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An Employer’s Guide to the Consolidated Appropriations Act, 2021

This article was originally published on 12.23.2020 and has been updated to reflect the latest developments.

Each year, Congress must pass 12 appropriations bills that provide the funding to operate all areas of the government for the next fiscal year, i.e. October 1, 2020 – September 30, 2021. If Congress is unable to pass the spending bills in time, the government shuts down for lack of funding. To avoid shutdowns in years where the government cannot pass the spending bills by the deadline, they use a Continuing Resolution that authorizes, or extends, the current budget for a period.

This year is especially challenging with the added complications and challenges of the national pandemic. For months, Congress has been working to negotiate additional funding to help businesses, individuals, and all those adversely affected by the national pandemic. Not everyone agrees on who and how much money they should provide. As a result, we hit September 30 without passage of the spending bills.

Using four continuing resolutions to extend the current budget, i.e. through December 11, December 18, December 21, and now through December 28, Congress now has time to review and agree on the new budget appropriations. The new, expansive, 5,593-page, $1.4 trillion omnibus spending agreement encompasses many different provisions and includes an additional $900 billion in coronavirus relief.

After months of negotiation, the House and Senate pass the bill on December 21, only to face a challenge from the President to reduce areas of spending and increase stimulus checks from $600 to $2,000. However, the President ends up signing the bill into law on December 27 with no such modifications. From here, the House may or may not take up new legislation to address some of these items.

Within the bill are specific areas that impact employers and employee benefits. We’ve broken them down into segments for easier reference:


 

Coronavirus Response and Relief Supplemental Appropriations Act, 2021

Extension and Benefit Phaseout Rule for Pandemic Unemployment

Effective upon enactment - this provision extends pandemic unemployment assistance:

  • Extension to March 14, 2021 for those currently receiving, but not yet exhausting, benefits and for relief for governmental entities and nonprofit organizations
  • Limits pandemic unemployment assistance to any week prior to April 5, 2021, i.e. no benefits payable for any week beginning after April 5, 2021
  • Increases maximum number of weeks from 39 to 50
  • Adds additional unemployment funding of $300 per week for weeks of unemployment beginning on or after December 26, 2020 and ending before March 14, 2021 (previously was $600 from the date the State entered into agreement with the federal government and ending on or before July 31, 2020)

Extension of the Families First Coronavirus Relief Act (FFCRA)

Effective upon enactment

  • The FFCRA provides businesses with tax credits to cover certain costs of providing employees with required paid sick leave and expanded family and medical leave for reasons related to COVID-19, from April 1, 2020, through March 31, 2021 (previously December 31, 2020)
  • Employers have the choice of paying the applicable mandatory paid sick and family leave through December 31, 2020, as indicated in FFCRA, or extend payment eligibility through March 31, 2021 subject to all other obligations under FFCRA (this extension also applies to the emergency paid sick leave and family medical leave provisions applicable to self-employed individuals)
  • Regarding emergency paid sick leave and family medical leave, self-employed individuals may now elect to use earnings from the prior taxable year rather than the current taxable year

