The American Rescue Plan Act (ARPA) was signed on March 11 and includes additional relief for employers and their employees for 2021. Upon full review of the legislation, we’d like to communicate the high points on the three provisions (listed below) that impact TASC offerings and how you can make sure these relief benefits are available to your employees.
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- Dependent Care FSA – Increased Contribution Limit
- COBRA – Extended Subsidies
- FMLA – Extended Employer Tax Credits
Read more below for an overview of these three temporary provisions. We will send a follow-up communication this week to clients who have existing plans directly impacted by the ARPA provisions to offer plan-level information and instructions.
PROVISION 1: Dependent Care FSA – Increased Annual Contribution Limit
The ARPA includes a provision that allows Plan Sponsors to increase the annual employee contribution limit in a Dependent Care FSA (DCFSA) plan from $5,000 to $10,500 for the 2021 calendar year* (1/1/21-12/31/21). This allowable election amount is available on top of any carried over funds from the 2020 plan year.
While this provision is not mandated, it allows for additional relief to plan participants and eligible employees throughout 2021 and is of utmost value for employers and employees alike. After all, with more allowable pretax plan contributions, employers increase the potential for more FICA savings.
Keep in mind, this ARPA provision is compatible with the DCFSA provisions allowed under the 2021 Consolidated Appropriations Act (CAA) (where employer-adopted) to create unprecedented benefits for employees with dependent care expenses in 2021.
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Unlimited carryover
This means that a DCFSA participant could potentially elect the $10,500 maximum for 2021 and legally carry over up to $10,500 of unused funds into their 2022 plan year. It also means that any carried over funds from 2020 can be added on top of this maximum election amount for 2021. For example: If a participant carries over $4000 of unused funds from 2020 DCFSA and elects the maximum $10,500 for 2021, they will have a total of $14,500 funds to use for 2021 DCFSA with no risk of forfeiture into 2022.
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Unrestricted midyear election changes and new enrollment
This means two things: 1) an existing DCFSA participant can increase their 2021 elections up to $10,500; and 1) an eligible employee could join the DCFSA plan any time in 2021 and elect up to $10,500 – both for the 2021 calendar year.
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Increased dependent age limit from 13 to 14
This means a DCFSA participant (or eligible employee) who has a dependent child who turned 14 in 2020 or 2021 can still be reimbursed for eligible expenses for that child (for plan years that end in 2021).
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We encourage you to adopt (allow) this temporary provision to ensure your employees receive all the relief made available for dependent care expenses while they can. And TASC has it covered. In the spirit of the legislation, the temporary DCFSA provision will automatically be applied to all existing Dependent Care FSA plans at TASC and the plan amendments will be distributed this summer.
If you do not wish to have the $10,500 cap adopted into your DCFSA plan, you may opt-out (or request a custom contribution cap) by completing the Opt-Out/Custom Request Form by April 1(DCFSA plans will be updated on April 2).Please have your 12-digit TASC ID# ready to enter.
*Plans that run off-calendar years will need to make sure that contributions are set in such a way as to not exceed the new $10,500 cap for the 2021 calendar year.
PROVISION 2: Extended Subsidies for COBRA Premiums
This ARPA provision allows Assistance Eligible Individuals (AEIs) who lost health coverage (including dental and vision coverage) due to their or their family member’s involuntary termination or reduction in hours to receive COBRA coverage with a premium reduction of 100% from April 1, 2021 through September 30, 2021.
Allowances for Individuals/Employees
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- If an AEI already elected COBRA, they have 100% subsidized continuation starting on April 1, 2021.
- If an AEI did not make any election yet, they must be given the opportunity to make an election during a new extended lookback election period which ends 60 days after they are notified. They can elect starting April 1, 2021 and can enjoy the subsidy until the end of their original COBRA time frame or September 30, 2021, whichever comes first.
- If an AEI elected coverage and then dropped, they must be given an opportunity to elect coverage, provided they are still within the 18-month COBRA time frame.
- If an AEI becomes eligible for COBRA starting April 1, 2021 or later, they are eligible for the subsidy starting on April 1, 2021.
