COVID-19 Relief Stimulus Bill
December 29, 2020//Comments Off on COVID-19 Relief Stimulus Bill
| COVID-19 Relief Stimulus Bill Yesterday, December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021, which includes the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA), the COVID-Related Tax Relief Act of 2020 (COVIDTRA) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR). Listed below are highlights of several aspects of the bill. FFCRA Paid Leave As the COVID-19 pandemic continues and the vaccine is unlikely to be available on a wide-scale basis in the next several months, the refundable payroll tax credits for emergency paid sick leave (EPSL) and extended family and medical leave (E-FMLA), which were enacted pursuant to the Families First Coronavirus Response Act, are extended through March 31, 2021. Notably, only the tax credits are extended, which means compliance with the EPSL or E-FMLA requirements is voluntary for employers after December 31, 2020. The policy behind this may have been to incentivize employers to continue allowing employees in the middle of FFCRA leave as of January 1, 2021 to finish out, and be paid for, any remaining leave to which they would have otherwise been entitled. The tax credit is only available for leave that would otherwise satisfy the FFCRA, had it remained in effect, i.e., if employees for whom the employer provides paid leave would otherwise meet the eligibility requirements under the FFCRA and did not use the full amount of EPSL or E-FMLA leave between April 1, 2020 and December 31, 2020. Paycheck Protection Program (PPP) The bill includes funding to restart the PPP program. The updated program will have revised eligibility rules, but many businesses should qualify for additional funding. Some of the key highlights include: • Maximum employer size has been reduced from 500 employees to 300 employees. • Maximum loan size has been reduced from $10 million to $2 million. • Applicants must be able to demonstrate a 25% decline in revenue for a 2020 quarter as compared to the same quarter in 2019. • Employers may choose a covered period of either 8 or 24 weeks. • 60% of proceeds must go to payroll expenses. The bill also makes other tweaks to the program, including the addition of other qualifying expenses, such as PPE and payments to essential suppliers. Furthermore, borrowers in specific industries hard hit by COVID-19, such as restaurants and hotels, may be eligible for larger loans of 3.5 times their average monthly payroll. Regardless of whether a business receives a second PPP loan, the new legislation includes provisions which clarify the tax treatment of expenses paid with PPP funds. Under recent IRS guidance, business expenses covered with forgiven PPP proceeds would not be deductible, resulting in increased tax liability for the business. Many members of Congress felt that this guidance did not conform with the legislative intent of the CARES act. The issue has now been put to rest as the new bill makes it very clear that businesses may deduct those expenses on the same basis as other business expenses. Finally, new and existing PPP loans of less than $150,000 will be eligible for a streamlined one-page forgiveness application. Economic Injury Disaster Loans (EIDL) The EIDL program received additional funding for targeted loans to hard-hit small businesses.To qualify, a business must have 25 or fewer employees and be able to demonstrate an economic loss of at least 30 percent. Loan amounts are capped at $50,000 and the SBA is directed to prioritize businesses in low-income communities, owners who are economically or socially disadvantaged or who are veterans. The bill also makes an important change to EIDL loan advances. The CARES Act provided for emergency advances to businesses of up to $10,000 under the EIDL program. Unlike loans, these amounts did not have to be repaid. However, in its rulemaking, the SBA decided to reduce PPP forgiveness by the amount of an EIDL grant. Under the new bill Congress has made clear its intent for these amounts to be treated as grants, eliminating deductions from PPP forgiveness. Relief for Health Care and Dependent Care Flexible Spending Accounts As many employees are approaching the end of the year with significantly more unused funds in their health FSA and/or dependent care assistance plan (DCAP) than usual due to COVID-19, the stimulus package provides employers with the option of amending their plans to allow the following: • Employers offering a DCAP or health FSA may allow participants to carry over all unused DCAP and health FSA contributions or benefits remaining at the end of the 2020 plan year to the 2021 plan year. • Employers offering a DCAP or health FSA may allow participants to carry over all unused DCAP and health FSA contributions or benefits remaining at the end of the 2021 plan year to the 2022 plan year. • Employers offering a DCAP or health FSA may extend the grace period for using any benefits or contributions remaining at the end of a plan year ending in 2020 or 2021 to 12 months after the end of the applicable plan year. • Similar