COVID-related Tax Relief Act of 2020

Effective upon enactment

  1. Additional Recovery Rebates for Individuals - This new credit is in addition to the credit previously paid.
    1. For the tax year beginning in 2020, eligible individuals will receive a credit in the amount of:
      1. $600 per adults ($1,200 married filing jointly) plus $600 for each child for individuals with adjusted gross income up to $75,000 per taxpayer, $112,500 for head of household, or $150,000 for married filing jointly
      2. Incomes over these thresholds are reduced by 5% creating prorated refunds to those with incomes between $75,000 and $99,000 per taxpayer, $112,500 and $146,000, and $150,000 and $198,000 for married filing jointly
      3. Credits are not available for taxpayers with income over $99,000, $146,000 for head of household, or $150,000 for married filing jointly
      4. No payments will be made for any taxpayer deceased prior to January 1, 2020
    2. The Treasury Secretary will provide the refunds by direct deposit to any account belonging to an individual on or after January 1, 2019 to which previous payments of taxes were made. Payments will be made prior to January 15, 2021. After payment is made, notice shall be made to the recipient’s last known address indicating date, method of payment, and contact number at IRS for failure to receive the payment. No payments will be made without a valid ID number
  2. Delay of Payment of Employer Payroll Taxes - employers and self-employed may defer their Social Security tax (6.2%) paid to an employee on a pay date during the period September 1, 2020 and ending April 30, 2021 (previously December 31, 2020) but only if the amount of such wages or compensation paid for a bi-weekly pay period is less than the threshold amount of $4,000. The taxes must be withheld and paid back between January 1, 2021 and April 30, 2021. Interest will begin accruing January 1, 2022.
  3. Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act - Effective as if included in the CARES Act with rules to be written not later than 10 days after the enactment date
    1. Allowable use of PPP loans expands to include covered operations, property damage costs, covered supplier costs, and covered worker protection expenditures
      1. Covered operations expense = payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses;
      2. Property damage cost = a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation;
      3. Covered supplier cost = an expenditure made by an entity to a supplier of goods for the supply of goods that-
        1. are essential to the operations of the entity at the time at which the expenditure is made; and
        2. is made pursuant to a contract, order, or purchase order—
        3. in effect at any time before the covered period with respect to the applicable covered loan; or
        4. with respect to perishable goods, in effect before or at any time during the covered period with respect to the applicable covered loan
      4. Covered worker protection = an operating or a capital expenditure to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government, during the period beginning on March 1, 2020 and ending the date on which the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et 8 seq.) with respect to the Coronavirus Disease 2019 (COVID–19) expires related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19, e.g. drive-through window, sneeze guards, ventilation systems, etc.
    2. Selection of covered period – re-defines covered period to be the date the covered loan originates and ends on the date selected by the eligible recipient – either 8 weeks after origination or 24 weeks after origination (previously the 8-week choice only applied to those whose loans originated prior to June 5, 2020)
    3. Simplified application for loan forgiveness
      1. Covered loans up to $150,000 – the covered loan amount may be forgiven if the eligible recipient signs and submits certification, of one page or less, to the lender within 24 days of the date of enactment, that provides:
        1. a description of the number of employees the employer retained;
        2. the estimated amount of the covered loan amount spent by the eligible recipient on payroll costs;
        3. the total loan value; and
        4. attestation that the recipient accurately provided the required certifications and complied with the documentation and records requirements per the submission form
      2. Covered loans of more than $150,000 – no change to the filing requirements for these recipients
    4. Specific group insurance payments as payroll costs – “group insurance” is re-defined as “payment required for the provisions of group health care or group life, disability, vision, or dental insurance benefits, including insurance premiums”
    5. Clarification and limitation on eligibility – a business or organization is not eligible for a loan if they were not in operation on February 15, 2020 nor are businesses that receive grants under section 24 of this act, i.e. entities receiving shuttered venue operator grants
    6. Second draw loans –
      1. Eligible entity - any business concern, nonprofit organization, housing cooperative, veterans organization, Tribal business concern, eligible self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative that:
        1. Employs not more than 300 employees; and
        2. had gross receipts during the first, second, third, or only with respect to an application submitted on or after January 1, 2021, fourth quarter in 2020 that demonstrate not less than a 25 percent reduction from the gross receipts of the entity during the same quarter in 2019;
          1. if not in business during the first or second quarter must demonstrate with gross receipts during the third or fourth quarter of 2019;
          2. if only in business the fourth quarter of 2019, then must demonstrate with gross receipts during the fourth quarter of 2019;
          3. if not in business during 2019 but was in business as of February 15, 2020, then must demonstrate with grow receipts during the first quarter of 2020
        3. Eligible entities are limited to only one covered loan
    7. Maximum amount of loan – is the lesser of:
      1. $2,000,000; or
      2. 2.5 times the average total monthly payment for payroll costs incurred or paid during the 1-year period before the date on which the loan is made or calendar year 2019; or
        1. If a seasonal employer (For PPP loan purposes, seasonal employer is defined as an eligible recipient that does not operate for more than 7 months in any calendar year; or during the preceding calendar year, had gross receipts for any 6 months of that year that were not more than 33.33% of the gross receipts of the employer for the other 6 months of that year) - 2.5 times the average total monthly payments for payroll costs incurred or paid by the eligible entity for any 12- week period between February 15, 2019 and February 15, 2020; or
        2. If an entity that did not exist in the year period preceding February 15, 2020 – 2.5 times the sum of the monthly payments by the eligible entity for payroll costs paid or incurred as of the date on which the eligible entity applies for the loan; or
        3. If entity assigned NAICS code beginning with 72, i.e. accommodation and food service - 3.5 times the average total monthly payment for payroll costs incurred or paid during the 1-year period before the date on which the loan is made or calendar year 2019
      3. Full loan forgiveness eligibility is available if at least 60% of the covered loan was used for payroll costs
    8. Additional loan amounts –
      1. Eligible recipients may apply for the difference between the full amount of the loan for which they were eligible, and the amount of the loan taken
      2. Likewise, if recipient returned all or part of the covered loan, they may reapply for the difference between the amount retained and the maximum amount applicable
      3. For eligible recipients who did not accept the full amount of the covered loan, they may request a modification to increase the amount of their loan up to the applicable maximum

