Karen Gelula, Kasia S. Crain, Author at Spotlight on Benefits

Affordable Care Act Penalty and Reporting Relief

The Employer Reporting Improvement Act and the Paperwork Burden Reduction Act (PBA), each signed into law in December 2024, provide the following penalty and reporting relief for plan sponsors required to provide minimum essential coverage in accordance with the requirements of the Patient Protection and Affordable Care Act (ACA):

An individual’s date of birth may be used as a substitute when the individual does not have a tax identification number (TIN) for ACA reporting due in 2025 and after.

Reminder: Until further guidance is issued, to ensure that the reasonable cause exception from ACA reporting penalties is retained, plan sponsors should continue to solicit the individual’s TIN three times: (i) as part of the application for enrollment in the plan, (ii) within 75 days after the application is received and (iii) by December 31 of the year after the initial solicitation.

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IRS Announces Phase 2 of Pre-Examination Compliance Pilot Program

Recently, the IRS announced phase two of its expansion of the Pre-Examination Compliance Pilot Program. Under the pilot program, an employer may limit or entirely avoid an impending IRS audit if they promptly correct any identified errors via the IRS’s Self Correction Program (SCP). During phase two, the IRS will notify employers by letter that their retirement plan was selected for upcoming examination. The employer then has 90 days to review their plan’s documents and operations to determine if they meet current tax code requirements.

If the employer identifies any errors, they may self-correct the errors under the SCP. Errors that aren’t eligible for correction under the SCP can be corrected by requesting a closing agreement, and the IRS will use the favorable Voluntary Correction Program fee structure to determine the sanction amount payable.

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Use of Forfeitures in Qualified Retirement Plans

On February 27, 2023, the IRS and the Department of Treasury published proposed regulations regarding the use of forfeitures in qualified retirement plans. If finalized, the proposed rule will be effective for plan years beginning on or after January 1, 2024. However, plans may rely on the proposed regulations now.

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UPDATED: Changes to a Family Member’s Exchange Subsidy Eligibility

Under Internal Revenue Code (Code) Section 36B, individuals are eligible for an exchange subsidy (or premium tax credit) if their employer has not offered them affordable coverage that provides minimum value. The IRS recently released two pieces of guidance with respect to eligibility determinations under Code Section 36B – Final Regulations under Code Section 36B and Notice 2022-41. Under the new guidance, subsidized exchange coverage for family members will be based on the cost of employer-sponsored family coverage. Plans that operate on a plan year other than the calendar year may be amended to permit mid-year election changes corresponding to the new exchange subsidy eligibility rules.

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IRS Extends Temporary Relief from “Physical Presence” Requirement Through December 31, 2022

The IRS recently issued Notice 2022-27, providing a six-month extension of the temporary relief from the physical presence requirement for certain plan elections (including spousal consents) required to be witnessed by a plan representative or notary public. Issued in response to the COVID-19 pandemic, the IRS provided initial relief from the physical presence requirement for the period January 1through December 1, 2020, provided initial extended relief through June 30, 2021, and extended relief for a second time through June 30, 2022. Most recently, Notice 2022-27 extends the relief through December 31, 2022.

The temporary relief from the physical presence requirement applies to any participant election witnessed by a notary public of a state that permits remote electronic notarization or by a plan representative, if certain requirements are satisfied. We discussed those requirements in a prior blog post on this topic.

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Temporary Reinstatement of Relief for Telemedicine Coverage in HDHPs

The Consolidated Appropriations Act 2022 (“CAA 2022”), signed by President Biden on March 15, 2022, reinstated temporary relief for high deductible health plans (“HDHPs”) to provide pre-deductible coverage of telehealth services from April 1 through December 31, 2022, without impacting HDHP participants’ eligibility to contribute to their health savings accounts (“HSAs”).

In general, HDHP coverage of telehealth services at no or low cost before the participant satisfies the minimum HDHP deductible (in 2022, $1,400 for single-only coverage and $2,800 for family coverage) would cause HDHP participants to become ineligible to make HSA contributions.

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Employers – Check Your Severance Arrangements Now!

If employees are required to provide proof of COVID-19 vaccination or a timely negative COVID-19 test, and/or wear a mask as a condition of employment (COVID-19 Policies), and an employee is terminated for violating a COVID-19 Policy, will that employee be entitled to severance benefits?

The answer depends on what the employer intends and the terms of the applicable severance arrangement which, for example, can be in the form of a severance plan, a severance agreement, or an employment agreement.

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Internal Revenue Service Extends Temporary Relief from the Physical Presence Requirement by One Year

The IRS recently issued Notice 2021-40, providing a one-year extension through June 30, 2022, of the temporary relief from the physical presence requirement for certain plan elections (including spousal consents) required to be witnessed by a plan representative or notary public. Issued in response to the COVID-19 pandemic, the IRS provided initial relief from the physical presence requirement for the period beginning January 1, 2020 and ending December 1, 2020, and then provided initial extended relief through June 30, 2021.

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DOL Issues Model COBRA Subsidy Notices and Initial Guidance on COBRA Subsidy Relief under the American Rescue Plan Act of 2021

As discussed in our prior blog post, the American Rescue Plan Act of 2021 (ARP) requires employers that sponsor group health plans to provide a 100% COBRA subsidy for “Assistance Eligible Individuals” during the “Subsidy Period” (April 1 through September 30, 2021, or the date the participant is no longer an Assistance Eligible Individual, if earlier) and to offer a COBRA special election opportunity for certain individuals to enroll in COBRA coverage in order to receive the benefit of the COBRA subsidy.

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IRS Clarifies Pandemic-Related Relief for Dependent Care FSAs

As noted in our prior blog posts here and here, the Consolidated Appropriations Act of 2021 (the “Act”) includes several types of relief for flexible spending accounts (“FSAs”), impacting both health and dependent care FSAs. In February, the IRS issued Notice 2021-15 (the “Notice”), which provides clarifying guidance with respect to the Act’s FSA relief provisions and answers many of the outstanding questions posed by employers following the Act’s passage. Our prior blog post answers common questions about how the guidance applies to health FSA benefits. Below we describe the key changes in the Act and the Notice (together, the “Relief”) specific to dependent care FSAs.

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