It’s important to stay current on COVID-related legislation and guidance. As 2021 winds down and we look ahead to 2022, let’s review the key regulatory elements that may affect your benefit plans. First, we’ll revisit the various COVID-related legislation, guidance, and relief connected to health and welfare plan provisions. Then, we’ll go into general refreshers on cafeteria plans, nondiscrimination testing, form 5500 filing obligations, and updated San Francisco health care expenditure rates.
2021 compliance summary
For those who crave the details, here’s the full text of our compliance alert. Read on for bite-sized explanations of each topic.
Health and dependent care flexible spending account (FSA) changes
Unless Congress acts, many of the provisions allowed by the Consolidated Appropriations Act, 2021 (CAA)1 and the American Rescue Plan Act (ARPA)2 soon end for health FSAs and dependent care FSAs. At a high level, the CAA Health FSA relief provisions permit employers to offer carryovers of the full unused balance from plan years ending in 2020 and 2021 into subsequent plan years (i.e., into plan years ending in 2021 and 2022, respectively). Pay close attention to deadlines as many need to be amended by December 31, 2021.
Outbreak period of relief continues
Reference the full alert for a deeper explanation of the outbreak period relief. The Final Rule and subsequent agency guidance provides that, for all group health plans, disability and other employee welfare plans, and all pension plans that are subject to the Employee Retirement Income Security Act of 1974 (ERISA) or the Internal Revenue Code (the Code), applicable deadlines for individuals and plans that fall within the Outbreak Period will be extended on a case-by-case basis until the earlier of (1) the end of the Outbreak Period; or (2) one year from the date the plan or individual’s deadline period would have commenced (which will vary by individual occurrence). Until the United States Congress or the President of the United States of America act to declare the National Emergency has ended, this plan deadline relief will continue into 2022.
ARPA COBRA subsidy
ARPA provided a 100 percent federal subsidy of COBRA continuation coverage premiums for certain qualified beneficiaries who became eligible for COBRA continuation due to an involuntary termination of employment or reduction in hours. The Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy period introduced by ARPA was available for coverage periods beginning April 1, 2021 and to end on September 30, 2021; although it is possible that an assistance eligible individual may—by virtue of the ongoing Outbreak Period plan deadline relief—elect COBRA coverage after September 30, 2021 retroactively (perhaps even to – or before April 1, 2021). ARPA further provided that the “person to whom premiums are payable” (the “Premium Payee”) – generally the employer or the plan – may be entitled to claim a tax credit to be reimbursed for the COBRA premiums not paid by assistance eligible individuals due to the COBRA premium subsidy. Therefore, Premium Payees that provided the COBRA subsidy for such a retroactive election of COBRA coverage may need to claim the attendant tax credit on their January 31, 2022 Form 941 filing.
For nondiscrimination testing, it’s important to test prior to the end of the cafeteria plan year. Generally, if testing is completed after the end of the plan year, it's too late to take corrective action. Instead of reducing key or highly compensated elections to pass the nondiscrimination test(s), the affected employees would be taxed on their total election amount.
Form 5500 obligation
A frequently overlooked responsibility for cafeteria plan sponsors is Form 5500 filings under certain circumstances. In 2002, IRS Notice 2002-243 suspended the filing requirement imposed on cafeteria and fringe benefit plans. However, don’t be misled! The filing requirement for welfare benefit plans remains unchanged.
2022 San Francisco healthcare expenditure rates
The San Francisco Office of Labor Standards Enforcement recently released updated Health Care Security Ordinance (HCSO) required health expenditure rates for 2022. For the new rates and previous years’ rates, go to the full text.
Be sure to bookmark and visit our COVID-19 resource page to read how the latest information and rule changes may impact your benefits.
This general summary is intended to educate employers and plan sponsors on the potential effects of recent government guidance on employee benefit plans. This summary is not and should not be construed as legal or tax advice. The government’s guidance is complex and very fact specific. As always, we strongly encourage employers and plan sponsors to consult competent legal or benefits counsel for all guidance on how the actions apply in their circumstances.
HealthEquity does not provide legal, tax or financial advice. Always consult a professional when making life-changing decisions.