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IRS Provides Additional COVID-19 Relief for Cafeteria Plans

On February 18, 2021, the Internal Revenue Service (IRS) issued clarifying guidance on the temporary special rules for health flexible spending arrangements (FSAs) and dependent care assistance programs (DCAPs). This provides welcome guidance regarding the application of cafeteria plan relief provided by the Consolidated Appropriations Act (CAA).

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COVID-19 Relief Bill Offers COBRA Reform and Temporarily Increases DCAP Maximum

On March 11, 2021, President Joe Biden signed the American Rescue Plan Act of 2021 (ARPA) providing Consolidated Omnibus Budget Reconciliation Act (COBRA) reform provisions and an increase in Dependent Care Assistance Program (DCAP) maximum deferrals. While details from the agencies are forthcoming, here is an overview of these provisions of the ARPA.

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IRS Delivers COVID-19 Surprise to Workers: A Chance to Redo Their 2021 Health Plan and FSA Choices

Wish you could change your health plan for 2021? In newly released guidance on new flexible rules for healthcare and dependent care Flexible Spending Arrangements (FSAs), the Internal Revenue Service (IRS) has included a new COVID-19-relief surprise: Employers can allow employees to make changes prospectively to health care coverage for 2021.

In a recent article in Forbes, McDermott partner Jacob Mattinson explains what the new IRS guidance means for both employers and employees.

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Consolidated Appropriations Act: Health and Welfare Benefits Provisions

The Consolidated Appropriations Act (the Act) was signed into law by the president on December 27, 2020, and includes significant health and welfare benefits provisions that affect group health plans and health insurance issuers. The Act is the most comprehensive single piece of legislation to impact group health plans since the Affordable Care Act.

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Healthcare and Childcare FSA Fix for 2021, Finally: Special Carryover Rules and More

The Consolidated Appropriations Act provides tax relief for workers who socked away pre-tax money into flexible spending accounts (FSAs) for 2020 and couldn’t use it because of the coronavirus pandemic. Now employees may be able to carry over all of their unused funds to use later. Even ex-employees might get more time to spend down unused money instead of forfeiting it.

In a recent article in Forbes, McDermott partner Jacob Mattinson speaks to the employer perspective on FSA carryovers.

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Further Guidance on the ACA’s Cadillac Tax

Effective for tax years beginning on or after January 1, 2018, an excise tax of 40 percent will be imposed on the cost of employer-sponsored health coverage that exceeds an annual limit. This tax is informally known as the “Cadillac Tax” and will impose a penalty on employers, health insurers and “persons who administer plan benefits” with regard to high-cost health care coverage.

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