IRS Issues Guidance on Payroll Tax Deferment
On Aug. 8, 2020, President Donald Trump ordered the U.S. Department of Treasury (the Department) to defer collecting certain payroll taxes from wages earned between Sept. 1 and Dec. 31, 2020.
On Aug. 28, 2020, the Internal Revenue Service (IRS) issued Notice 2020-65 (the Notice) to provide guidance for affected employers. Employer participation in these deferrals is permitted, but not required.
The Notice releases employers from their obligation to collect and pay payroll Social Security taxes for individuals who receive applicable wages, defined as compensation that is less than $4,000 for a biweekly pay period, or “the equivalent threshold amount with respect to other pay periods.”
Employers must determine whether applicable wages exist every pay period between Sept. 1 and Dec. 31, 2020.
The Notice informs employers that any taxes deferred between Sept. 1 and Dec. 31, 2020, will need to be collected and remitted to the IRS between Jan. 1 and Apr. 30, 2021, unless the Department can find an avenue to eliminate the obligation to pay the deferred taxes. Interest, penalties and additions to tax will begin to accrue on May 1, 2021, for any unpaid deferred taxes.
Employers will need to pay these deferred taxes in addition to collecting and remitting the taxes that regularly become due during the Jan. 1 to Apr. 30 pay period.
The Notice also explains that employers will be allowed to make arrangements with affected employees to collect deferred taxes in 2021.
Employers will need to evaluate whether their employees will benefit in the short term or be harmed in the long term by these deferrals — if they are not forgiven — and plan accordingly. The additional amount being collected during repayment will result in lower net pay next year, which may create more financial stress than any benefit the deferral may provide.
DOL Issues New FAQs on FFCRA Leave and Return to School
The U.S. Department of Labor (DOL) has published new frequently asked questions (FAQs) about whether employees qualify for paid leave under the Families First Coronavirus Response Act (FFCRA) in different school reopening situations, including those that blend in-person with distance learning.
A new “Return to School” section was added to the DOL’s existing FFCRA FAQs on Aug. 27, 2020. The new section’s three FAQs address employee eligibility for expanded family and medical leave and paid sick leave when:
- A child attends a school operating on an alternate-day basis;
- A parent chooses remote learning when in-person instruction is available; and
- A school begins the year with remote learning but may shift to in-person instruction if conditions change.
In general, according to the FAQs, parents qualify for FFCRA leave only on days when in-person learning is not offered as an option by the school. Employers should review the new FAQs to ensure their employee leave policies comply with the FFCRA.
Medicare Part D Notices Due Before Oct. 15, 2020
Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2020 — the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.
This notice is important because Medicare beneficiaries who aren't covered by creditable prescription drug coverage and don't enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees.
To make the process easier, employers often include Medicare Part D notices in open enrollment materials sent out annually. If a plan sponsor chooses to provide the disclosure notice with other plan participant information, the creditable coverage disclosure must be prominent and conspicuous. This means that the disclosure notice portion of the document or a reference to the section in the document that contains the disclosure notice portion must be prominently referenced in at least 14-point font in a separate box, bolded or offset on the first page of the provided plan participant information. Also, as a practical matter, group health plan sponsors often provide the creditable coverage disclosure notices to all plan participants.
Employers should confirm whether their health plan’s prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before Oct. 15, 2020. “Before” means the individual must have been provided with the notice within the past 12 months. So, if it was provided on or after Oct. 16, 2019, that will suffice.
2021 Open Enrollment Checklist
To prepare for open enrollment, group health plan sponsors should be aware of the legal changes affecting the design and administration of their plans for plan years beginning on or after Jan. 1, 2021. Employers should review their plan documents to confirm that they include these required changes.
In addition, any changes to a health plan’s benefits for the 2021 plan year should be communicated to plan participants through an updated summary plan description (SPD) or a summary of material modifications (SMM).
Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, when applicable — for example, the summary of benefits and coverage (SBC). There are also some participant notices that must be provided annually or upon initial enrollment. To minimize costs and streamline administration, employers should consider including these notices in their open enrollment materials. Download our 2021 Open Enrollment Checklist.