The US Department of the Treasury has released long-expected proposed regulations regarding the section 4960 excise tax on certain remuneration or separation amounts paid to the five highest paid employees of a tax-exempt organization. The new proposed regulations continue the tough approach previously taken on section 4960 issues, while also providing some new exceptions and important clarifications.
Under the recently published final rule issued by the US Department of Labor, retirement plan administrators can choose to deliver required disclosures electronically by complying with the conditions of a new safe harbor. The final rule represents an opportunity for retirement plans to save costs and enhance participant access to disclosure documents.
To help cafeteria plan participants address challenges arising from the COVID-19 crisis, the Internal Revenue Service recently issued guidance allowing employers to make a number of participant-friendly changes under their cafeteria plans. While employer adoption of these more flexible rules is voluntary, plan sponsors should work with third-party administrators, insurance providers and legal advisors to ensure that the new provisions are properly adopted, documented and communicated.
The Internal Revenue Service (IRS) recently announced cost-of-living adjustments to the applicable dollar limits for health savings accounts (HSAs) and high-deductible health plans (HDHPs) for 2021. Some of the dollar limits currently in effect for 2020 will change for 2021.
In recognition of the difficulties faced by retirement plan sponsors, participants and beneficiaries due to the COVID-19 pandemic, new guidance extends the deadlines for notices and disclosures required by Title I of ERISA and extends deadlines for retirement plan participants and beneficiaries to submit benefit claims and benefit appeals. The new guidance also provides some welcome fiduciary relief for electronic disclosures, incomplete plan loan or distribution documentation, as well as delayed participant contributions and loan repayments.
The US Department of Labor, in conjunction with the Internal Revenue Service and US Department of the Treasury, issued guidance and deadline extensions applicable to ERISA-governed group health and welfare plans. The guidance provides relief for plan sponsors, plan administrators and plan participants that may be struggling to comply with applicable deadlines and requirements in the midst of the chaos related to the COVID-19 pandemic.
SUB-Pay Plans: An Alternative to Severance Programs
While the coronavirus pandemic wreaks havoc on the economy and jobs, employers consider disaster-related employee benefit structures, such as easily administered qualified disaster assistance relief programs and the financially attractive severance alternative known as “supplemental unemployment benefit plans” or “SUB-pay plans.” Compared to the typical severance program, restructuring a temporary or permanent layoff program as a SUB-pay plan can yield financial and tax savings exceeding 30% of an employer’s typical severance costs while also providing FICA tax savings to employees of 7.65%.
Overview
A new IRS notice extends the deadline for individuals to make health savings account (HSA) contributions from April 15, 2020 to July 15, 2020. The IRS issued the notice to provide taxpayers with various tax filing and payment deadline extensions in response to the ongoing COVID-19 emergency.
In Depth
In response to the COVID-19 emergency, the IRS has issued Notice 2020-18, which extends certain tax filing and payment deadlines. All taxpayers with filing or payment deadlines of April 15, 2020 are eligible for relief under the Notice, regardless of whether they are directly impacted by COVID-19 (for example, due to illness or quarantine). The Notice extends the deadline for individuals to make contributions to their health savings accounts from April 15, 2020 to July 15, 2020.
HSAs allow individuals who are covered under high-deductible health plans (HDHPs) to contribute an amount up to IRS limits ($3,550 for individual coverage and $7,100 for family coverage in 2020), which is used to pay for certain eligible medical expenses on a pre-tax basis. HSA contributions are typically due by the federal income tax filing deadline of April 15. Because that deadline has now been extended to July 15, 2020, the IRS has also extended the deadline to make HSA contributions until the new filing deadline.
Earlier this month, the IRS allowed individuals covered by an HDHP to receive testing and care for COVID-19 without a deductible, or with a deductible below the HDHP minimum, without disqualifying the individual from making or receiving HSA contributions (see our previous On the Subject here).
As part of the Families First Coronavirus Response Act (the “Act”), Congress eliminated patient cost-sharing for Coronavirus (COVID-19) diagnostic testing and testing-related services provided under any employer-sponsored group health plan. This impacts all employer plans, insured and self-funded, of all sizes. The provisions are effective as of March 18 and will continue on a temporary basis for at least 90 days unless extended by the Department Health and Human Services (HHS).
On March 13, 2020, President Trump declared a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Declaration”) due to extraordinary circumstances resulting from Coronavirus. This Declaration opens up new methods for employers to provide tax-favored financial assistance to employees who are affected, directly or indirectly, by the virus.
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