Originally published on December 28, 2020. Updated January 7, 2021 with an overview on the new mental health parity compliance requirements.

On December 27, 2020, after months of deliberation, President Trump signed a $900 billion COVID-19 stimulus package (“bill”) into law. The bill includes extensions and amendments to some expiring programs passed under the first two rounds of COVID-19 relief bills, the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as some new programs and provisions aimed at helping businesses and workers. Below, we review the healthcare-related provisions of the bill as well as a few provisions aimed at helping employers and workers, including the:

  1. Extension of tax credits for employer provided voluntary FFCRA leave until March 31, 2020;
  2. Temporary special rules for health flexible spending arrangements (FSAs) and dependent care FSAs;
  3. Ban on surprise billing for certain care;
  4. New mental health parity compliance requirements;
  5. Extension of pre-tax benefits on employer-provided student loan repayments until January 1, 2026;
  6. Extension of the CARES Act Paycheck Protection Program (PPP) until March 31, 2021 and a new round of PPP loans for certain employers up to $2 million;
  7. Extension of the CARES Act Employee Retention Credit until July 1, 2021 and expansion of certain provisions of the credit;
  8. Extension of CARES Act Emergency Injury Disaster Loan (EIDL) Grants to December 31, 2021 and provision of $20 billion for Targeted EIDL Advances for certain small employers;
  9. Extension of certain payroll tax deferrals until December 31, 2021;
  10. Direct $600 payments to individuals and dependent children;
  11. Extension of the CARES Act unemployment assistance until March 15, 2021 and the provision of supplemental federal compensation for a limited time;
  12. Extension of the eviction moratorium until January 31, 2021; and
  13. Provision of $25 billion for rental assistance.

Healthcare Related Provisions

1. Extension of Tax Credits for FFCRA Emergency Paid Sick and Family Leave

The bill extends Families First Coronavirus Response Act (FFCRA) employer tax credits until March 31, 2021. It is important to note that the bill does not extend the previous FFCRA requirement for employers to provide emergency paid sick and family leave, which is set to expire on December 31, 2020; rather, it provides a tax incentive for employers who voluntarily continue to provide emergency paid family and sick leave. The tax credits consist of a 100% refundable tax credit for qualified wages and healthcare expenses provided to employees while they are taking leave that would have been required under FFCRA. For more on the FFCRA tax credit extension, see our blog. We also review the FFCRA and FFCRA tax credits extensively in our prior blog posts. Employers should discuss any tax-related questions with qualified tax counsel or a tax adviser.

2. Temporary Special Rules for Health Flexible Spending Arrangements (FSAs) and Dependent Care FSAs

The bill provides significant changes to health FSA and DC FSA rules for the 2020 and 2021 plan years, which are permissible (not mandatory) for employers including:

  • Carryover Amounts: For plan years ending in 2020 or 2021, health FSAs and DC FSAs can permit participants to carry over any remaining unused funds into the next plan year (2021 or 2022).
  • Extension of Grace Periods: For plan years ending in 2020 or 2021, employers can extend their grace period to 12 months after the end of the plan year for their health FSAs and DC FSAs. During the extended grace period, participants can incur new claims and use amounts they have remaining from the prior plan year.
  • Post Termination Reimbursements from Health FSAs: Health FSAs can allow employees who cease participation in a plan during calendar years 2020 or 2021 due to termination to continue to incur claims and receive reimbursements from unused benefits or contributions through the end of the plan year in which their participation ceased (including any grace period or modified grace period allowed under these temporary rules).
  • Special Rule for Dependents Who Aged Out During Pandemic: The temporary rules allow certain employees to use DC FSA funds for dependent children who have “aged out,” or turned 13.
  • Change in FSA Elections: For plan years ending in 2021, health FSAs and DC FSAs can allow employees to prospectively modify their elections (up to the annual IRS maximum) without a valid change in status event.

For more details on these temporary changes to FSAs and how employers can adopt them, see our blog.