to DCAPs, employers offering a health FSA may allow participants who cease participation during the 2020 or 2021 plan year to continue to be reimbursed from any unused benefits through the end of the plan year (and applicable grace period) in which participation ceased. This is often referred to as a “spend down” provision when included in a traditional DCAP. • Employers offering DCAPs may reimburse employees for dependent care expenses for children who turned 13 during the pandemic.The relief applies to plan years with open enrollments that ended on or before January 31, 2020 (e.g., calendar year 2020 plans). It also applies for the subsequent plan year (e.g., calendar year 2021 plans) to the extent the employee has a balance at the end of the 2020 plan year after any relief adopted by the employer, such as an extended grace period or carry over. The relief allows the employer to substitute “age 14” for “age 13” for purposes of determining eligibility for reimbursement of a child’s expenses. In general, DCAP eligibility ends at age 13, except in cases of mental or physical incapacity. • Employers offering a health FSA or DCAP may allow employees to make prospective election changes (subject to annual limitations) to their 2021 contributions without experiencing a change in status event. The stimulus bill allows employers to retroactively amend the plan to take advantage of any of the relief described above; however, any amendment must be adopted no later than the “last day of the first calendar year beginning after the end of the plan year in which the amendment is effective.” The employer must also operate the plan consistent with the terms of the amendment in the interim between date the amendment is intended to be effective and when it is ultimately adopted by the plan. For calendar year plans, this means any changes to the 2020 plan year must be adopted on or before December 31, 2021 and any changes to the 2021 plan year must be adopted on or before December 31, 2022. Employers who adopt any of the relief options must amend their cafeteria plan by the applicable deadline and communicate the changes to employees. Unemployment Prior relief programs (FFCRA and CARES) made substantial changes to unemployment insurance nationwide, both expanding who may qualify, how long they may receive benefits and notably the amount they would receive. The $600 enhanced unemployment benefit which was part of the CARES act expired in July and is now being replaced with a $300 benefit. This enhanced benefit is in addition to the amount normally paid under state unemployment programs. The new benefits could begin as early as December 27th and last until March 14th. The new law also makes adjustments for workers who have both “regular jobs” and supplement those earnings with self-employment income. Stimulus Payments Many Americans will receive a second round of stimulus payments under the new law. These payments come directly from the US Treasury and employers may not offset or otherwise take stimulus payments into account when determining wages. • Both adults and dependent children may qualify for a $600 payment. As an example, a qualifying married couple, who file jointly and have two children under age 17 would qualify for a $2,400 payment. • Payments are phased out at $75,000 of annual income for single filers and $150,000 of annual income for joint filers. • Payments will be based on Adjusted Gross Income (AGI) and filing status for the 2019 tax year. • The Treasury department expects to begin processing direct deposits shortly after the bill is signed into law. Surprise Medical Billing A last-minute addition to the final bill is a provision that will reign in so called “surprise medical bills.” This term refers to situations where someone receives medical services at a facility that is in their health insurance plan’s network but is then “surprised” by billing they receive from various medical providers who do not accept their insurance. Typically, the patient had no real choice in selecting the medical provider either because it was an emergency situation (ER doctors often don’t accept the same insurance as the hospital where they work) or it is a specialist such as an anesthesiologist or radiologist who was assigned to their case by the hospital. Beginning in 2022, the legislation will require insurers and medical providers to negotiate payment for these services and will prohibit the medical providers from billing a patient for the difference between the payment from the insurer and the billed amount, so called “balance billing.” In addition to physicians, the legislation will apply similar rules to air ambulances and laboratory services. Patients can enter into agreements with out-of-network providers to be “balance billed,” but mandatory disclosures and consent rules will place limits on the practice. Please be advised that this content has been prepared for informational purposes only and should not be relied on for legal or tax advice. The information is subject to change as guidance develops. |
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