Blogs May 2021

The IRS recently issued Notice 2021-31, which provides much-anticipated guidance for employers on the ARPA COBRA subsidy. The document is 40+ pages long, and the nature of much of the guidance is very detailed, very nuanced, and very narrow. It presents a plethora of situations, many of which most employers will not need to deal with directly or which only serve to clarify otherwise intuitive lines of thought. Add its sheer length, and you have a document that cannot be easily condensed or summarized into a short, meaningful article.

That said, following are 15 key takeaways that are relevant for employers. They are presented in a short format for easy consumption, with references to the specific FAQ document those that want to dive deeper. The summary is presented in the order of the FAQ document. However, we have also highlighted five items as “Critical Issue.” These reflect guidance which is either critical or surprising in nature.

Background on ARPA Subsidies

As a recap, ARPA provides a 100% COBRA premium subsidy for individuals who lost coverage due to a reduction in hours or due to an involuntary termination of employment (Assistance Eligible Individuals or AEIs). The premium subsidy is available for medical, dental, vision, HRA, and EAP coverages for up to six months, from April 1, 2021, through September 30, 2021. ARPA provides that COBRA premiums are “presumed paid” by AEIs and the employer (or insurer) to whom the premiums were to be paid is entitled to a tax credit against its share of Medicare taxes.

Key Takeaway #1: Self-Certification or Attestation   (CRITICAL ISSUE) 

Employers may require individuals to self-certify or attest to being eligible for the subsidy and not being eligible for another group health plan or Medicare. Employers may rely on this attestation for the purposes of claiming the tax credit. In an odd twist of wording, the IRS indicates that employers are not required to secure an attestation from AEIs, however, they ARE required to maintain documented proof and substantiation in order to claim the tax credit. COBRA reporting of AEIs that have provided attestation will suffice for this documentation. (Q-4, Q-5, Q6)

Key Takeaway #2: Waiting Period for New Coverage

If an AEI is “eligible for” other group health plan coverage but that plan has a waiting period, the subsidy can continue during the waiting period. (Q-9)

Key Takeaway #3: Exchange Coverage

If a Qualified Beneficiary is currently covered under an individual policy through a Health Insurance Exchange, they are eligible to drop the Exchange coverage, re-elect COBRA coverage, and receive the subsidy. (Q-13)

Key Takeaway #4: Retiree Coverage

If an individual would otherwise be an AEI but has access to retiree coverage, eligibility for the retiree coverage is not a disqualifying event so long as the retiree coverage is offered under the same group health plan as is provided for active employees. The premium credit would be limited to the premium for active employees. (Q-18, Q-36)

Key Takeaway #5: Only Spouse and Children (Not DPs )  (CRITICAL ISSUE) 

Only a spouse or children who were covered on the day before the Qualifying Event (or a child born to or adopted by the covered employee during the COBRA period) are eligible for the subsidy. Other dependents, even though they may be eligible for coverage are not eligible for the subsidy. Of note here is coverage for Domestic Partners who may be covered under COBRA coverage, but who are not considered Qualified Beneficiaries under the COBRA law. This means they are not eligible for the subsidy. (Q-19)

Key Takeaway #6: What Constitutes an Involuntary Termination

There are 11 questions which outline various permutations of what constitutes an involuntary termination. Generally, these fall in line with a colloquial understanding of an involuntary termination. However, if unique circumstances arise, employers should review these questions for confirmation. (Q-24-Q-34)

Key Takeaway #7: No Partial Subsidy for Richer Plan Coverage  (CRITICAL ISSUE) 

If an employer allows a special enrollment and an employee elects a richer plan, the subsidy is not available for the equivalent cost of coverage under the base plan (with the employee paying the buy-up cost). To be clear, while not intuitive, no subsidy would be available if the employee elected a richer plan. There is an exception to this rule if the base plan is no longer available. In that case, the individual must be offered coverage under the “most similar” plan. (Q-41, Q-42)

Key Takeaway #8: Employer No Longer Subject to Federal COBRA

Key Takeaway #9: Extended Election Only Applies to Federal COBRA

The extended election period (where QBs can jump back onto COBRA) only applies to federal COBRA, not to state COBRA-lookalike laws, unless the state law specifically provides for such a provision.