3. Ban on Surprise Billing

The bill included the “No Surprises Act,” which aims to protect consumers from surprise medical bills from out-of-network providers and facilities. The bill provides the following:

  • Emergency Services: Group health plans and insurers who cover benefits for services in an emergency department or hospital must cover emergency services without prior authorization and regardless of whether the services are provided by an in-network provider or emergency facility. If services are provided by out-of-network providers or facilities, the limitation of coverage cannot be more restrictive than required for in-network providers. Further, any cost-sharing payments (e.g., copayments, coinsurance, and deductibles) cannot be more than required for in-network providers and must be counted toward any in-network deductible or out-of-pocket maximum. This cost-sharing parity also applies to out-of-network air ambulance services.
  • Non-Emergency Services Provided at an In-Network Facility by an Out-of-Network Provider: Similarly, if a plan participant receives an item or service from an in-network facility by an out-of-network provider, the out-of-network provider cannot impose cost-sharing greater than the cost-sharing of an in-network provider.
  • The bill requires plans and insurers to provide an initial payment or notice denying payment to out-of-network providers or facilities within 30 days of receiving a bill for services. The bill outlines how plans and insurers must determine the amount that must be paid to out-of-network providers and provides an independent dispute resolution process for payment disputes. In return, out-of-network providers and facilities are prohibited from billing plan participants more than the cost-sharing requirements required under their plans.

The bill also requires plans or insurers provide an identification card with any deductible and out-of-pocket maximum applicable to a plan and a telephone number and website address where individuals can seek consumer assistance information, requires plans or insurers to notify certain plan participants when a provider is removed from a plan’s network, and requires plans and insurers to provide certain price comparison tools by telephone and through a website. These provisions apply to plans beginning on or after January 1, 2022. For more on the No Surprises Act, see our blog.

4. New Mental Health Parity Compliance Requirements

The bill aims to promote compliance with the Mental Health Parity and Addiction Equity Act (MHPAEA), which prohibits group health plans from imposing more restrictive treatment limitations or higher financial requirements on mental health or substance use benefits (MH/SUD) as compared to other medical or surgical benefits under the plan. The bill requires plans and insurers to perform and document a comparative analysis on a plan’s design and application of “non-quantitative treatment limitations” (NQTLs) to MU/SUD benefits versus medical benefits. Specifically, the analysis must contain information on the plan’s NQTLs for MU/SUD benefits, factors used to determine the application of NQTLs to MU/SUD and medical benefits, and an analysis on the plan’s compliance with NQTL parity requirement.

Beginning 45 days after the enactment of the bill (February 10, 2021), plans and insurers must make the analysis available to state and federal regulators, upon request. After reviewing a plan’s analysis and finding non-compliance, federal regulators can request the plan take corrective action or provide further analysis. The bill also requires regulatory agencies to release guidance for plans and insurers to promote compliance with the MHPAEA.

5. Extension of Pre-tax Benefits on Employer-Provided Student Loan Repayments

The bill extends the CARES Act tax benefit for employer-provided student loan repayments until January 1, 2026, which was previously set to expire on January 1, 2021. The provision expands IRS Section 127 to permit employers to provide up to $5,250 per year in pre-tax benefits to employees (or a lender) to help pay for their student loans. The Act allows employers to deduct these contributions as a business expense and allows employees to exclude these amounts from their income.

This benefit requires employers to establish a formal Section 127 education assistance program to provide the benefit. Section 127 requires the following:

  • Employers must adopt a written plan document;
  • The benefit must be an additional employer contribution (i.e., the program cannot provide eligible employees the choice between loan repayment and taxable income);
  • The program cannot favor highly compensated employees and no more than 5% of the benefits can be provided to shareholders or owners; and
  • Employers must provide reasonable notification of the availability and terms of the program to eligible employees.

Employers should work with a qualified vendor or tax advisor to adopt a written plan document and administer any Section 127 benefit.

Relief for Employers

6. Expansion of the Paycheck Protection Program

The bill expands and provides $284 billion in funding for the CARES Act Paycheck Protection Program (PPP), which previously stopped taking applications in the fall. The PPP provides forgivable loans to small businesses (employers with less than 500 employees) that were impacted by COVID-19, if certain requirements are met. Below is an outline of some of the changes made by the bill.

