CARES Act Archives - Page 4 of 6

What Individuals Need To Know About The CARES Act

Posted on April 2020 by info

On March 6, 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 was enacted, becoming the first of three Congressional relief and stimulus acts passed in March and setting off a firestorm of administrative relief by several federal agencies including the IRS and Department of Labor.

This alert briefly summarizes the following relief provisions enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted on March 27, 2020.

Temporary waiver of required minimum distribution (RMD) rules for certain retirement plans and accounts
Temporary waiver of early distribution penalty from tax-qualified plans and special rules related to plan loans
Changes to charitable contribution deduction limitations
Net operating loss (NOL) carrybacks for losses generated after December 31, 2017
Postponement of excess business loss limitation and relief for limitations incurred in 2018 and 2019
Recovery rebates for individuals

Temporary Waiver of RMD Rules for Certain Retirement Plans and Accounts

Generally, required minimum distributions must begin at age 72 for individuals born on or after July 1, 1949, or at age 70 ½ for individuals born before July 1, 1949.

The CARES Act waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This applies even for taxpayers who turned 70 ½ in 2019 but deferred their first RMD to April 1, 2020.

RMDs that have already been taken in 2020 may be rolled over within 60 days of the distribution.

Insights:

Waived RMDs do not need to be taken in subsequent years. However, any forgone RMD in 2020 will affect the account balance used to calculate the RMD in 2021 and future years. It is not known whether additional relief will be offered for individuals who took their RMD early in 2020 and are already outside the 60-day rollover window. RMDs were last waived in 2009. At that time, the IRS issued a notice stating that the 60-day rollover deadline would be satisfied if completed by a given date that year. It is possible that similar guidance will be issued this year.

Special Rules for Use of Retirement Funds

Eligible individuals can withdraw up to $100,000 for coronavirus-related purposes from tax-qualified retirement plans during 2020 without incurring the usual 10% early distribution penalty.

Taxable distributions should generally be included in gross income ratably over a three-year period.

Taxpayers may recontribute the withdrawn amounts in one or more re-contribution payments to the qualified plan at any time within three years of the distribution. These repayments will be treated as a tax-free rollover and not subject to that year’s cap on contributions.

The CARES Act also makes it easier to borrow money from 401(k) plans, raising the borrowing limit from $50,000 to $100,000 for the first 180 days after enactment, and by delaying the payment dates for any loans due the rest of 2020 for one year. (The CARES Act was enacted March 27, 2020; the 180-day window closes September 23, 2020.)

Coronavirus-related distributions are made to an individual (i) diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention; (ii) whose spouse or dependent is diagnosed with COVID-19 by such a test; or (iii) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.

Notably, however, a “dependent” here is defined more broadly than a “qualifying child” for purposes of the recovery rebates. Here, “dependent” includes children under the age of 19 or full-time students under the age of 24 as of December 31, 2020. In addition, individuals who are permanently and totally disabled may also be considered dependents, as can certain other qualifying relatives such as parents and in-laws.

Insights:

Given that COVID-19 tests are in short supply, it’s likely that most individuals will look to the last catch-all category for relief under this provision.

What’s unclear in the CARES Act is the timing of these two three-year periods and whether they run concurrently, or whether the three-year gross income inclusion period is subsequent to the three-year payback period.

California has its own early distribution penalty and while California’s statue generally conforms to the federal Internal Revenue Code, California likely needs to enact its own legislation to offer similar relief.

Allowance of Partial Above-The-Line Deduction for Charitable Contributions

Individuals who do not elect to itemize their deductions in 2020 may take a qualified charitable contribution deduction of up to $300 against their adjusted gross income in 2020. A qualified charitable contribution is a charitable contribution (i) made in cash, (ii) for which a charitable contribution deduction is otherwise allowed, and (iii) which is made to certain publicly supported charities.

Insights:

This above-the-line charitable deduction may not be taken for contributions to a non-operating private foundation or a donor advised fund.

Modification of Limitations on Charitable Contributions During 2020

Currently, individuals who make cash contributions to publicly supported charities are permitted a charitable contribution deduction of up to 60% of their AGI. Any contributions in excess of the 60% AGI limitation may be carried forward as a charitable contribution in each of the succeeding five years.

The CARES Act suspends the AGI limitation for qualifying cash contributions and instead permits individual taxpayers to take a charitable contribution deduction for qualifying cash contributions made in 2020 to the extent such contributions do not exceed the taxpayer’s AGI.
Any excess is still carried forward as a charitable contribution in each of the succeeding five years.

