Legislative updates

Legislation Introduced to Expand HSA Access

Senator Rand Paul (R-KY) has introduced the Health Savings Accounts for All Act of 2020 (S.4367). The legislation is intended to expand access and reduce restrictions on health savings accounts (HSAs).

According to details of Senator Paul’s press release, the bill proposes to eliminate the annual limit on tax-deductible contributions to HSAs by individuals and their employers. The requirement to be enrolled in a high deductible health plan in order to contribute to an HSA would also be eliminated. Additionally, HSA balances could be used for the payment of health insurance premiums, direct care service arrangements, and expenses incurred during the prior or current tax year before the establishment of the HSA. Another provision would allow for the tax-free transfer of HSAs upon death to certain family members.


Senate Bill Introduced to Provide COBRA Subsidization

Senator Martha McSally (R-AZ), along with Senators John Cornyn (R-TX), Steve Daines (R-MT), and Dan Sullivan (R-AK) have introduced S. 4329, the Continuous Health Coverage for Workers Act, in order to provide premium assistance for COBRA continuation coverage for individuals whose jobs have been impacted by COVID-19. The language of the bill is intended to be included in the overall Senate response under the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act.

Notably, the Senate proposal would provide employers with up to an 85 percent premium reimbursement for COBRA continuation coverage—beginning with the first month after the Act’s enactment, and ending on December 31, 2020. This subsidy would allow qualified beneficiaries who have not terminated voluntarily to maintain employer-sponsored health coverage at a cost that is more affordable to those who have been made newly unemployed or have had hours reduced.

Other details are provided below.

  • The Act requires group health plans to provide various notices—including special enrollment, extension of election period, furlough, and expiration of premium assistance. These notices contain specific content requirements, including information related to the Exchange. Samples will be drafted and issued by the Department of Labor within 30 days following the Act’s enactment.
  • Individuals not enrolled in COBRA but who would be eligible for premium assistance may elect COBRA continuation coverage starting after the Act’s enactment, and ending 60 days after the date the group health plan provides the required notice of the extended election period. The group health plan must provide this notice within 60 days of the Act’s enactment.
  • If permitted by the plan sponsor, a qualified beneficiary that is eligible for premium assistance may, within 90 days after receipt of a notice from the group health plan, enroll in different coverage offered by the plan sponsor so long as the coverage does not exceed the premium of coverage initially enrolled in, and the different coverage elected does not provide only ancillary medical benefits.
  • If a qualified beneficiary is denied premium assistance by a group health plan, the qualified beneficiary is entitled to an expedited review of the denial to be performed by the Secretary of Labor within 15 business days following the receipt of the application.
  • The termination of premium assistance will be a qualifying event. The group health plan must also provide a notice to individuals regarding the expiration of premium assistance 15-45 days before the expiration date.
  • If an assistance eligible individual becomes eligible for another group health plan or Medicare, he must notify the group health plan that he is no longer eligible for premium assistance in a period to be specified by the Departments of Labor, Treasury, and Health and Human Services. Failure to notify the group health plan may result in a penalty assessed to the individual equal to the greater of $250 or 110 percent of the premium assistance.
  • The coverage extends to certain church plans, which are generally exempt from COBRA.

Additional details based on further analysis will be forthcoming as warranted. The timeline for negotiation and enactment of further COVID-19 pandemic relief is short, as both the House and Senate are expected—barring a deviation from their schedules—to leave for a month-long district work period in early August.


Senate Releases Details of Next Round of Pandemic Relief

The U.S. Senate yesterday released details of additional relief it is proposing in response to the coronavirus (COVID-19) pandemic. It builds upon the March 2020 enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This legislative package is formally being described as the Health, Economic Assistance, Liability, and Schools (HEALS) Act. It contains provisions for a second round of direct payments to Americans, a modified version of the CARES Act unemployment compensation subsidy, liability protection for businesses and schools that re-open, and numerous other provisions.

The House of Representatives previously passed its version of more COVID-19 relief, H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. Senate and House approaches and magnitude differ markedly. If the current Senate package is approved it will require significant compromise between the House and Senate for another round of COVID-19 relief to become law.

Among the HEALS Act provisions of note in this multi-bill Senate package are the following.

 

Money Purchase Pension Plan Relief

The CARES Act granted penalty-free early withdrawals from retirement savings arrangements, permitted taxpayers to pay the associated tax over three years, allows taxpayers to recontribute withdrawn funds, and increased to $100,000 the maximum limit on retirement plan loans. The CARES Act excluded money purchase pension plans from this relief. This Senate package retroactively adds these provisions for such plans.

 

Employee Certification of Enhanced Plan Loan Eligibility

The CARES Act allows employer retirement plans to rely on an employee self-certification that he or she qualifies for a coronavirus-related distribution (CRD) from a retirement plan, which provides a distribution trigger to an individual who would otherwise not be eligible for a distribution. The CARES Act did not directly address employee self-certification of eligibility for an enhanced retirement plan loan. The HEALS Act would codify this clarification, which was previously made in regulatory guidance under IRS Notice 2020-50.