    Taxpayer Certainty and Disaster Tax Relief Act of 2020

    Employee Retention Credit for Employers Subject to Closure due to COVID-19

    Effective upon enactment - provides credits to all sized businesses who keep employees on the payroll – modifications of the provision from the CARES Act:

    • Credit allowed against applicable employment taxes for each calendar quarter equal to 70% (previously, 50%) of qualified wages paid to employees after March 12, 2020 and before July 1, 2021 (previously, December 31, 2020) for any calendar quarter, up to a maximum of $10,000 per calendar quarter
    • The maximum credit is $7,000 (70% of first $10,000 of qualified wages) per employee for any calendar year quarter (previously this was limited to each calendar year)
      • Employers with less than 500 employees: If the employer had 500 or fewer employees on average in 2019, the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full-time and were paid for full-time work, the employer still receives the credit. Advance credits are available for any calendar quarter not to exceed 70% of the average quarterly wages
      • Employers with more than 500 employees: If the employer had more than 500 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.
    • The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19 related shut-down order, and (2) gross receipts are less than 80% (previously, 50%) of the gross receipts for the same calendar quarter in calendar year 2019 (2020 for any quarter that the employer was not in existence in 2019)
    • The credit applies to wages paid in calendar quarters beginning after December 31, 2019 and before October 1, 2020 and for which the paid emergency sick time or family leave credit has not been taken
    • In the previous version, this credit did not apply to governmental employers of the U.S. government, any State government or political subdivision or any agency or instrumentality –
      • this version adds the following exception: 501(c)(1) organization that is exempt from tax under section 501(a) or any entities and any governmental or State entity listed above if they are a college, university, or whose principal purpose or function is providing medical or hospital care
      • Of these, all colleges, universities or medical or hospital care entities automatically meet the “eligible employer” requirement of “carrying on a trade or business in 2020"
    • Allowance for certain health plan expenses – includes amounts paid by the eligible employer to provide and maintain a group health plan but only to the extent that the amounts are excluded from the gross income of employees by reason of section 106(a) of the code

    Certain Charitable Contributions Deductible by Non-Itemizers

    Effective for taxable years beginning after December 31, 2020 – provides extension of the ability for non-itemizers to claim a deduction of up to $300 ($600 for married filing jointly) for charitable contributions made in 2020 to tax years beginning in 2021 for contributions made to Section 509(a)(3), i.e. a public charity by being a “supporting organization” or for the establishment of a new, or maintenance of an existing, donor-advised fund (as defined under Section 4966(d)(2)

    Temporary Special Rules for Health and Dependent Care Flexible Spending Arrangements