Insights:

This provision benefits taxpayers who elect to itemize their deductions in 2020 and make cash contributions to certain public charities. Contributions to non-operating private foundations or donor advised funds are not eligible for the 100% AGI limitation.

Net Operating Losses

Previously, NOLs generated beginning in 2018 were limited to 80% of taxable income computed without regard to any NOL deduction. Any unused NOL was not able to be carried back but could be carried forward indefinitely.

The CARES Act permits individuals with NOLs generated in taxable years beginning after December 31, 2017, and before January 1, 2021, to carry back such NOLs five taxable years. Such NOLs not carried back may continue to be carried forward indefinitely. The CARES Act also eliminates the 80% taxable income limitation imposed by the TCJA for taxable years beginning before January 1, 2021.

Insights:

Taxpayers with NOLs generated in 2018 and 2019 may find it advantageous to amend returns prior to those years to carryback NOLs to years with taxable income subject to a 39.6% tax rate.

Excess Business Loss Limitations

Beginning in 2018, net business losses in excess of $500,000 for joint filers ($250,000 for all other taxpayers) were not allowed as a current deduction against other income. These threshold amounts were indexed for inflation and, in 2020, were scheduled to be $518,000 for joint filers ($259,000 for all other taxpayers). The disallowed business losses became a net operating loss applied to subsequent taxable years.

The CARES Act suspends the application of this excess business loss rule for 2020, and retroactively suspends the excess business loss limitation rule for 2018 and 2019. Thus, taxpayers will be allowed to offset their business losses against other income for 2020.

Insights:

Taxpayers will need to address with their tax advisors the impact of the retroactive removal of the excess business loss limitation rule for 2018 and 2019. Many taxpayers have not yet filed for 2019 and the removal of the loss limitation rule should be considered in the preparation of the 2019 return. If a taxpayer was subject to the excess business loss rule in his or her 2018 tax return, the taxpayer should amend his or her 2018 return to take advantage of the elimination of the rule for 2018. Taxpayers may have a refund opportunity for 2018 if their net business losses were limited and may also find their 2019 tax liabilities either increased or decreased, depending on whether their business losses were being carried forward to 2019 or were sustained in 2019 but were limited.

Recovery Rebates for Individuals

Eligible individuals will receive a refundable tax credit against their 2020 taxable income equal to $1,200 ($2,400 for joint filers) plus $500 per qualifying child. The refund is determined based on the taxpayer’s 2020 income tax return but is advanced to taxpayers based on their most recent income tax filing – the 2018 or 2019 tax return, as appropriate.

The credit begins to phase out if the individual’s AGI exceeds $75,000 ($150,000 for joint filers and $112,500 for head of household filers), and is reduced by an amount equal to 5% of the amount in which the taxpayer’s AGI exceeds these thresholds. As a result, individuals with no qualifying children completely phase out of the credit if their AGI exceeds $99,000 ($198,000 for joint filers). Individuals with two qualifying children completely phase out of the credit if their AGI exceeds $119,000 ($218,000 for joint filers).

If an eligible individual’s 2020 income is higher than the 2018 or 2019 income used to determine the rebate payment, the eligible individual will not be required to pay back any excess rebate. However, if the eligible individual’s 2020 income is lower than the 2018 or 2019 income used to determine the rebate payment such that the individual should have received a larger rebate, the eligible individual will be able to claim an additional credit generally equal to the difference of what was refunded and any additional eligible amount when they file their 2020 income tax return.

Individuals who have not filed a tax return in 2018 or 2019 may still receive an automatic advance based on their social security benefit statements (Form SSA-1099) or social security equivalent benefit statement (Form RRB-1099). Individuals who are otherwise not required to file and are not receiving social security benefits are still eligible for the rebate but will be required to file a tax return to claim the benefit.

The CARES Act provides that the IRS will make automatic payments to individuals who have previously electronically filed their income tax returns using direct deposit banking information provided on a return any time after January 1, 2018.

Eligible individuals do not include nonresident aliens, individuals who may be claimed as a dependent on another person’s return, estates, and trusts.

A qualifying child (i) is a child, stepchild, eligible foster child, brother, sister, stepbrother, or stepsister, or a descendent of any of them, (ii) under age 17, (iii) who has not provided more than half of their own support, (iv) has lived with the taxpayer for more than half of the year and (v) who has not filed a joint return (other than only for a claim for refund) with the individual’s spouse for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins.

