CARES Act Employee Benefit Impact
- High Deductible Health Plans payment for tele-health. Effective immediately, the CARES Act creates a temporary safe harbor allowing HDHPs to cover telehealth services and other remote care without cost to plan members before plan members’ deductibles are met. This temporary safe harbor applies to all HDHPs, including those with plan members using HSAs. Under the Act, a HDHP will not lose HDHP qualified status if it offers cost-free telehealth services to plan members before the annual deductible is satisfied even to expenses not related to COVID-19. This is only temporary relief, and this safe harbor only applies for plan years beginning before January 1, 2022. This temporary rule would sunset on December 31, 2021. Diversified Group’s Response: This is not mandatory; HDHPs can elect to waive deductibles for all telehealth or remote care services without adversely impacting HSA eligibility. Plans that currently have HSA and standalone telemedicine where the telemedicine visit is subject to the HSA deductible would need to be amended to allow for this change;
- Waiver of OTC written prescription requirement. The Act allows amounts paid from an HSA, FSA and HRA to be treated as paid for medical care even if they are paid without a prescription. This includes menstrual care products as qualified medical expenses for payment or reimbursement with an HSA, FSA or HRA. These changes apply to amounts paid or expenses incurred on or after January 1, 2020. There is no expiration date to this change. Diversified Group’s Response: plan documents must be updated to reflect this change. In the case of HRAs, the plan document must allow for the reimbursement of all Internal Revenue Code Section 105(b) medical expenses in order to cover OTC and menstrual care products without a prescription. Many HRA plans only reimburse deductible or medical coinsurance and/or copay expenses not reimbursed under the integrated group health plan. In those cases, OTC and menstrual care products would not be an eligible reimbursable expense unless amended. If the documents allow it, these changes can be retroactive to January 1, 2020;
- Expanded COVID-19 Testing Coverage. The CARES Act expands the types of COVID-19 diagnostic testing an employer must cover on a first-dollar basis with no cost-sharing to participants to include certain tests that are: (1) provided by labs on an emergency basis; (2) state-developed tests; and (3) any other test determined appropriate by the Department of Health and Human Services (HHS);
- COVID-19 In and Out-of-Network Providers. For in-network providers, the CARES Act clarifies that if a plan has a negotiated rate with a given provider already in place, that is the amount the plan will pay for COVID-19 testing coverage. If there is no negotiated rate, such as for out-of-network providers, reimbursement is at the “cash price,” unless the plan negotiates a lower rate with the provider. The CARES Act requires providers to post the cash price of tests on their public website and authorizes the Secretary of Health and Human Services to impose a monetary penalty of up to $300 per day on any provider who fails to do so;
- Coverage for COVID-19 Vaccines. Group health plans must provide coverage, at no cost to plan participants, for any “qualifying coronavirus preventive service” – including a COVID-19 vaccine – within 15 business days after the service is recommended by the United States Preventive Services Task Force or the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention;
- HIPAA. The CARES Act clarifies responsibilities of plan sponsors to safeguard protected health information (“PHI”) of individuals undergoing treatment for substance use disorders. Under the CARES Act, such an individual’s prior written consent must be obtained before PHI is shared with other entities, including HIPAA business associates;
- Waiver of the 10% early distribution penalty for IRAs and 401(k) plans. Distributions made between January 1 and December 31, 2020 by a person who is or whose family is infected with the coronavirus or who is economically harmed by the virus will have the early distribution penalty waived on amounts up to $100,000;
- Waiver of required distribution rules for IRAs and 401(k) plans. Minimum distributions that otherwise would have to be made in 2020 are waived including distributions due to the owner turning age 70 1/2 in 2019;
- 2019 HSA contribution deadline. The IRS extended the 2019 tax-year HSA contribution deadline to July 15, 2020. State tax filing and payment deadlines may vary.
Small Business Loans and Tax Credits Under the CARES Act
Paycheck Protection Provision:
Small Employers can begin applying for loans April 3rd. Independent Contractors and Sole Proprietors can begin applying for loans April 10th. Not all banks are up and running yet to accept applications. In all cases you are advised to contact your bank first to see when or if they will be ready to take applications and to assist you to determine what documentation you need to apply. The Small Business Administration website has a list of current SBA lenders. Additional commercial lenders will be added once approved by the SBA.
PPP loans can be used to assist with qualified payroll and benefit costs, utilities, rent, mortgage interest and other debt obligations. The money cannot be used for compensation of individual employees, independent contractors or sole proprietors in excess of an annual salary of $100,000. In order to qualify for the loan forgiveness portion of the program, 75% of your loan amount must go toward payroll costs. Additionally, to get full loan forgiveness, companies need to maintain pre-crises levels of full-time employees. Companies are able to lay off staff while they have the PPP loan, but forgiveness of the loan will be reduced.
Employee Retention Tax Credit:
This is a fully refundable tax credit for employers equal to 50% of qualified wages (including qualified health plan expenses) that eligible employers pay their employees. The tax credit applies to wages paid after March 12, 2020 and before January 1, 2021. Eligible employers will have fully or partially suspended operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority due to COVID-19 or experiences a significant decline in gross receipts during the calendar quarter. The maximum tax credit is $10,000 of qualified wages per quarter, at 50% the maximum credit for qualified wages paid to any employee is $5,000. Employers who apply for and receive a PPP loan are not eligible for this tax credit.
Diversified Group’s Response:
- Qualified healthcare expenses are defined as the total amount from CY 2019.
- Check initially with your lender to determine what they would define as documentation of “qualified healthcare expenses.”
- Plan sponsors should immediately contact their payroll provider to obtain reporting on their CY 2019 COBRA rates for medical, dental and vision coverage by tier minus the 2 percent admin fee.
- If your payroll vendor is unable to provide such data then, upon request, we will provide a report of COBRA rates by plan and enrollment by plan in total for Calendar year 2019.