New Eligibility: The PPP extends eligibility to certain news organizations, marketing organizations, housing cooperatives and non-profits. On the other hand, employers that were not in operation on February 15, 2020 and publicly traded companies will not be eligible for the loan.

Additional Eligible Expenses: Under the first iteration of the PPP, only amounts spent on payroll (including group health plan benefits), rent, utilities, and interest on mortgages spent by December 31, 2020 could be forgiven if certain requirements were met. The bill extends the time period to spend loan amounts and receive loan forgiveness until March 31, 2021. In addition, the bill expands the list of forgivable categories to include:

  • Covered operations expenditures (e.g., payments for business software that facilitates business operations, product or service delivery, the payment/processing of payroll expenses, human resources, sales, and accounting);
  • Covered property damage;
  • Covered supplier costs; and
  • Covered worker protections (e.g., operating or capital expenditure to comply with guidance issued by governmental health and safety authorities related to sanitation, social distancing, and other worker and customer safety requirements related to COVID-19).

In addition, forgivable payroll costs are now clarified to include payments required for group life, disability, vision and dental insurance (the prior rules merely stated that payroll costs included payments for “group health care coverage, including insurance premiums.”)

Employers will still be required to spend at least 60% of the loan on payroll costs as a condition of loan forgiveness but will now be able to spend the remaining 40% on more categories while still receiving loan forgiveness. The bill also allows employers to choose between an 8-week period and a 24-week period after the origination of the loan to spend loan amounts and receive loan forgiveness on eligible expenditures. We recommend employers work with qualified tax counsel or a tax adviser for any questions about PPP loans.

Simplified Loan Forgiveness Application: The bill provides a simplified process for employers to receive loan forgiveness on loans less than $150,000.

Second PPP Loans: Employers who already received a PPP loan and used the full amount for permitted purposes are eligible for a second PPP loan if:

  • They employ 300 or less employees; and
  • Had gross receipts during a quarter in 2020 that was 25% or more less than gross receipts from the same quarter in 2019 (with special rules applying to employers that were not in business during certain quarters of 2019).

The maximum loan amount is 2.5 times an employer’s average total monthly payroll costs (3.5 times for employers in accommodation and food services industries) during a specified period of time, up to $2 million.

We reviewed the original iteration of the PPP in our blogs here and here.

7. Extension of Employee Retention Credit

The bill expands and extends the CARES Act Employee Retention Credit until July 1, 2021, which was set to expire on December 31, 2020. In its original iteration, the Employee Retention Credit provided employers tax incentives equal to 50% of qualified wages and healthcare expenses provided to employees during a (1) partial/full shutdown caused by a governmental COVID-19 order or (2) a significant decline in business (defined as a 50% or more decline in gross receipts, as compared to the same calendar quarter in 2019). The bill modifies the Employee Retention Credit in several ways:

  • Extends the application of the credit to qualified wages and healthcare expenses provided to employees prior to July 1, 2021.
  • Increases the credit to 70% of eligible wages and healthcare expenses (from the prior 50% credit).
  • Increases the total amount of qualified wages for which employers can receive the tax credit from $10,000 per employee for all calendar quarters to $10,000 per employee for each calendar quarter ($40,000 total per year).
  • Changes the eligibility for a “significant decline in business” to an 80% or more decline in gross receipts, as compared to the same calendar quarter in 2019.
  • Changes how qualified health plan expenses are calculated for purposes of the tax credit (the bill appears to simplify how healthcare expenses are allocable to certain employees by looking at monthly/periodic insurance premiums instead of the “average cost of maintaining a group health plan” that was outlined in the prior iteration of the credit).

We reviewed the CARES Act Employee Retention Credit in our prior blogs here and here.

8. Extension and Funding for EIDL Grants and Targeted EIDL Advances

The bill extends the CARES Act Small Business Administration (SBA) Emergency Disaster Loan (EDIL) emergency grants from December 31, 2020 until December 31, 2021 and increases funding to $40 billion for the program. For more on EDIL grants, see our prior blog.