Insights:

Individuals between the ages of 17 and 24 are ineligible to be claimed as a qualifying child and may be unable to claim their own independent rebate if they are eligible dependents on their parents’ tax return. Eligible dependents include children under the age of 19 or full-time students under the age of 24 who do not provide more than half of their own support and who live with the taxpayer for more than half the year.

Employers Who Continue To Pay Employees Are Aided By CARES Act

Posted on April 2020 by info

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides two distinct and substantial employment tax benefits for certain employers under Sections 2301 and 2302 of the Act. Section 2301 provides a refundable payroll tax credit for certain wages paid to employees from March 13 to December 31, 2020. Section 2302 allows employers to defer the deposit of certain employment taxes for as much as two years. Taken together, these provisions provide significant relief for employers and are designed to encourage employers to continue paying wages to employees during these unprecedented times.

Section 2301 Employer Retention Credit

Insight:

This credit is not limited to small employers. However, any employer who receives a Small Business Administration Loan under the Paycheck Protection Program of the CARES Act is ineligible to receive this employee retention credit.

Section 2301 of the CARES Act provides a payroll tax credit of up to $5,000 per employee for eligible employers. The credit is equal to 50% of “qualified wages” paid to employees during a quarter, capped at $10,000 of “qualified wages.” The credit is available for wages paid from March 13 to December 31, 2020.

Eligible Employers
To be eligible, employers must meet the following criteria:

They must be carrying on a trade or business during 2020, and
During the calendar quarter, either:
1. Their operations were fully or partially suspended as a result of orders from a governmental authority limiting commerce, travel, or group meetings due to COVID-19, or
2. Their gross receipts for the quarter were less than 50% of the gross receipts for the same calendar quarter in the prior year. The employer will remain eligible for the credit until such calendar quarter as their gross receipts equal 80% of the gross receipts for the same calendar quarter in 2019.

Qualifying Wages
The wages that can be used to calculate the tax credit differ based on whether the employer has over or under 100 employees. For employers with 100 or more full-time employees on average during 2019 (as determined by IRC Section 4980H as enacted by the Affordable Care Act), only wages paid to employees who are not providing services qualify for the credit. But for employers with less than 100 full-time employees, all wages paid to employees, regardless of whether the employees are providing services, qualify for the credit. For purposes of the employee count, organizations that are under common control (using IRC Section 52(a) and (b)) or that are a member of an affiliated service group (using IRC Section 414(m) and (o)) will be treated as a single employer.

Qualified wages are based on the definition of wages used for FICA taxes, plus the amount paid by the employer for health plan expenses. But the wages cannot exceed what the employee would have been paid for working an equivalent amount of time during the preceding 30 days. In other words, wage increases do not qualify for the employee retention credit. The CARES Act does not explain how this limitation should be calculated, so IRS guidance would be helpful.

Any federally mandated sick or child care leave paid under the Families First Coronavirus Response Act (FFCRA) is specifically excluded from “qualified wages” for the employee retention tax credit, since employers receive a dollar-for-dollar tax credit for such paid leave wages.

Insight:

The employee retention tax credit cannot be taken on the same wages as other tax credits, such as Work Opportunity Tax Credit under IRC Section 51 or Employer Credit for Paid Family and Medical Leave under IRC Section 45S.

How to claim the credit
Claiming the employee retention credit will track the same procedures for claiming the tax credits for providing federally mandated paid sick and child care leave under FFCRA. In IR 2020-57 (dated March 20, 2020), the IRS said that employers can immediately recoup their refundable tax credits for paid sick and child care leave by reducing their total federal tax deposit amount from all employees (not just from those who are receiving wages that qualify for the credit) by the amount of eligible credit. Specifically, employers can deduct the amount of tax credit for paid sick and child care leave from: (1) federal income taxes withheld from all employees’ pay; (2) the employees’ share of Social Security and Medicare taxes; and (3) the employer’s share of Social Security and Medicare taxes. Likewise, in IR 2020-62 (dated March 31, 2020), the IRS said that employers can follow that same process to immediately recoup their employee retention tax credit. These credits will ultimately be reconciled against the total tax liabilities when employers file their quarterly Form 941 or other employment tax returns.