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Allowances for Clients/Employers
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- The employer or carrier will be reimbursed 100% of the total COBRA premium (102% of the actual cost) by a credit against payroll taxes or as refund of an overpayment.
- A plan may but is not required to permit AEIs to elect different coverage, if they also allow their current employees this option. AEIs would have 90 days after notice of the option to make the election. The different coverage cost must be less than the existing plan for the AEI.
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Required COBRA Notifications & Dates
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- AEIs must be provided a Notice informing them of the availability of the subsidy and the special enrollment period to be delivered by May 31, 2021. The DOL will provide a model notice template for the Notice no later than April 10, 2021.
- A Notice of subsidy expiration must be sent between 15 and 45 days before the end of the period. The DOL will provide a model notice template for the Notice within the next 6 weeks.
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IMPORTANT CONSIDERATIONS:
There are several legislative changes that affect COBRA in addition to the American Rescue Plan Act that employers must navigate and take into consideration, to include:
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- IRS Notice 2021-15 (regarding the Consolidated Appropriations Act)
- Disaster Relief Notice 2021-01
- And more coming!
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TASC can help. We will ensure compliance with all COBRA notification requirements, as mentioned above.
PROVISION 3: FMLA – Extended Tax Credits for Employers
This ARPA extends the Families First Coronavirus Response Act (FFCRA) employer payroll tax credits for Emergency Paid Sick Leave (EPSL) and Paid Family Leave for six (6) months from April 1, 2021 through September 30, 2021. It also adds additional qualifying reasons for employees to take the paid leaves:
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- The employee obtains immunization related to COVID-19.
- The employee is recovering from a condition, illness or disability related to the vaccination.
- The employee is seeking or awaiting the results of a COVID-19 test or diagnosis (including where the employer has requested the test or diagnosis).
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ARPA resets the limit on the tax credit available for EPSL and Paid Family Leave as of April 1, 2021.
Employers may voluntarily provide employees up to 80 hours of EPSL and up to 10 weeks of Paid Family Leave during the period from April through September 2021 (in addition to any EPSL or EFMLEA previously provided) and be eligible for the corresponding tax credit.
IMPORTANT CONSIDERATIONS:
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- Employers must be aware that if they provide the EPSL and/or Paid Family Leave, it must be counted toward an employee’s standard bank of FMLA leave hours, except in the case where the employee is ineligible for FMLA.
- If the employer does not provide the EPSL and /or Paid Family Leave, the qualifying reasons (including those added under ARPA) are still counted under the standard FMLA.
- Any previously paid EPSL/EFMLEA hours are disregarded as of April 1, 2021. The clock has been reset.
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TASC can help. We will help employers navigate all these complicated legislative and regulatory changes, to include helping clients track available hours for EPSL and Paid Family Leave.
Clients with DCFSA, COBRA, and/or FMLA plans at TASC will receive a follow-up email this week
with more information about how to comply with these provisions.
For immediate questions about how the American Rescue Plan Act will impact your existing plan (DCFSA/COBRA/FMLA), please call TASC Customer Care at 800-422-4661.
When prompted, press “2” and enter your 12-digit TASC ID#.
Don’t Have One of these Benefit Plans in Place? Now’s the time to add it in!If you don’t current offer one or more of these benefits to your employees or would like to shift them to one administrator (TASC), we are ready to help, and there has never been a better time to boost your benefits! Adding more benefits to your plan will help you and your employees save more money during this challenging time. These relief provisions are only available for plan years that end in 2021 (on or before 12/31/21), so act now to take advantage.
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- Add a Dependent Care FSA (on Universal Benefit Account®)
- Add COBRA Administration & Compliance
- Add FMLA Administration & Compliance
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To add any of these offerings to your benefits package, give us a call at (888) 595-2261 and press #1 to speak with one of our friendly Plan Advisors ready to help. Please have your 12-digit TASC ID# ready if you are a current TASC client. You may also email our Plan Advisors at iWantTASC@tasconline.com.
You can rely on TASC to stay abreast of all legislative changes and keep you informed as to how they may affect your benefits and compliance management. Subscribe to our blog for important updates as they happen.
