.

 

Note: This article does not constitute the rendering of legal advice. Please talk to your company’s employment and/or ERISA counsel about specific or questions.

Endnotes

  1. See Q#104 and #105. www.dol.gov/agencies/whd/pandemic/ffcra-questions.
  2. See Q#44 and #45 plus any updates. www.irs.gov/newsroom/how-should-an-employer-substantiate-eligibility-for-tax-credits-for-qualified-leave-wages#substantiate_eligibility.
  3. See Section K. www.eeoc.gov/wysk/what-you-should-know-about-covid-19-and-ada-rehabilitation-act-and-other-eeo-laws.
  4. www.dol.gov/agencies/whd/flsa/pandemic.
  5. CDC’s General Business FAQs. www.cdc.gov/coronavirus/2019-ncov/community/general-business-faq.html.

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