Key Takeaway #10: Extended Deadlines Don’t Apply

The election period for the ARPA extended election period is 60 days from receiving formal notification in order to receive the subsidy. The Emergency Relief Notice provisions which allow for extensions of timeframes for COBRA elections, extended payment deadlines, and non-contiguous retroactive coverage for COBRA elections do not apply. (Q56-Q59)

Key Takeaway #11: Subsidized Amount Is 102%

The subsidized amount is the full premium (or premium equivalent) plus the statutory 2% COBRA administration fee. (Q-63)

Key Takeaway #12: Employer Subsidies Don’t Qualify for ARPA Subsidy  (CRITICAL ISSUE) 

Employers who have provided any direct, pre-existing COBRA subsidy are NOT entitled to recoup any portion of their direct subsidy via the ARPA subsidy program. If an employer subsidy expires during the ARPA subsidy period, the employee would then be eligible for the ARPA subsidy. If an employer subsidized a portion of the COBRA premium, the AEI is eligible for an ARPA subsidy for the premium amount that was required to be paid by the Qualified Beneficiary. (Q-64)

Key Takeaway #13: Subsidy Calculations for Non-AEIs  (CRITICAL ISSUE) 

If an AEI also covers a non-AEI (for example, a DP or spouse who was added after the Qualifying Event), the amount of the subsidy calculation is based on the premium differential for those who are AEIs and those who are not. Here, an example is instructive. Assume the employee, DP, and 2 children are covered. The EE+Sp/DP+Child(ren) premium is $1,800, and the EE+ Child(ren) premium is $1,300. The amount of the ARPA subsidy would be $1,300 and the $500 cost attributable to the DP would not be subsidized. Alternatively, assume a 3-tier EE+2+ premium of $1,800, the subsidy for EE+Child(ren) coverage would be $1,800, and the DP would be covered at no additional cost. (Q-68)

Key Takeaway #14: Timing and Method of Tax Credit

Employers become entitled to the tax credit at the point when an election is made (for retroactive months) and on the first of each month thereafter for prospective months. The tax credit is taken against the employer portion of Medicare taxes on Form 941, Employer Quarterly Federal Tax Return. Employers may reduce their federal tax deposits up to the amount of the credit and/or request an advance (on Form 7200) of the amount if the credit exceeds the federal tax deposits. Note that tax credits taken are includible in gross income for employers. (Q-74, Q-75, Q-79)

Key Takeaway #15: No Tax Credit Refunds Required

If an AEI fails to provide notice that they are no longer eligible for the subsidy in a timely manner, the employer is still entitled to a previously taken tax credit (unless the employer knew of the individual’s eligibility for other coverage). (Q-78)

Earlier this month, the City of San Francisco waived the 2020 reporting requirement for the Health Care Security and Fair Chance Ordinances. This marks the second year in a row that the reporting requirement has been waived due to the Public Health Emergency. This is welcome relief for employers who employ workers in the City and County of San Francisco.

As a reminder, this reporting reprieve does not waive the requirement to comply with all other aspects of the ordinances. If you have questions about your need to comply, please reach out to your Vita Account Manager.

As employees begin returning to the workplace, how can employers keep their employees safe, accommodate their concerns, and minimize liability? What are the challenges and risks of instituting a vaccine mandate? Join Jeanine DeBacker, employment law attorney at McPharlin Sprinkles & Thomas LLP, and Brie Linkenhoker, PhD and Founder of Worldview Studio, as they provide guidance and clarity on these questions and others. We address several topics, including:

• Vaccine mandates
• Privacy issues
• Accommodation requests
• Masking protocols
• Employee education resources
  

Note: The content of this presentation is not to be considered legal advice. We recommend Clients speak with legal counsel specializing in labor and employment law to ensure your organization meets requirements.

Additional Resources

Employer Action Plans

• COVID-19 Resources for Employers with model policies and communications by ThinkHR
• Vaccine Guidance with model policies and accommodation requests by Fisher Phillips
• Workplace Vaccine and Mask Mandates guidance by Sun Life
• Model Mandatory/Voluntary Vaccine Policy Memo by SHRM (see below)
• CDC’s Workplace Vaccination Program
• Vaccine Communications Guidance for Employers by Communicate to Vaccinate
• California Employment Law Blog from Jeanine DeBacker

COVID-19 Vaccine Education

• Department of Health & Human Services Communication Toolkit
• COVID-19 FAQ’s from the Ad Council
• COVID-19 FAQ’s from the National Foundation for Infectious Diseases

Model Mandatory/Voluntary Vaccine Policy Memo to Employees

Mandatory Vaccination Option

Date:
To:
From:
Subject: Mandatory Vaccination Policy

[Company name] has implemented a mandatory vaccination policy effective [date] requiring [disease name(s)] vaccination(s) for all employees. In accordance with [Company name]'s duty to provide and maintain a workplace that is free of known hazards, we are adopting this policy to safeguard the health of our employees and their families, our customers and visitors, and the community at large from infectious diseases that may be reduced by vaccinations. In making this decision, the executive leadership team reviewed recommendations from [insert department names or other organizations consulted such as the Centers for Disease Control and Prevention, the Advisory Committee on Immunization Practices and local health officials].

