With 2020 coming to a close, we thought it would be helpful to provide a few reminders for employers on year-end tasks.  This is not intended to be a comprehensive list but we do hope it’s helpful.  As always, feel free to reach out to your IMA Benefits team if you have questions on any of these.

  • Provide COBRA participants with annual open enrollment information with new pricing before the end of the plan year so they can submit any revised elections they’d like to make before the new plan year begins.
    • Remember they get the same open enrollment opportunities as active employees, such as adding dependents, enrolling in medical/dental/vision they’re not currently enrolled in, moving to another plan option, etc.
    • You may have individuals that haven’t elected COBRA or kept their payments current but due to the Outbreak Period extensions are still eligible to make up those elections/payments.  Don’t forget to communicate with them, too.
  • Help your flexible spending account (FSA) administrator with resolving unsubstantiated claims
    • If your employees are not responding to requests for receipts to substantiate an FSA debit card transaction, then the FSA administrator may need your help reaching out to those employees to request valid receipts
    • If an employee won’t submit proper substantiation, then they owe your plan a debt, which is the employer’s responsibility to collect
  • Run annual non-discrimination testing as of the last day of the plan year
    • This includes cafeteria plan testing, self-funded plan testing (including health FSAs and HRAs), and daycare FSA testing
  • If your health FSA is adopting the increased carryover limit of $550 into the plan year that begins in 2021, the IRS has granted special permission to amend your 2020 health FSA document by the end of 2021
    • This is a permanent change that will index the carryover limit annually to be 20% of the annually indexed health FSA paycheck deduction limit under §125(i)
    • Health FSAs cannot have both a carryover and a grace period (for 2020 only, there may have been a one-time COVID-19 exception as discussed below)
    • Carryovers are not permissible for daycare FSAs, but grace periods are permissible
  • If your health FSA adopted one or both permanent CARES Act updates to (a) no longer require a prescription to reimburse over-the-counter (OTC) medicines/drugs and/or (b) treat menstrual products as reimbursable, be sure to update your health FSA plan document to accommodate those changes before the end of the plan year
    • These changes were not given special permission to wait until 2021 to formally adopt amendments
    • Remember these allowed modifications to the definition of reimbursable expenses only go back to January 1, 2020, so this will likely be a mid-plan year change for non-calendar plans
  • Gear up for annual reporting needs due in early 2021, such as ACA reporting as applicable, MA and other state-specific reporting as applicable, and including the value of health coverage on Forms W-2 as applicable
  • Gear up for paid leave requirements in the states and localities your employees are located, such as:
    • The CO HFWA
    • As well as new paid leave laws in ME, MA, NY, and others
    • Pay attention to remote workers in cities/states with extra rules, such as rules in San Francisco or New York that apply when someone who lives there but ordinarily commutes outside of there for work has now been working from home and is therefore newly triggering extra requirements

Also don’t forget new tasks related to COVID-19 which may not be on the usual year-end task list.

  • FFCRA paid leaves and several tax credits expire at the end of the year
    • Timely file for tax credits you’ll be claiming, such as FFCRA paid leave credit worth 100% (not available to employers in the public sector), employee retention credit (ERC) worth 50% (if you qualify and didn’t take a PPP loan), and paid FMLA credit (if you participated in the §45S paid FMLA pilot program).
  • If you have deferred employment tax deposits and payments, note deferrals end December 31, 2020
    • Also, if you allowed employees to defer Social Security tax withholding from September 1, 2020 through December 31, 2020, be sure to withhold and remit those deferrals by April 30, 2021
  • If you adopted certain flexibilities allowed by your insurer or stop loss insurer, it’s ideal to update your plan documents by the end of the plan year
    • This may include months where you relaxed your 30 hours per week requirement during a furlough
  • If you adopted certain other flexibilities that regulators allowed due to COVID-19, be sure to update plan documents by the end of 2021 for those
    • These include one-time grace periods and allowing election changes without a qualifying event
    • This might also include the ability for a tuition reimbursement plan to include an employee’s student loan payments as an eligible reimbursement for 2020 only

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.