In addition, the IRS has published Form 7200, Advance Payment of Employer Credits Due to COVID-19, which allows employers to request a rapid refund for both the employee retention credit and the FFCRA paid sick and child care leave tax credits. Form 7200 can be filed (by fax) to request an advance of payments at any time before the end of the month following the quarter in which the qualifying wages were paid. It can be filed multiple times during the quarter if necessary. Amounts use to offset federal tax deposits as described above should not be duplicated on a request for refund on Form 7200. Ultimately, any amounts refunded using Form 7200 will also be reconciled on the employer’s quarterly Form 941 or other employment tax returns.

Insight:

The timing of the rapid refunds is still somewhat unclear. They are supposed to be processed within two weeks after receipt of Form 7200, but the IRS’s system for processing Form 7200 does not yet appear to be fully operational and it is unclear when it will be up and running. To maximize cash on hand, employers should compare whether they might be better off offsetting their accumulated tax credits from their upcoming payroll deposits or requesting the refund on Form 7200. The result may differ for each employer, depending on their facts and circumstances.

Section 2302 Employer Payroll Tax Deferral

Insight:

This payroll tax deferral is available to all employers with no size restriction. However, any employer whose Paycheck Protection Program (PPP) SBA loan is forgiven under Section 1106 of the CARES Act is ineligible for this payroll tax delay.

Section 2302 of the CARES Act permits employers to forgo timely payment of the employer portions of Social Security and RRTA taxes that would otherwise be due from March 27 through December 31, 2020, without penalty or interest charges (as confirmed by IRS Notice 2020-22, dated March 31, 2020). Employers must pay 50% of the deferred amount by December 31, 2021, and the remainder by December 31, 2022.

Insight:

If the employer utilizes this benefit and later is approved for PPP SBA loan forgiveness, it is not clear if the payment date on accumulated deferrals is accelerated to the forgiveness date or if deferrals cease on a prospective basis.

Self-employed individuals can take an equivalent tax deferral on 50% of the OASDI tax imposed on self-employment income under IRC Section 1401 and will not be penalized for failing to make estimated tax deposits on that amount during the deferral period.

To protect third parties, such as payroll service providers and certified professional employer organizations, the CARES Act requires that the customer or client bear the ultimately responsibility for the payment of any deferred taxes if they instruct the third party to defer payment.

Insight:

It is not yet clear how these two provisions would work in tandem. At the moment, it appears that an employer could defer its deposit of payroll taxes that are otherwise due from March 13 to December 31, 2020 (using the payroll tax holiday under Section 2302 of the CARES Act) and offset against those un-remitted payroll taxes the employee retention credit (under Section 2301 of the CARES Act), and/or the tax credits for paying federally mandated FFCRA sick and child care leave, which would reduce the amount that the employer would eventually need to remit (i.e., 50% of the net amount would be owed on December 31, 2021, and the remainder would be owed on December 31, 2022).

CARES Act Improves Cash Flow For Employers and Employees As It Relaxes Qualified Plan And Employee Benefit Rules

Posted on April 2020 by info

As the number of employers and employees impacted by the novel coronavirus (COVID-19) grows each day, employers with workplace retirement plans may find that employees may be looking to those plans now more than ever to help cover financial hardships they are experiencing. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (H.R. 748) includes several relief provisions for tax-qualified retirement plans, expands health care flexible spending accounts so funds can be used for over-the-counter items, clarifies some health insurance plan questions, and, through year-end, allows employers to reimburse employees for student loan payments tax-free. This alert explains those items. Further guidance will be needed from the IRS and DOL to answer many open questions about how these relief provisions are intended to work.

Defined Benefit (DB) Retirement Plans

Although it is not clear, based on past practices, the IRS may require employers to make an election to use the provisions described below. Plan amendments memorializing those elections would be needed by January 1, 2022.

Funding Relief. Many employers who sponsor defined benefit (DB) retirement plans (including cash balance plans) are facing large contribution requirements due to very low interest rates and a volatile stock market. The CARES Act provides short-term relief for single-employer DB plans. Specifically, employers have until January 1, 2021, to make any minimum required contributions that were originally due during 2020. The relief applies to quarterly contributions and any year-end contributions, regardless of plan year. When paid, contributions will need to include interest for the late payment.

AFTAP Relief. Also, when determining whether Internal Revenue Code (IRC) Section 436 benefit restrictions apply to any plan year that includes the 2020 calendar year, sponsors can (but are not required to) choose to use the plan’s adjusted funding target attainment percentage (AFTAP) for the plan year ending in 2019. This could help employers avoid freezing benefits and continue offering lump sums and other accelerated payment forms in 2020, even if the plan’s funded status significantly declined due to COVID-19.