    Effective for taxable years beginning after December 31, 2020 – allows health flexible spending arrangements (FSAs) and dependent care flexible spending arrangements (DCSAs) to:

    • Permit participants to carry over any unused benefits or contributions remaining from the 2020 plan year to the plan year ending in 2021 and, for plan years ending in 2021, the same allowance to carry over to the plan year ending in 2022; or
    • Allow the extension of the plan’s grace period for plan years 2020 and 2021 to extend to 12 months after the end of each plan year; and
    • Allow individuals who cease participation in the plan during calendar years 2020 and 2021 to receive reimbursements through the end of the plan year in which participation ceased

    Special Carry Forward Rule for Dependent Care Flexible Spending Arrangements (DC FSA) Where Dependent Aged-Out During Pandemic

    • extends the ability to submit claims reimbursement in 2021 for expenses related to a child who attained age 13 during the plan year and who has an unused balance; and
    • permits the plan to allow an employee to prospectively change the amount of their contribution without regard to a change in status; provided:
      • the employer creates a plan amendment that is retroactive to not later than the last day of the first calendar year beginning after the plan year in which the amendment is effective; and
      • the plan is operated consistent with the terms of the amendment

      Exclusion for Certain Employer Payments on Student Loans

      Applies to payments made after December 31, 2020 – Enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2026 (previously January 1, 2021).

      Employer Credit for Paid and Family Medical Leave

      Applies to wages paid in taxable years beginning after December 31, 2020

      • Extends the tax credit for employers who provide paid family and medical leave to their employees. Eligible employers may claim the credit, which is equal to a percentage of wages they pay to qualifying employees while they’re on family and medical leave
      • The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended the credit until December 31, 2020 – this law further extends the credit until December 31, 2025

      Private Health Insurance and Public Health Provisions

      Surprise Billing – “No Surprises Act”

      Effective for plan years on or after January 1, 2022 - Eliminating patient responsibility for high out-of-pocket costs associated with surprise bills for patients utilizing out-of-network providers in an emergency or inadvertent treatment situation has long been central to our advocacy efforts over the last few years.

      Provisions related to emergency services

      • Requires coverage for emergency services in a hospital or freestanding emergency department at the same level whether the provider is an in-network provider or out-of-network provider for the following:
        • Total allowable charge based on the median price allowed for in-network providers for a given procedure in the same geographic region; and
        • Out-of-pocket cost sharing to the patient
        • Includes post-stabilization care if medical condition prevents moving the patient
      • All out-of-pocket amounts must contribute toward the in-network deductible and out-of-pocket limits in the same way as like charges from network providers

      Provisions for non-emergency services performed by non-network providers at certain participating facilities

      • Same as emergency services unless:
        • the provider satisfies notice and consent criteria
          • appointment to furnish item is at least 72 hours prior to the date the service or item will be furnished;
          • provides a written paper or electronic form (in 15 most common languages in the geographic region), as requested by the participant, beneficiary, or enrollee containing notification that:
            1. provider is a non-participating provider;
            2. the estimate is a good faith estimate of the charge and does not constitute a contract for the items or services;
            3. a list of other participating providers at the facility who can furnish the item or service and to whom a referral can be made at their option;
            4. information about whether prior authorization or other care management limits may be required in advance of receiving the item or service
          • consent provisions:
            1. information that consent to such item or service is optional;
            2. obtains consent; and
            3. provides copy of signed consent back to the participant, beneficiary, or enrollee through mail or email, as selected by the individual
          • notice provisions
            1. public one-page notice in clear, understandable language relaying the prohibitions under this provision;
            2. any other applicable state law or requirement; and
            3. information on how to contact appropriate State and Federal agencies should the individual feel the provider or facility violated any requirement
        • applies only to services related to:
          • emergency medicine;
          • anesthesiology;
          • pathology, radiology, and neonatology, whether or not provided by a physician or non-physician practitioner;
          • items and services provided by assistant surgeons, hospitalists, and intensivists;
          • certain diagnostic services (including radiology and laboratory services) other than advanced diagnostic lab tests as itemized by the Secretary;
          • items and services provided by such other specialty practitioners, as the Secretary specifies through rulemaking; and
          • items and services provided by a non-participating provider if there is no participating provider who can furnish such item or service at such facility

