The American Rescue Plan (ARPA): BASIC’s Response
This post contains an overview of three temporary provisions in the American Rescue Plan Act (ARPA) that impact BASIC services and clients, as well as our business response to each:
- Dependent Care FSA – Increased Contribution Limit
- COBRA – Extended Subsidies
- FMLA – Extended Employer Tax Credits
This new ARPA legislation creates huge incentives for an employer to add a COBRA, FMLA, and Dependent Care FSA plan from BASIC. We should encourage our current clients to add one or more of these plans to make sure their employees get full access to the additional relief benefits, only available for a limited time.
We will be sending an email communication with content similar to what is presented below to all BASIC clients soon, followed by a second round of emails to clients with FMLA/COBRA/DCFSA plans in place to offer more plan-level information. Please encourage your BASIC clients to watch for these emails to receive important information regarding the legislation and how it affects their applicable benefit plans.
ARPA PROVISIONS & HOW BASIC IS RESPONDING
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 for 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 new ARPA provision for DCFSA is compatible with the temporary 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!
- 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 their 2020 DCFSA and elects the maximum $10,500 for 2021, they will have a total of $14,500 in funds to use for their 2021 DCFSA with no risk of forfeiture into 2022.
- 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 2) an eligible employee could join the DCFSA plan any time in 2021 and elect up to $10,500 – both for the 2021 calendar year.
- 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).
*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.
HOW BASIC IS RESPONDING
For the sake of consistency with our response to previous relief bills, BASIC will take a proactive approach to the DCFSA provision and automatically apply it to all existing DCFSA plans. Plus, since this provision is a “no-brainer” for an employer to adopt, a proactive approach is more practical than asking 3,000 DCFSA clients to contact us with an adoption request.
Per our previous responses, we will offer clients the ability to OPT OUT of the automatic adoption of this DCFSA provision or request a custom cap (up to $10,500) by completing the opt-out form by April 1 (DCFSA plans will be updated in our system shortly after).
Amendments will be completed and distributed this summer (along with the CAA adoptions, where applicable).
BASIC’s Consumer Driven Accounts system is ready to administer these new provisions for employers. To learn more about BASIC’s CDA services, click here!
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
- 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.
Allowances for Clients/Employers
- 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 a 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.
Required COBRA Notifications & Dates
- 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.
There are several legislative changes that affect COBRA in addition to the American Rescue Plan Act that employers must navigate and take into consideration, which include:
- IRS Notice 2021-15 (regarding the Consolidated Appropriations Act)
- Disaster Relief Notice 2021-01
- And more coming!
HOW BASIC IS RESPONDING
BASIC will provide the following services for all COBRA clients (new and existing):
BASIC COBRA can help your clients comply with all regulations and requirements. If you’re interested in learning more about BASIC COBRA, click here!
PROVISION 3: FMLA – Extended Tax Credits for Employers
The ARPA extends the Families First Coronavirus Response Act (FFCRA) employer payroll tax credits for paid sick and paid family leave for six (6) months from March 31, 2021 through September 30, 2021. It also adds additional qualifying reasons for employees to take the paid leaves:
- 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)
ARPA resets the limit on the tax credit available for Emergency Paid Sick Leave (EPSL) and paid family leave (EFMLA) as of April 1, 2021.
Employers may voluntarily provide employees up to 80 hours of EPSL in the period from April through September 2021, in addition to any EPSL provided earlier, and be eligible for the corresponding tax credit.
- Employers must also be aware that if they provide the EPSL and/or paid family medical leave, it must be counted toward their standard bank of FMLA leave hours.
- Any previously paid EPSL/EFMLEA hours are disregarded as of April 1, 2021. The clock has been reset.
HOW BASIC IS RESPONDING
BASIC will help employers navigate all these complicated legislative and regulatory changes, to include helping clients track available hours for EPSL and EFMLEA.
BASIC FMLA can help your clients comply with all regulations and requirements. If you’re interested in learning more about BASIC FMLA, click here!