RMDs Not Waived for DB Plans. DB plans are not eligible for 2020 RMD waivers (that relief is only available for defined contribution plans (see below)).

Defined Contribution (DC) Retirement Plans

Coronavirus-Related Distributions and Expanded Plan Loans. Employers who have DC plans — like a 401(k) plan or 403(b) plan — can let participants take up to $100,000 in “coronavirus-related distributions” by December 31, 2020. The distributions would be exempt from the 10% early withdrawal penalty and taxable over three years. Participants can take up to three years to repay all or any part of those distributions (and the repayment would be treated as a tax-free rollover when repaid to the plan).

From March 27 to September 23, 2020 (i.e., for 180 days after the CARES Act became law), “qualified individuals” can borrow up to the lesser of $100,000 (instead of just $50,000) or 100% of their entire vested account balance (instead of just 50%). For all new or existing plan loans to an affected participant, repayments due before December 31, 2020, may be delayed one year (but interest is charged during the delay). Also, the one-year delay would not count toward the maximum five-year repayment period for plan loans.

These special “coronavirus-related distributions” and expanded plan loan provisions are available to “qualified individuals,” which means any participant who self-certifies that he or she:

Has been diagnosed with SARS-CoV-2 or COVID-19 (with a test approved by the Centers for Disease Control and Prevention);
Has a spouse or dependent who has been diagnosed with SARS-CoV-2 or COVID-19 (with a test approved by the Centers for Disease Control and Prevention); or
Has experienced adverse financial consequences from being quarantined, furloughed or laid off; having work hours reduced; being unable to work due to lack of child care; closing or reducing the hours of a business owned or operated by the individual; or from other factors, as determined by the Treasury Secretary.

Insight

When former employees no longer have payments made via payroll deductions the loans frequently go into default, resulting in taxable income for the participant at the end of the calendar quarter following the default date and a Form 1099-R would be issued showing the loan balance as taxable income for the year. However, the CARES Act appears to provide a one-year grace period for any loans that were outstanding on or after March 27, 2020. It seems that this one-year extension could delay the income inclusion for one year if a participant with an outstanding loan would otherwise default on the loan due to nonpayment including loss of employment due to a COVID-19 related business closure. To prevent such loan defaults, employers may want to amend the loan documents and/or loan policy so that affected participants can take advantage of the one-year delay even if the participant’s employment is terminated or if the participant is laid off.

Participants that don’t qualify for “coronavirus-related distributions” may qualify for a regular “hardship” withdrawal due to an immediate and heavy financial need, if the plan allows. There are many situations that qualify a participant for regular hardship withdrawals, including expenses or loss of income incurred due to a disaster declared by the Federal Emergency Management Agency, also known as FEMA. Regular hardship withdrawals cannot be repaid to the plan, must be taken into income in the year distributed, and are subject to the 10% early withdrawal penalty (although they are not subject to 20% withholding). Generally, DC plans may also allow in-service distributions for participants who are over age 59½ and may allow vested employer contributions to be withdrawn under a “5 year” or “2 year” rule, so long as the plan document allows it (or is amended to allow it).

2020 Required Minimum Distributions (RMDs) Suspended. The CARES Act waives all 2020 RMDs from DC plans (and IRAs). That waiver includes initial payments to participants who turned age 70½ in 2019 and who did not take their initial RMD last year because they had a grace period until April 1, 2020. The RMD relief does not apply to DB plan participants.

Plan Amendments. Employers can immediately implement the provisions provided by the CARES Act but generally have until the end of the first plan year beginning on or after January 1, 2022, to amend their DC plans for this relief. Amendments to adopt provisions that are not included in the CARES Act require amendment by December 31, 2020.

Insight

This deadline appears to be the same for individually designed DC plans and for IRS preapproved DC plans

What Should Retirement Plan Sponsors Do Now?

