IRS Issues Guidance on Taxability of DCAP Benefits for 2021, 2022
General Rules
- Carryovers of unused DCAP amounts typically are not permitted, although a 2½ month grace period is allowed.
- However, recent coronavirus-related relief allows employers to amend their plans to permit the carryover of unused DCAP amounts to plan years ending in 2021 and 2022, or to extend the permissible grace period to plan years over the same period.
IRS Issues Guidance on American Rescue Plan’s COBRA Subsidy
The COBRA Subsidy
The ARPA subsidy covers 100% of COBRA and state mini-COBRA premiums from April 1–Sept. 30, 2021, for certain assistance-eligible individuals whose work hours were reduced or whose employment was involuntarily terminated. The subsidy is funded via a tax credit provided to employers, insurers or group health plans, according to the terms of the statute.
The IRS Guidance
Among the topics covered by the 40-page Notice are how to calculate and claim the tax credit, including when a third-party payer is involved. According to the guidance, employers must document individuals’ eligibility for COBRA premium assistance in order to claim the credit.
Remainder of 2022 Notice of Benefit and Payment Parameters Finalized
On May 5, 2021, the Department of Health and Human Services (HHS) published a second Notice of Benefit and Payment Parameters (NBPP) for 2022 that finalized the remainder of the standards included in the proposed notice issued at the end of 2020. The first final 2022 NBPP was published Jan. 19, 2021.
This second NBPP describes additional benefit and payment parameters under the Affordable Care Act (ACA) that apply for the 2022 benefit year.
Highlights
Out-of-Pocket Maximum
The ACA’s out-of-pocket maximum limit will increase to $8,700 (self-only coverage) and $17,400 (family coverage) for 2022.
Affordability Percentage
The required contribution percentage for catastrophic coverage eligibility will decrease to 8.09% for 2022.
DOL issues model notices, FAQ for COBRA subsidy in the ARPA
On April 7, 2021, the U.S. Department of Labor (DOL) issued FAQs and model notices for the COBRA premium assistance provisions of the American Rescue Plan Act (ARPA). The ARPA provides a 100% subsidy for employer-sponsored group health insurance continued under COBRA and similar state continuation of coverage programs for eligible individuals. The subsidy applies from April 1 through Sept. 30, 2021. The notices and the FAQs appear
on a new DOL webpage dedicated to the ARPA COBRA subsidy.
Important Dates
March 11, 2021 – ARPA signed into law.
April 1, 2021 – ARPA subsidy for COBRA premiums began.
Sept. 30, 2021 – ARPA subsidy for COBRA premiums expires.
About the Families First Coronavirus Response Act
Coronavirus Bill Requiring Paid Employee Leave Signed Into Law
On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the Act) into law. The Act requires employers to provide paid leave for some employees related to the coronavirus (COVID-19) pandemic, among other measures. The leave provisions of the Act take effect no later than 15 days after it is signed by the president.
Emergency Paid Sick Leave
The Act requires 80 hours of paid sick leave for government workers and employees of companies with fewer than 500 employees. Leave must be made available to workers who are symptomatic or are under an order or advice to quarantine or self-isolate, who have to care for a family member under such an order or advice, or who have a child whose school or child care provider or facility has closed or is unavailable due to the coronavirus.
Future regulations may exempt small businesses with fewer than 50 employees from the paid sick leave requirement. Health care providers and emergency responders may be excluded from both types of leave benefits.
Emergency Family and Medical Leave Act
The Act provides FMLA rights for some employees of companies with fewer than 500 employees, requiring partially paid leave after 10 days when an employee is unable to work or telework due to school or child care closures related to the coronavirus.
Other Provisions
The Act provides funding for economic assistance and requires health plans to cover COVID-19 testing at no charge. A refundable tax credit for employers that provide paid leave benefits as required by the Act is also included. The U.S. Treasury is expected to use its regulatory authority to advance funds to some small businesses to cover the cost of providing paid sick leave.
View, download, and print this announcement.
IRS Allows HDHPs To Cover Coronavirus Costs
Key Points
- HDHPs can pay for COVID-19 testing and treatment without imposing a deductible.
- As a growing trend, states are directing or encouraging health insurance issuers to cover this testing without any costsharing.
- Employers with HDHPs should consult with their plan’s issuer or benefits administrator regarding their plan’s coverage for COVID-19 testing and treatment.
Client and Employee Resources
The more your employees understand your benefit plans the more they become educated, empowered consumers. The programs you provide will also gain an enhanced value.
As your strategic partners in employee benefits, we can provide multiple avenues of ongoing support, including:
- Employee Meetings (English and Spanish)
- Webcasts
- Payroll Stuffers
- Poster Campaigns
- Newsletters
Carrier Directories
E-Verify is a web-based system that allows enrolled employers to confirm the eligibility of their employees to work in the United States. Click the image below to begin.