 

Payments of Single-Employer DB Pension Plans

The HEALS Act would clarify the due date—delayed for 2020 by the CARES Act—by which certain minimum required contributions to single-employer defined benefit (DB) plans must be made.

 

Paycheck Protection Program

The HEALS Act would make modifications and provide for a second round of loans under the Small Business Administration’s Paycheck Protection Program (PPP), a CARES Act creation designed to help small businesses retain employees during the pandemic with low-interest, potentially forgivable loans. Loan proceeds may be used for such payroll-related expenses as retirement and health benefit costs.

The HEALS Act would allow businesses with 300 or fewer employees to receive a second PPP loan if their first or second quarter 2020 revenue declined by 50 percent or more compared to the same time period in 2019. The HEALS Act would also permit certain nonprofits—including chambers of commerce and trade associations—to receive PPP loans.

 

FSA Carryover

The HEALS Act would allow up to $2,750 in unused health and dependent care flexible spending arrangement (FSA) benefits in 2020 because of the pandemic to be rolled over and used in 2021. Unused health FSA balances above $500 generally cannot be carried over and are forfeited; dependent care FSA balances of any amount have heretofore not been eligible for carryover. Both could be carried over from 2020 to 2021 under HEALS Act provisions.

The timeline for negotiation and enactment of further COVID-19 pandemic relief is short, as both the House and Senate are expected—barring a deviation from their schedules—to leave for a month-long district work period in early August.


House Bill Would Extend, Expand Tax Benefits for CRDs

Rep. Sean Maloney (D-NY) has introduced H.R. 7645, legislation that would extend the time period for taxpayers to withdraw coronavirus-related distributions (CRDs) from retirement savings arrangements and receive the special tax benefits that CRDs provide. Certain withdrawals could be tax-free under the legislation.

CRDs, as defined in the Coronavirus Aid, Relief and Economic Security (CARES) Act, are eligible for the following tax benefits for withdrawn amounts up to $100,000 (currently, only for withdrawals in 2020).

  • Three-year taxation on amounts withdrawn
  • Exemption from the 10 percent excise tax for early (pre-59½) distributions
  • The option to repay such withdrawn amounts within three years

Included in the bill is expected to be a provision that would make CRDs tax-free if the taxpayer qualifies as a first-time home buyer. “Expected,” because neither bill text nor a summary is available at this time. Details of legislative intent are being inferred from the bill’s description at the official congressional web site:

To extend the time period for making coronavirus-related distributions from retirement plans and to provide an exclusion from gross income of coronavirus-related distributions which are first-time homebuyer distributions.”

H.R. 7645 has been referred to the House Ways and Means Committee.


Senate Passes Bill to Extend PPP Small Business Loan Application Deadline

On Tuesday, the United States Senate passed by unanimous consent a bill to extend from June 30, 2020, to August 8, 2020, the deadline for businesses to apply for a Paycheck Protection Program (PPP) loan administered by the federal Small Business Administration.

PPP loans were created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, targeted to businesses with no more than 500 employees. The purpose of the program is to assist small employers in retaining employees on their payrolls in a time of financial stress during the coronavirus (COVID-19) pandemic. More than $130 billion of the $669 billion appropriated for the program had not been applied for as the June 30th deadline approached.

If certain conditions are met, PPP loans can be forgiven and treated as a grant. Among the conditions for full forgiveness is a requirement that 60% of loan proceeds be used for payroll expenses. These expenses can include not only wages and salaries, but also employer contributions to defined contribution and defined benefit retirement plans. Expenses can also include providing group health care coverage, including payment of insurance premiums.

As this is reported, the House of Representatives had yet to approve the bill, which is required—in addition to signing by President Trump—for the application deadline to be extended.

 


IRS Issues Tax-Related Deadline Relief for Tornado Victims in Parts of South

The IRS has issued News Release IR-2020-126, announcing an extension of time to complete filing of returns and making tax payments as a result of April tornadoes, severe storms, and flooding that took place in parts of Mississippi, Tennessee, and South Carolina. At this time, areas included are Clarke, Covington, Grenada, Jasper, Jefferson Davis, Jones, Lawrence, Panola, and Walthall counties in Mississippi; Bradley and Hamilton counties in Tennessee; and Aiken, Barnwell, Berkeley, Colleton, Hampton, Marlboro, Oconee, Orangeburg, and Pickens counties in South Carolina. Under this guidance, certain tax-related acts with deadlines falling on or after April 12, 2020, have been extended to October 15, 2020. (This guidance is in addition to the nationwide coronavirus-related relief already available to taxpayers for time-sensitive tax act completions that are due on or after April 1, 2020, and before July 15, 2020, which are extended through July 15.

IR-2020-126 specifically notes that this extension applies to IRA contributions. This news release, however, does not specifically appear to address or include other time-sensitive acts described in Treasury Regulation 301.7508A-1(c)(1), such as completion of rollovers, recharacterizations, or correction of excesses., that have been granted in other disaster relief. Additional guidance with respect to these tax-related acts may be forthcoming.

