Paid Leave Tax Credits, Unemployment Benefits, COBRA Premium Subsidies and Notice Requirements, and a Punt on Minimum Wage
Today, the U.S. House approved the Senate’s version of the $1.9 trillion spending bill, The American Rescue Plan Act (the “Act”). The differences between the Senate’s and the House’s versions required the House to vote again on the final bill. President Biden has stated that he will sign it this week.
Of interest to employers is the omission in the Senate bill of the increase in the minimum wage to $15 by 2025 that the House bill had included. However, Congress is widely expected to take on the minimum wage issue with new bills in the coming weeks.
Regarding the tax credits for employers that offer paid COVID-19 related leave to employees, the Act extends those through September 30, 2021, although businesses are not required to offer paid leave. Additionally, two provisions are included in the Act regarding unemployment benefits. First, persons eligible for unemployment benefits can receive those benefits for 74 weeks – up from 50 weeks. Second, the Act continues the current weekly $300 unemployment benefit subsidy until August 29, 2021.
The Act also contains a subsidy that will cover 100% of COBRA premiums through September 30, 2021. The subsidy takes the form of a tax credit granted to the entity to whom COBRA premiums are payable, which will be the employer in most circumstances. Additionally, COBRA-eligible employees must be given both notice of the subsidies and an additional opportunity to elect COBRA, even if they had previously declined or terminated COBRA coverage. The premium subsidy and additional notices will likely result in an increased number of COBRA coverage elections.
Also regarding COBRA elections and HIPAA special enrollment, at the beginning of the COVID-19 pandemic, the Department of Labor, the Department of the Treasury, and the Internal Revenue Service extended certain deadlines pertaining to these issues. The extension of the tolling period for these deadlines was set to end on March 1, 2021. With COVID-19 remaining a concern, on February 26, 2021, the Employee Benefits Security Administration (“EBSA”) issued guidance that operates to extend these deadlines beyond March 1st. These deadlines will now end on the earlier of either:
- One year from the date the deadline would have occurred after March 1, 2020, absent the previous extension guidance; or
- 60 days after the announced end of the national emergency.
How these deadlines will apply in practice is less than clear, as the calculation of the new deadlines must be considered on an individual basis. However, revised notifications to comply with both the ESBA’s guidance and the Act will be required. Additionally, standard disclosures also should be reviewed and revised to comply with both the ESBA’s extension guidance and the Act’s premium subsidy notification requirements.
The combination of the extended deadlines and the Act’s new COBRA premium subsidies and notice requirements will require careful handling. A similar COBRA subsidy in 2009 created a great deal of confusion, which resulted in mistakes that had financial repercussions. Although employers generally use vendors/third party administrators (“TPAs”) to handle these issues, employers who sponsor employee health plans should communicate with their COBRA and health plan TPAs to confirm that a plan of action is in place to comply with these requirements. If the TPA fails to comply with these newly prescribed requirements, the employer remains ultimately responsible for compliance and can face civil penalties and be liable to affected individuals. A review of the indemnity provisions in written agreements with such TPAs would also be sensible in light of these issues. Additionally, employers must ensure that lists of affected employees provided to TPAs are fully accurate, as any indemnification by the TPA is unlikely to cover mistakes or omission by the employer.
For more information, please contact our office (806) 468-3300.