On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (the “Act”), which included the newest federal COVID-19 relief legislation. Although the Act focuses on a number of items, including financial relief for individuals and businesses, there are several sections that affect employers.
First, the Act does not extend job-protected paid leave under the Families First Coronavirus Response Act (FFCRA) passed on March 18, 2020, which included two types of paid leave under the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA). Under the FFCRA, those leave provisions expire on December 31, 2020 and the benefits were not specifically extended in the new COVID-19 package. Rather, the Act allows employers to voluntarily provide leave for the first quarter of 2021 and receive associated tax credits.
As previously detailed in a series of compliance updates and webinars, the FFCRA’s two types of paid leave applied to employees impacted by COVID-19 that work for “covered employers”—private employers with fewer than 500 employees and certain public employers. Under the EPSLA, covered employers are required to provide employees up to 80 hours of paid sick leave for a variety of COVID-19 related reasons, and under the EFMLEA, an additional 10 weeks of partially paid leave.
While employers are not required to offer additional FFCRA benefits, they may voluntarily do so for any leave taken through March 31, 2021. If an employee has already exhausted all FFCRA sick leave, including 80 hours of EPSLA and/or 10 weeks of EFMLEA as of December 31, 2020, the employee is not eligible for any further leave in 2021. But if the employee’s leave is not exhausted, the employer may voluntary extend it. Employers claiming tax credits in 2021 must comply with all requirements of FFCRA and associated regulations.
Ban on Surprise Medical Bills:
Effective January 1, 2022, the Act includes the No Surprises Act, which prohibits billing patients for certain out-of-network medical expenses and has significant implications for patients, medical providers, and payors. Under standard billing practices for an out-of-network claim, the payor (insurance company or TPA) normally pays the out-of-network benefit and then the patient is balance billed the difference. The Act removes the “surprise” in three situations:
In the event there is a dispute about the payment of a surprise medical bill, the Act relies on voluntary negotiations between insurers and providers, supported by an arbitration process if negotiations fail. If a state already has legislation in place to address surprise medical bills, the Act defers to existing state laws for state-established payment amounts.
Temporary Special Rules for FSAs:
Under the Act, temporary rules are in place allowing employers (as plan sponsors) to give participants additional time to use FSA account balances and make changes to FSA elections. These changes are optional and require amendments to plan documents. For calendar year plans, amendments effective in 2020 must be adopted by December 31, 2021 and for those effective in 2021, amendments must be adopted by December 31, 2022. Plan sponsors should also communicate the changes to affected employees so they understand their options.
Temporary Removal of Limits on FSA Carryover Amounts: for health FSA plans beginning in 2020, up to $2,750 can be contributed with a carryover limit of $550 for 2020 and $560 for 2021. For dependent care FSAs, the limit is $5000 per family. FSAs are subject to a “use it or lose it” rule and participants must use or forfeit the unused FSA balance. The Act temporarily eliminates the health FSA carryover limit, allowing employees to carry over any unused amounts from the 2020 or 2021 plan year to the next plan year, and permits dependent care FSA carryovers for those years.
Under normal FSA rules, health and dependent care FSAs permit a participant to have a 2-1/2 month grace period after the end of plan year to be reimbursed for claims incurred during that period, unless the plan has a carryover provision. Under the Act, the grace period is extended for a period of up to 12 months following the end of the plan year. The temporary relief allows plans to extend the grace period through June 30, 2021.
Mid-Year FSA Election Changes: Under normal FSA rules, a plan participant can only make changes to their FSA if they experience a change in status, which is defined by IRS rules. The Act now allows employees to make mid-year election changes to FSA elections in plan years ending in 2021, even if there is no change in status.
Under the CARES Act, signed into law on March 27, 2020, unemployed workers eligible for unemployment benefits under state law were eligible for an additional $600 per week benefit, with these payments expiring on July 31, 2020. The Act allows unemployed workers to receive an additional $300 per week benefit for weeks beginning after Dec. 27, 2020, with the benefit available through March 14, 2021. There are no retroactive payments allowed for periods prior to December 27, 2020.