Targeted EIDL Advances for Small Businesses: The bill also designates $20 billion toward a new “Targeted EIDL Advance” for employers who:

  • Apply for an SBA loan before December 31, 2021;
  • Are in a low-income community;
  • Have suffered an economic loss greater than 30% (i.e., gross receipts declined during an 8-week period between March 2, 2020 and December 31, 2021 compared to a comparable 8-week period immediately preceding March 2, 2020 or during 2019); and
  • Employ 300 or less employees.

Applicants will receive $10,000, regardless of whether they are approved for an EDIL loan, they accept the EDIL loan, or they previously received an EDIL loan. However, employers who already received an EDIL grant provided under the CARES Act will only receive the difference between $10,000 and the amount of the previously received grant. The SBA must provide the grant or deny the grant within 21 days of any application.

9. Extension of Payroll Deferral Provided under Notice 2020-65

On August 28, 2020, the IRS issued Notice 2020-65 (entitled “Relief with Respect to Employment Tax Deadlines Applicable to Employers Affected by the Ongoing Coronavirus (COVID-19) Disease 2019 Pandemic”), which allowed employers to defer the employee portion of Social Security and Railroad Retirement taxes on certain wages until April 30, 2021. The bill further extends the tax deadline to December 31, 2021.

For more, see the IRS website and Notice 2020-65.

Assistance for Workers

10. Direct Cash Payments

The bill provides a one-time cash payment of $600 to individuals who reported making $75,000 or less on their 2019 tax returns. Individuals who qualify for stimulus checks can also receive an additional $600 for each dependent child. This means that a family of four (2 adults and 2 dependent children) could receive up to $2,400 in payments.

11. Unemployment Benefits

The bill extends the CARES Act unemployment provisions and provides federal supplemental unemployment compensation, including the following:

  • Extends CARES Act Pandemic Unemployment Assistance: The bill extends the CARES Act Pandemic Unemployment Assistance (PUA) program from December 31, 2020 until March 14, 2021. The PUA provides unemployment benefits to individuals who are usually ineligible for state unemployment benefits, including part-time, temporary, and self-employed individuals.
  • Increase in Number of Weeks: The bill provides an additional 11 weeks of unemployment benefits for a total maximum of 50 weeks of benefits. The CARES Act previously provided an additional 13 weeks of unemployment benefits to individuals who exhausted their state benefits (for a total of 39 weeks).
  • Waiver Authority for Certain Overpayments of Pandemic Unemployment Assistance: The bill allows State agencies to waive the requirement for individuals to pay back overpayments of unemployment benefits they received if the payment was not the fault of the individual and the repayment would go against equity and good conscience.
  • Extension of Federal Unemployment Compensation: The bill provides an additional $300 per week in federal unemployment compensation (amounts provided on top of state benefits) for unemployment between December 26, 2020 and March 14, 2021.

12. Extension of the Eviction Moratorium

The order issued by the CDC entitled “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19” is extended for one month through January 31, 2021.

12. Direct Rental Assistance

The bill provides $25 billion in rental assistance for fiscal year 2021. The amounts will be distributed to States and territories, who must use 90% toward financial assistance (e.g., for the payment or rent, utilities, and expenses related to housing due to COVID-19) and 10% toward housing stability services (e.g., services intended to keep households stably housed) to eligible households. States must prioritize low-income households and unemployed individuals for financial assistance and housing stability services.