Employers who sponsor workplace retirement plans should review plan procedures to determine if any changes are needed to implement the CARES Act. For example:

For DC plans that will allow “coronavirus-related distributions” in 2020, a new distribution code would be needed, so that those distributions are not subject to the 10% early distribution penalty tax or the mandatory 20% withholding that would otherwise apply. If employers have more than one DC plan in their controlled group, procedures are needed so that the amount of such distributions made to any individual does not exceed a total of $100,000. These procedures would be similar to those for plans that made qualified disaster distributions over the past few years for certain hurricanes, floods or wildfires. If the DC plan will allow coronavirus-related distributions to be repaid to the plan, procedures are needed to treat those as rollover contributions and to limit the amount of such repayments to the amount of coronavirus-related distributions that the employee took from all DC plans in the controlled group.
If a DC plan sponsor wants to increase the maximum plan loan amounts available under the plans during 2020, existing plan loan procedures would need to be updated to allow for that increase. Plan sponsors who limit how many outstanding loans a participant can have at any time may want to increase that limit to allow participants to use the increased loan limits. Permissible one-year delays in loan repayments should be documented (such as updating amortization schedules), so that loans will not go into default. DC plans that do not currently allow participant plan loans could be amended to add them.
DC plan sponsors will need to update their plan operation immediately for the waived 2020 RMD distributions. Plans would use similar procedures as were used when 2009 RMD payments were waived after the 2008 economic crisis.
The plan’s definitions of covered compensation should be reviewed to ensure it is aligned with the sponsor’s intent, especially with regard to determining if employee assistance and paid leave will be subject to employees’ deferral elections and employer contributions.

Employers may also want to remind participants that they can change elective deferral amounts at any time in accordance with the plan document and to inform them how to take advantage of any changes in plan operations or procedures due to the CARES Act.

Health Plans

Tax-Free Over-the-Counter Products. The CARES Act allows employees to use funds in health care flexible savings accounts (FSAs) to purchase over-the-counter (OTC) medical products, including those needed in quarantine and social distancing, without a prescription. This change also applies to Health Savings Accounts (HSAs). Employers must generally have a “high deductible health plan” (HDHP) to have an HSA for their employees. Several years ago, the Affordable Care Act (ACA) eliminated the ability to use health care FSAs for OTC products, so the CARES Act rolls back that prohibition. The CARES Act also provides that menstrual products qualify as OTC products that can be purchased with health care FSA or HSA funds.

Insight

Employers may want to consult with their vendors to ensure that debit cards or other service delivery mechanisms are updated to accommodate this change in the law, so that employees may begin using health care FSAs or HSAs immediately to purchase COVID-19 related OTC items, such as pain relievers, hand sanitizers, cleaning products, etc.

Insight

Employers may want to remind employees of change in family circumstance requirements that might allow them to change their health care elections including pretax contributions to medical FSAs. Likewise, plan administrators should prepare for an increased number of requests for change.

Health Care Services

The CARES Act requires employer-sponsored group health plans (and health insurers) to address several health care services related to COVID-19, including the following.

COVID-19 Testing. Group health plans and insurers are required to cover approved diagnostic testing for COVID-19, including in vitro diagnostic testing, without any cost-sharing to participants, at their in-network negotiated rate (or if no negotiated in-network rate, an amount that equals the cash price for such tests as publicly listed by the provider).

COVID-19 Prevention. Group health plans and insurers are required to cover any qualifying preventative services related to COVID-19 without cost-sharing to participants. Plans are required to cover these services within 15 days after the date that a recommendation is made regarding the preventative service. Preventative services includes (1) any item, service, or immunization that is intended to prevent or mitigate COVID-19 and is evidence-based with an “A” or “B” rating in the U.S. Preventive Services Task Force’s recommendations or (2) an immunization with a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention.

Expanded Telehealth. Effective March 27, 2020, for plan years beginning on or before December 31, 2021, employers with a HDHP and an accompanying HSA can provide coverage for telehealth services before participants reach their deductible without disqualifying them from being eligible to contribute to their HSA. For calendar year plans, this provision would generally apply for 2020 and 2021. This is consistent with the IRS’s previous announcement that an HDHP will not fail to be an HDHP solely because it provides coverage for COVID-19 related diagnostic testing and services prior to participants satisfying their deductible.

Tax-Free Student Loan Repayments

From March 27 until December 31, 2020, employers can contribute up to $5,250 towards an employee’s student loans and such amount will be excluded from the employee’s taxable income. The employer could either pay the amount to the lender or to the employee. The amount could be applied to principal or interest for “qualified education loans” defined in IRC Section 221(d)(1). The $5,250 limit applies in the aggregate to both the new student loan repayment benefit and other employer-provided, tax-free educational assistance (e.g., tuition, fees, books).

Insight

This appears to be the first time an employer’s payment of an employee’s student loan debt can be made tax-free to employees.