This relief applies to residents of the identified area, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events.

Affected taxpayers who reside or have a business located outside the covered disaster area are required to call the IRS disaster hotline at 1-866-562-5227 to request relief.


Senate, House Bills Would Allow Additional PPP Loans

Companion bills have been introduced in the U.S. House of Representatives and Senate to provide additional capital to small businesses hardest hit by the coronavirus (COVID-19) pandemic. The Prioritized Paycheck Protection Program (P4) Act is sponsored in the Senate by Democrats Chris Coons (DE), Ben Cardin (MD), and Jean Shaheen (NH), and in the House by Democrats Angie Craig (MN), and Antonio Delgado (NY).

The P4 Act would authorize additional Paycheck Protection Program (PPP) loans to businesses with 100 or fewer employees—including sole proprietorships and other self-employed—that have already expended the proceeds of a prior PPP loan or are on-pace to do so, and that can demonstrate a loss of business revenue of 50 percent or more due to the COVID-19 pandemic.

PPP is a Small Business Administration lending program created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.

Importantly, if certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.


Paycheck Protection Program Revised Interim Final Rule Published in Today’s Federal Register

Today’s Federal Register contains the Small Business Administration (SBA) revised interim final rule (IFR) on the agency’s Paycheck Protection Program (PPP). This initiates a 30-day comment period on the guidance, although—as the agency notes—the guidance is effective without advance notice and public comment, due to its time sensitivity and specific authorization by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March 2020.

This SBA guidance was issued in response to enactment on June 5 of the Paycheck Protection Program Flexibility Act of 2020, legislation that made enhancements to PPP, the SBA loan program intended help small employers meet payroll and other expenses as they deal with the economic effects of the coronavirus (COVID-19) pandemic.

PPP changes in the June legislation included the following.

  • Extends from 8 to 24 weeks from a loan’s origination the period in which expenses paid with a PPP loan could be eligible for loan forgiveness (not to extend beyond December 31, 2020)
  • Reduces from 75 percent to 60 percent the portion of a loan that must be used for payroll expenses (vs. overhead, etc.) and remain fully eligible for loan forgiveness
  • Extends from 2 to 5 years the period for loan repayment for borrowed amounts that are not forgiven (applies to loans made on or after June 5, 2020)
  • Allows a borrower who received a PPP loan before enactment of the June 5 legislation to elect that the covered period run for 8 (vs. 24) weeks

 


Paycheck Protection Program Revised Interim Final Rule Issued

Scheduled for publication in next Tuesday’s Federal Register is a Small Business Administration (SBA) interim final rule on the agency’s Paycheck Protection Program (PPP). This guidance is being issued in response to enactment on June 5 of the Paycheck Protection Program Flexibility Act of 2020, legislation that made enhancements to this SBA loan program intended to help small employers meet payroll and other expenses as they deal with the economic effects of the novel coronavirus (COVID-19) pandemic.

If certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include not only wages and salary, but also employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.

The SBA issued a previous interim final rule in April 2020 to provide guidance in implementing PPP. But with the program changes made by the June 5 legislation, that April rule no longer reflects certain important features of PPP as it now exists, requiring the issuance of a new interim final rule. These important PPP changes include the following.

  • Extends from 8 to 24 weeks from a loan’s origination the period in which expenses paid with a PPP loan could be eligible for loan forgiveness (not to extend beyond December 31, 2020)
  • Reduces from 75 percent to 60 percent the portion of a loan that must be used for payroll expenses (vs. overhead, etc.) and remain fully eligible for loan forgiveness
  • Extends from 2 to 5 years the period for loan repayment for borrowed amounts that are not forgiven (applies to loans made on or after June 5, 2020)
  • Allows a borrower who received a PPP loan before enactment of the June 5 legislation to elect that the covered period run for 8 (vs. 24) weeks

The SBA notes that this interim final rule is effective without advance notice and public comment because of its time sensitivity and specific authorization by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the legislation that created the PPP lending program. Nonetheless, comments are invited and must be submitted within 30 days of the guidance’s publication in the Federal Register.


President Signs Paycheck Protection Program Extension Legislation

President Trump signed into law Friday, June 5, the Paycheck Protection Program Flexibility Act of 2020, legislation that the Senate approved Wednesday night. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.

Importantly, if certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.

Among its provisions, this legislation will have the following effects.

  • Extends from 8 to 24 weeks from the time of loan origination the period in which expenses paid with a PPP loan could be eligible for loan forgiveness (not to extend beyond December 31, 2020)
  • Reduces from 75 percent to 60 percent the portion of a loan that must be used for payroll expenses (vs. overhead, etc.) and remain eligible for loan forgiveness
  • Extends from 2 to 5 years the period for loan repayment for borrowed amounts not forgiven
  • Provides no impediment to loan forgiveness for the documented inability to hire similarly qualified placement employees or to rehire former employees
  • Allows a borrower who received a PPP loan before enactment of this legislation to elect that the covered period run for 8 (vs. 24) weeks