Comparison Chart of Existing COVID-19 Relief and the new COVID-19 Stimulus Bill

ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
1. Families First Coronavirus Response Act (FFCRA)Employers with less than 500 employees required to provide paid family and sick leave related to COVID-19 between April 1, 2020 to December 31, 2020. Tax credits designed to fully reimburse employers for the cost of providing required COVID-19 leave.Mandatory requirement to provide leave not extended (expires December 31, 2020); however, tax credits for businesses offering leave that would have been required under the FFCRA extended to March 31, 2021.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
2. Temporary Special Rules for health FSAs and DC FSAsThe IRS allowed employers to permit participants to: (1) make prospective changes on their health FSA and DC FSA until December 31, 2020, regardless of whether there was a “qualified life event;” (2) apply certain unused FSA/DC FSA funds through December 31, 2020; and (3) carryover up to $550 to the next plan year for health FSAs. For more, see our blog. In addition, the IRS extended participant deadlines to file FSA claims during the “COVID-19 Outbreak Period” (which began March 1, 2020 and ends 60 days after the end of the National Emergency, which is still to be determined). For more, see our blog.Extended permissible special temporary rules for the 2020 and 2021 plan year on carryovers, grace periods, run-out periods, application of DC FSA funds to dependent children, and prospective election changes.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
3. Ban on Surprise BillingNoneProhibits plans and insurers from treating out-of-network emergency providers differently from in-network providers with respect to cost-sharing and coverage limits.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
4. Mental Health Parity Compliance RequirementsNoneRequires plans and insurers to perform and document a comparative analysis on a plan’s non-quantitative treatment limitations to mental health benefits versus medical benefits.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
5. Pre-Tax Benefits on Employer-Provided Student Loan RepaymentsEmployers permitted to provide up to $5,250 in pre-tax benefits to employees to help pay for student loans. Applies to amounts contributed from March 27, 2020 to December 31, 2020.Extends pre-tax benefits to amounts contributed until January 1, 2026.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
6. Paycheck Protection Program (PPP)Employers with fewer than 500 employees can receive loans to spend on payroll, rent, utilities, or interest on mortgages. Loans are forgivable if spent prior to December 31, 2020, and if certain requirements are met.Provides $284 billion in funding for PPP loans, expands eligibility for certain industries, expands the list of eligible expenses, and allows certain employers to apply for a second PPP loan up to $2 million.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
7. Employee Retention CreditEmployer tax credit equal to 50% of qualified wages (including healthcare expenses) provided to employees during a partial/full shutdown due to a government COVID-19 order or significant decline in business (50% decline in gross receipts) from March 12, 2020 through December 31, 2020.Employer tax credit equal to 70% of qualified wages and healthcare expenses provided to employees during a partial/full shutdown due to a government COVID-19 order or significant decline in business (80% decline in gross receipts) through July 1, 2021.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
8. Emergency EIDL GrantsSmall employers who incurred a temporary loss in revenue due to COVID-19 could apply for a loan and receive an emergency grant of up to $10,000 until December 31, 2020.Extends emergency EDIL grant program to December 31, 2021 and increases funding for the program to $40 billion. Creates new targeted EIDL advances for employers who have less than 300 employees, are located in a low-income community, and experienced a 25% or more economic loss.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
9. Extension of Payroll DeferralThe IRS allowed employers to defer the employee portion of Social Security and Railroad Retirement taxes on certain wages until April 30, 2021.Deferral extended to December 31, 2021.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
10. Direct Cash PaymentsDirect cash payments of $1,200 for individuals earning less than $75,000 and $500 for each child aged 17 or younger.Direct cash payments of $600 per individual earning less than $75,000 and $600 for each dependent child.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
11. Unemployment AssistanceCARES Act expanded unemployment benefits for individuals who are unemployed, partially employed, or unable to work due to COVID-19 through December 31, 2020; extended state unemployment benefits to 39 weeks; and provided federal supplemental compensation of $600 per week until July 31, 2020.Continued CARES Act unemployment benefit expansion through March 15, 2021, extends state unemployment benefits to a maximum of 50 weeks, and provides federal supplemental compensation of $300 per week between December 26, 2020 and March 15, 2020.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
12. Moratorium on Residential EvictionsOrder prohibited evictions from September 4, 2020 to December 31, 2020.Extends prohibition to January 31, 2021.
ProvisionCOVID-19 Relief Provided Under FFCRA, CARES, or governmental agenciesChanges/Extensions Made by the new COVID-19 Stimulus Bill
13. Direct Rental AssistanceNone.  $25 billion in rental assistance for fiscal year 2021.

Additional Resources

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2020 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.