All employees must receive the vaccination no later than [date]. Individuals seeking an exemption from this requirement for medical or religious reasons should complete a request for accommodation form and submit the form to the human resources department.

Vaccinations will be administered by [insert details regarding who will provide the vaccine and where employees must go to receive the vaccine].

[Company Name] will pay for all vaccinations and the time spent receiving the vaccinations.

Should you have any questions regarding this new policy, please contact [name and contact information].

Voluntary Vaccination Option

Date:
To:
From:
Subject: Voluntary Vaccination Policy

[Company name] is implementing a voluntary vaccination policy effective [date] regarding [disease name(s)] vaccination(s) for employees. In accordance with [Company name]'s duty to provide and maintain a workplace that is free of known hazards, we strongly encourage employees to receive this vaccination to minimize the risk of infectious disease in our workplace. In making this decision, the executive leadership team reviewed recommendations from [insert department names or other organizations consulted such as the Centers for Disease Control and Prevention, the Advisory Committee on Immunization Practices and local health officials].

Employees may obtain the vaccination wherever they choose; however, [Company name] is facilitating vaccinations through [insert details regarding who will provide the vaccine and where employees can go to receive the vaccine]. [Company Name] will pay for all vaccinations and the time spent receiving the vaccinations.

Should you have any questions regarding this new policy, please contact [name and contact information].

Starting January 1, 2022, employees who work in the state of Washington will pay a mandatory 0.58% payroll tax on all W-2 income with no cap. This tax will fund a state-run long-term care insurance program which can provide up to a maximum of $36,500 of long-term care benefits for care provided in the state. This equates to a daily benefit of $100 per day for one year. There is a provision to increase the benefit. However, benefit increases will track with the Washington CPI. The tax will increase as income increases since there is no cap to the tax.

Eligibility Details

To be eligible for benefits, employees must have paid into the system for three years within the past six years or for a total of 10 years with at least five of those years paid without interruption. Benefits can only be received if you reside in Washington state.

Opt Out Option

Employees can opt out of this tax permanently if a) they own their own long-term care insurance policy, and b) if they can attest that the plan provides benefits equal to or better than the state program. The long-term care insurance must be in place by November 1, 2021. This attestation must be submitted to the state’s Employment Security Department between October 1, 2021 and December 31, 2022.

Who Should Consider a Private LTC Policy?

Arguably, there are three groups of employees who may benefit from considering a private long-term care insurance policy:

1. Employees who earn $300,000 or more in annual compensation. Most employees in this income bracket can find a policy that is more cost effective than the payroll tax.
2. Employees who plan to move out of the state of Washington when they retire because they will forfeit the benefit.
3. Employees who plan to retire in the next few years since they will not have vested benefits through the state.
   
   

Employer Action

If you have employees in Washington and would like to consider a long-term care benefit, provide a resource for employees, or explore an executive carve-out, please reach out to your Vita Account Manager. We will do an assessment to confirm the best options and course of action.

The Internal Revenue Service has announced the 2022 dollar limitations for Health Savings Accounts as well as underlying qualifying High Deductible Health Plans. The maximum HSA contribution and out of pocket maximum limits saw increases at both the family and individual levels.

High Deductible Health Plan Policy Limits

Health Savings Account Limits

High Deductible Health Plan Policy Limits

Any amount can be contributed to an HSA up to the maximum annual contribution, regardless of the actual deductible of the underlying HDHP plan. The HSA contribution rules assume that you will be enrolled on a high deductible health plan for 12 consecutive months.

Embedded Deductibles on an HSA-Qualified HDHP

Many qualified high deductible health plans have an aggregate family deductible, so that if an employee covers any dependents on the plan, the family deductible applies and the individual deductible is not taken into consideration. However, there are some plans that have an embedded individual deductible such that if one member of the family meets the embedded individual deductible, then the plan coinsurance would start to pay once that individual deductible is met. In order for such a plan to be a qualified HDHP, the embedded individual deductible must be at least the minimum family deductible outlined above. As an example, these types of plans would need to have an embedded individual deductible of $2,800 to remain HSA qualified in 2022.