IRS Approves Additional Leave-Based Donation Programs for COVID-19 Relief

We previously posted about two leave-sharing programs available to employers during the COVID-19 pandemic: major disaster leave-sharing programs and medical emergency leave-sharing programs.  These leave-sharing programs may allow employees to donate paid leave to co-workers affected by COVID-19.  When properly structured under Internal Revenue Service (“IRS”) guidance, the donated leave is excluded from the gross income of the donor employee. 

On June 11, 2020, the IRS published Notice 2020-46, which permits employers to establish an additional type of leave-sharing program: a leave-based donation program under which employees can donate vacation, sick, or personal leave in exchange for cash payments that the employer makes to a charitable organization described in Internal Revenue Code (the “Code”) Section 170(c) (a “Section 170(c) Organization”). Read More ›

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In Case You Missed It … Recent Posts From the SW Benefits Update

We periodically consolidate our prior blog posts and push them out as a single package to help individuals catch up on what they might have missed with respect to important health and welfare, qualified retirement plan, and executive compensation issues.  The posts highlighted here largely focus on the CARES Act and the impact the COVID-19 pandemic is having on employee benefit and executive compensation plans.  As always, please feel free to reach out to any member of our employee benefits and executive compensation group with questions.  Please enjoy (and have a safe) Memorial Day weekend!

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CARES Act Enables Employers to Assist with Student Loan Repayments

The Coronavirus Aid Relief and Economic Security Act (the “CARES Act”), signed into law on March 27, 2020, provides employers with a new mechanism to assist their employees with repayment of student loans. Section 2206 of the CARES Act amends Section 127 of the Internal Revenue Code (the “Code”) to allow employers to pay up to $5,250 toward qualified education loans as part of an educational assistance program as long as the payments are made before January 1, 2021. Employers can make payments either directly to the employee or to a lender.

Section 127 provides that amounts paid or expenses incurred by employers under an educational assistance program for the educational assistance of employees are not included in the employee’s gross income, provided that the program satisfies the following requirements:

  1. The program must be a separate written plan of the employer for the exclusive benefit of its employees to provide such employees with educational assistance. 
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Two Leave-Sharing Program Options for Employers During the COVID-19 Pandemic

As employers cope with the COVID-19 pandemic, they may consider leave-sharing programs as a method to permit employees to donate paid leave to their coworkers. Leave-sharing programs that are properly structured under Internal Revenue Service (“IRS”) guidance permit exclusion of transferred leave from the gross income of a donor employee and inclusion of the transferred leave in the gross income of the coworker recipient. However, the IRS has generally limited this favorable tax treatment to leave-sharing programs for: (1) major disasters, and (2) medical emergencies.

  1. Major Disaster Leave-Sharing Programs
    1. Eligible Employers

IRS Notice 2006-59 defines a “major disaster” as a major disaster as declared by the President under Section 401 of the Robert T. Read More ›

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Trump Signs Act Mandating Group Health Plans Cover COVID-19 Testing For Free

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (“FFCRA”) requiring group health plans to cover COVID-19 testing for free and without preauthorization.  This means no deductibles, no copays, and no coinsurance. 

More details regarding the changes employers are required to make are explained in our Employee Benefits Update of March 16, 2020 entitled “COVID-19 Employer Group Health Plan Changes to Help Employees.” One clarification that was made after publishing the Update is that that COVID-19 telehealth testing must also be provided for free.  Unfortunately, we still await relief on the telehealth/HDHP issue flagged in the Update.  Read More ›

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Congress Giveth and They Taketh Away — Recent Health Plan Changes

In enacting the Further Consolidated Appropriations Act, 2020, (the “Act”), Congress, among other changes, enacted the following key changes affecting employer group health plans:

  • Repeal of the Cadillac Tax:  Most notably, and a huge relief to most employers, Congress repealed the Cadillac tax.   The Affordable Care Act (“ACA”) added a requirement requiring employers to pay a 40% excise tax on the value of “rich” health plans (i.e., those that exceed $10,200 for an individual and $27,500 for a family, indexed for inflation).  The excise tax was originally scheduled to take effect for taxable years beginning after 2017, but it was delayed two years by subsequent legislation.
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What is the Fate of ACA? No Answers Yet from the Fifth Circuit.

Background

As noted in our previous December 2018 blog post, “Texas Judge Declares the Affordable Care Act Unconstitutional – What’s Next?,” and our October 2019 newsletter, “2019 End of Year Plan Sponsor “To Do” List (Part 1) Health & Welfare,” on December 14, 2018, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas ruled the whole of ACA to be unconstitutional in Texas v. United States of America, No. 4:18-cv-00167. The plaintiffs (certain Republican-led states and two individuals) alleged, and Judge O’Connor agreed, that the repeal of the individual mandate “renders legally impossible” the Supreme Court’s prior savings construction of ACA and that the individual mandate is not severable from the rest of ACA. Read More ›

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Enjoy the End of the Decade with Some Employee Benefit Plan Checklists

Each year, we publish health and welfare, cost-of-living, qualified retirement plan, and executive compensation plan checklists to help individuals and employers stay apprised of updates to the law of employee benefits.  We just published the last of these annual checklists.  In case you missed them, the links are below.

Happy Holidays!

2019 End of Year Plan Sponsor “To Do” List (Part 1) Health & Welfare

2019 End of Year Plan Sponsor “To Do” List (Part 2) Annual Cost of Living Adjustments

2019 End of Year Plan Sponsor “To Do” List (Part 3) Qualified Retirement Plans

2019 End of Year Plan Sponsor “To Do” List (Part 4) Executive Compensation

 

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A Post-Thanksgiving Treat: IRS Extends Certain ACA Reporting Deadlines and Transition Relief

The IRS provided welcome news to employers preparing to comply with the Affordable Care Act’s (“ACA”) information reporting requirements in early 2020 for the 2019 calendar year. In particular, Notice 2019-63 (the “Notice”) extends the deadline to furnish Forms 1095-B and 1095-C to employees. The new deadlines are provided, below.

 

  Original Deadline Extended Deadline
Form 1095-B (to employees) January 31, 2020 March 2, 2020
Form 1095-C (to employees) January 31, 2020 March 2, 2020

Importantly, the Notice does not extend the deadline for filing Forms with the IRS. Instead, the deadline to file with the IRS remains February 28, 2020 (for paper filings) and March 31, 2020 (for electronic filings). Read More ›

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California Cares . . . About Employees Losing Flexible Spending Account (“FSA”) Funds

California recently approved Assembly Bill 1554, adding a flexible spending account notice requirement to § 2810.7 of the California Labor Code.  The new law, which takes effect January 1, 2020, states:

(a) An employer shall notify an employee who participates in a flexible spending account, including, but not limited to, a dependent care flexible spending account, a health flexible spending account, or adoption assistance flexible spending account, of any deadline to withdraw funds before the end of the plan year. Notice shall be by two different forms, one of which may be electronic.

(b) Notices made pursuant to subdivision (a) may include, but are not limited to the following: (1) Electronic mail communication. Read More ›

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