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Temporary Increase in Annual DCAP Salary Contribution Limit

The American Rescue Plan Act of 2021 signed into law by President Biden on March 11 includes an increase in the annual limit on Dependent Care Flexible Spending Arrangement pre-tax contributions for calendar year 2021.  The limit for this year only has been increased from $5,000 to $10,500 (or $5,250 for married individuals filing separately). This temporary change is optional for employer plan sponsors.  Employers wishing to provide this enhanced benefit opportunity to their Plan Participants must amend their Plans to adopt the increased limit for the 2021 tax year.

This change will be relatively straightforward for calendar year Dependent Care Flexible Spending Arrangements.  Participants will be allowed to increase their annual elections to take advantage of the increased limits for any expenses incurred during 2021.  For non-calendar year plans, the change will be more complicated.  The annual limit on Dependent Care pre-tax payroll contributions has always applied on a calendar year basis for all plans and this temporary change to the annual limit does not change that.  Therefore, non-calendar year plan sponsors that offer this increased limit to their Participants will need to structure the Participant’s payroll contribution schedule so that the additional contributions are all made within 2021 calendar year payrolls.

Employers wishing to amend their plans to take advantage of the increased limits can submit an amendment request to Admin America here.  If you have additional questions about this temporary change to the 2021 Dependent Care FSA limits, you can e-mail Trey Tompkins at trey@adminamerica.com or you can schedule a call with Trey at an available time that is most convenient for you here.

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COBRA Premium Assistance in the New Federal COVID-19 Relief Package

Earlier today President Biden signed the ‘‘American Rescue Plan Act of 2021’’ (ARPA) which contains numerous provisions to aid individuals, businesses and state and local governments impacted by the coronavirus pandemic.  Included among those provisions is funding to pay COBRA premiums for individuals who lost their group health insurance coverage during the pandemic.  

ARPA’s COBRA Premium Assistance will pay 100% of the applicable premium for “Assistance Eligible Individuals (AEIs)” during the months of April 2021 through September 2021.  AEIs are COBRA Qualified Beneficiaries who’s Qualifying Event was an involuntary termination of employment or reduction of hours who are not currently eligible for other group health plan coverage or Medicare.  AEIs can be Qualified Beneficiary who’s original 18 month maximum period of COBRA would have extended into April 2020.  Therefore, AEIs could include individuals who lost coverage due to an involuntary termination of employment or reduction of hours that occurred as long ago as October 2, 2019.    

ARPA requires employers to send a special supplemental COBRA Notice to any potential AEIs with information about the COBRA Premium Assistance no later than May 30, 2021.  The U.S. Department of Labor is tasked with providing Model Notices for this purpose no later than April 10, 2021. 

AEIs who elect COBRA coverage as a result of the COBRA Premium Assistance Notice may start their coverage beginning in April 2021.  ARPA overrides the standard COBRA requirement that requires Qualified Beneficiaries to elect coverage (and pay for it) back to their original loss of coverage date.  ARPA does not extend a Qualified Beneficiary’s maximum period of coverage beyond the 18th month after the original loss of coverage. 

ARPA also requires employer to send a second notice later this summer to AEIs regarding the end of the COBRA Premium Assistance.  Admin America will be able to assist employers with the delivery of both required supplemental notices at the appropriate time.  Admin America will also track AEI COBRA premiums to assist employers with adjusting and paying their insurance carrier invoices and/or claiming the federal tax credit that is available to offset the unpaid COBRA premiums.

To better help employers and their employee benefits advisors understand the details of ARPA’s COBRA Premium Assistance provisions and Admin America’s administrative response, we will be scheduling multiple webinars in the upcoming weeks to review the changes.  Attendees will also have the ability to ask questions.  Online registration for the webinar sessions is available here.  Admin America will be providing additional communications to employers and advisors in the coming weeks as expected regulatory guidance is released and Admin America’s new procedures are finalized.  Any immediate questions may be directed to Trey Tompkins via e-mail at trey@adminamerica.com.

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Update on COVID-19-Related Extensions Impacting COBRA and Claims Filing Deadlines

Last week the U.S. Department of Labor issued guidance regarding when certain COVID-19 related deadline extensions will end.  This new guidance was released in EBSA Disaster Relief Notice 2021-01 which can be found online here.  In short, the guidance clarifies that deadline extensions will continue beyond March 1, 2020 but the length of each deadline extension is determined on a case-by-case basis (instead of all deadlines ending on the same future day) and limited to one year. 

The guidance issued last week supplemented guidance originally announced last May by the DOL and the IRS (available online here).  The COVID related deadline extensions announced last year required group health plans to disregard certain deadlines under COBRA, ERISA and HIPAA.   Last May’s guidance had a clear starting point.  It applied to any deadlines that would have otherwise occurred on or after March 1, 2020.  The end point was not as clear.  There was not a specific date announced as to when the deadline relief would end. Instead it provided that the period for calculating deadlines would not start again until 60 days after the COVID-19 national emergency was declared over by the President.   While that definition seems specific, it was complicated by a one year limit on the DOL and IRS’s ability to extend these types of deadlines.  Therefore, as February 28, 2021 approached, there was uncertainty as to how the end of the deadline extensions would impact plans and participants.

Notice 2021-01 clarifies that applicable deadlines will be extended until the earlier of (1) one year from the date the deadline would have otherwise applied, or (2) 60 days after the end of the announced COVID-19 National Emergency. Once the extension period has ended, the period of time for determining the applicable deadline will resume. For example, if a COBRA qualified beneficiary would have been required to make a COBRA election by May 15, 2020, the deadline is extended until May 15, 2021. Similarly, a qualified beneficiary whose COBRA premium payment grace period for November 2020 should have ended on November 30, 2020 may now pay their premium for November 2020 coverage as late as November 30, 2021 (presuming the COVID National Emergency does not end at least 60 days before that date).

The Notice also indicates that plans should consider sending updated notices to participants regarding their revised deadlines. Plans are also advised to consider notifying participants who are losing coverage of other coverage options, such as through the recently announced COVID-19 special enrollment period in the Exchanges. The notice acknowledges that the COVID-19 pandemic and other circumstances may disrupt normal plan operations and reassures employers acting in good faith and with reasonable diligence that enforcement will emphasize compliance assistance and other relief. The notice indicates that other federal agencies with jurisdiction over employer sponsored group health plans concur with this new guidance and its application to laws under their jurisdiction.

Admin America is working with the vendors of our benefits administration software to incorporate this new guidance into our administrative procedures with the expectation that the necessary adjustments will be completed this month.  Employers and/or their professional benefits advisors with any questions about this most recent guidance are invited to submit their questions via Admin America’s online Q&A portal available here