        Audit and payment dispute resolution

        • Requires Secretaries of Health and Human Services, Labor, and Treasury to establish the following rules for group health plans or insurers offering group or individual coverage:
          • the methodology to determine the qualifying payment amount, including information to make the payment determination, geographic regions, and process for receipt of complaints (by July 1, 2021);
          • an audit program ensuring compliance (by October 1, 2021)
          • If parties don’t agree, the law lays out very specific resolution guidelines that use an arbitration process to finalize the amount the health plan or policy owes the provider

        Ending surprise air ambulance bills

        • Requires coverage for out-of-network air ambulance bills at the same level whether the provider is in-network provider or out-of-network provider for the following:
          • Out-of-pocket cost sharing to the patient
          • All out-of-pocket amounts must contribute toward the in-network deductible and out-of-pocket limits in the same way as like charges from network providers
        • Must open negotiations of payments within 30 days of receiving initial payment or denial for the purposes of agreeing to a rate
        • If negotiations fail, it proceeds to an independent arbitration process
        • Requires air ambulance providers to submit cost and other data requirements to the Secretary of Health and Human Services, annually

        Transparency of in-network and out-of-network deductibles and out-of-pocket

        • Requires group health plan or health insurance issuer to provide, in clear writing, on any physical or electronic plan or ID card the following:
          • Any deductible applicable to the plan or coverage;
          • Any out-of-pocket maximum limitation applicable to the plan or coverage; and
          • A telephone number and website address where the individual may seek consumer assistance information
        • Requires advance explanation of benefits to a requesting health provider or participant, beneficiary, or enrollee verifying whether the provider is in or out-of-network and the contracted rate for the item or service
        • Ensure that provider network directories are accurate, reviewed each 90 days, and maintain an up-to-date roster on a public website
        • Telephonic and internet price comparison information be made available

        Applies to:

        • All grandfathered and non-grandfathered group health plan and insurance coverage in the individual market, small group market, large group market, and self-insured plan
      • Plans must also expand their external review process to encompass any adverse determinations

      Other Health Care Provisions

      1. Choice of health care professional – plans, who require designation of a primary care physician, must allow each participant the ability to designate any participating primary care physician
      2. Access to pediatric care – plans who require designation of a participating primary care physician must allow the person to designate any network physician who specializes in pediatrics as their primary care provider
      3. Patients access to obstetrical care – plans who require designation of a participating primary care physician must allow the person to designate any network physician who specializes in obstetrics and gynecology as their primary care provider

      Transparency

      1. Removes gag clauses on price and quality information
      2. Requires disclosure of direct and indirect compensation for brokers and consultants to employer-sponsored health plans and enrollees in the individual market for brokerage or consulting services that are reasonably believed to be $1,000 or more
      3. Strengthens parity in mental health and substance use disorder benefits
      4. Requires reporting on pharmacy benefits and drug costs

      Public Health Provisions

      1. Extensions for community health centers
      2. FDA amendments, including conditions of use for biosimilar biological products, orphan drug clarification, modernizing the labeling of certain generic drugs, and biological product patent transparency

      Other Matter

      Title XIV – COVID-19 Consumer Protection Act

      For the duration of a public health emergency, it shall be unlawful for any person, partnership, or corporation to engage in a deceptive act or practice in or affecting commerce in violation of the Federal Trade Commission Act (FTC) associated with:

      1. the treatment, cure, prevention, mitigation, or diagnosis of COVID-19; or
      2. a government benefit related to COVID-19

      For additional insights and workplace resources employers can leverage the wake of the COVID-19 pandemic, visit the  OneDigital Coronavirus Advisory Hub, or reach out to your local OneDigital advisory team.

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