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Client Alert: DOL Releases COBRA Model Subsidy Notices – Due By May 31st!

As explained in previous Client Alerts, the American Rescue Plan Act of 2021 (“ARPA”) requires that employers provide 100% COBRA subsidies to certain assistance eligible individuals from April 1, 2021 through September 30, 2021. Not only will COBRA be fully paid for these individuals during this time period, but eligible individuals who had previously declined COBRA (or who had elected COBRA and dropped it) have a second chance to elect and take advantage of the subsidized COBRA coverage. Notices of such subsidies and new election rights are due by May 31, 2021, so time is of the essence.

Summary of COBRA Subsidy

Under ARPA, any assistance eligible individual (“AEI”) shall be treated as having paid the full amount of the COBRA premium from April 1, 2021 through September 30, 2021.

The Department of Labor recently issued additional guidance, FAQs, as well as the model notices, found here:

COBRA Premium Subsidy dedicated page, available here;
FAQs, available here;
Model Notices:
- General Notice and Election Notice, available here;
- Notice in Connection with Extended Election Period, available here;
- Alternative Notice, available here;
- Notice of Expiration of Premium Assistance, available here;
- Summary of the COBRA Premium Assistance Provisions, available here.

Assistance Eligible Individuals

AEIs include individuals who, from April 1 through September 30, 2021, are COBRA qualified beneficiaries and:

are eligible for COBRA due to involuntary termination (for reasons other than the employee’s gross misconduct) or reduction in hours; and
elect such coverage.

However, the 100% subsidy is not available to AEIs for months beginning on or after the earlier of:

the date the individual is eligible for coverage under another group health plan (other than excepted benefits only, qualified small employer HRAs, or FSAs);
the date the individual is eligible for Medicare; or
the date COBRA expires, which is the earlier of: (a) the date the maximum COBRA period ends; or (b) the date the maximum COBRA period should have ended if it had been originally elected or not discontinued.

AEIs must notify the group health plan when they are no longer eligible for subsidies due to being eligible for other group health plans or Medicare. Penalties will ensue if they do not.

New Election Rights

For individuals who do not have a COBRA election in effect as of April 1, 2021 (but could have had they initially elected COBRA or not dropped COBRA coverage early), the ARPA allows such individuals to elect COBRA any time beginning April 1, 2021 and ending 60 days after receiving notice that they are allowed to do so. These notices must be provided to AEIs by May 31, 2021.

Basically, any individual who was eligible for COBRA due to involuntary termination (except for gross misconduct) or reduction in hours after October 1, 2019 could be an AEI. Therefore, it is imperative to determine who these individuals are and to provide them the requisite notice. In some cases, an individual may only be an AEI for a month or two depending on when the original COBRA maximum period ends.

These new COBRA elections will begin on or after April 1, 2021 and cannot extend beyond the original date of COBRA had it originally been elected or not discontinued. The Department of Labor released FAQs which clarify that an AEI can elect COBRA prospectively after receiving the subsidy notice or can elect it retroactively to April 1, 2021. See Q5 of the FAQs.

Switching Coverage

Any AEI may, within 90 days after notice, elect to switch from one group health plan offered by the plan sponsor (i.e., employer in most cases) to another coverage offered by the plan sponsor, if:

the employer permits the switch;
the premium for such different coverage does not exceed the premium for coverage in which the individual was enrolled at the time of the qualifying event;
the different coverage is also offered to similarly situated active employees of the employer; and
the different coverage is not only for excepted benefits, a qualified small employer HRA, or a health FSA.

See Q15 of the FAQs.

New Notice Requirements

Along with traditional COBRA requirements, plan administrators (i.e., employers or TPAs in most cases) must provide clear notices of the ARPA’s COBRA premium assistance / subsidy requirements, new election rights, as well as notices of when the subsidy will expire.

Premium Assistance Notice for New COBRA Qualified Beneficiaries

For AEIs who become entitled to elect COBRA at any point from April 1 through September 30, 2021, the COBRA election notices must include the following:

the availability of the premium assistance if eligible;
the option to enroll in different coverage (if the employer permits);
the forms necessary to establish eligibility for the premium assistance;
the name, address, the phone number to contact the plan administrator (or TPA, etc) regarding the premium assistance;
a description of the extended election period;
a description of the qualified beneficiary’s obligation to notify the plan of their eligibility for other group health plan coverage or Medicare and the penalty if they fail to do so (which, for intentional failures, is sizable under the ARPA); and
a description of the right to the subsidized premium as well as the conditions for receiving it.

This can be accomplished by amending the current notices or including a separate document with the notices to describe the above.

The DOL Model General Notice and Election Notice are found here.

The “Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021,” which contains information on the subsidy as well as the forms to elect or discontinue the premium assistance, must also be provided with the General Notice and Election Notice. The Summary can be found here.

Premium Assistance Notice for Current COBRA Qualified Beneficiaries / Re-Opened Election Rights Notice

This notice must be provided to those who are currently enrolled in COBRA to advise them of the new subsidy. Additionally, the notice also must be provided to AEIs who previously failed to elect COBRA or discontinued it and who may now elect COBRA under the extended election period.

Notice in Connection with Extended Election Period is found here.

As above, the “Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021,” which again contains information on the subsidy as well as the forms to elect or discontinue the premium assistance, must also be provided with the Notice in Connection with Extended Election Period. The Summary can be found here.

These notices must be provided by May 31, 2021.

Subsidy Expiration Notice

Additionally, the plan administrator must provide clear notice when the premium assistance expiration date is approaching, as well as notice that the individual may be eligible to continue COBRA without the premium subsidy or other group health plan coverage (if eligible).

This notice must be provided between 45 days before such expiration and ending 15 days before the expiration date. However, this notice requirement does not apply if the individual will be losing the subsidy due to being eligible for another group health plan or Medicare.

The DOL’s Model Notice of Expiration of Premium Assistance can be found here.

COBRA Penalties

Failure to provide these notices is deemed a failure to meet the COBRA notice requirements. As you may know, failure to provide accurate and timely COBRA notices come with hefty penalties, so compliance is imperative.

Employer Tax Credit

In most cases, employers will be responsible for initially funding these COBRA subsidies and will receive a payroll tax credit for doing so. These tax credits are calculated per quarter, and credits provided may not exceed the Code section 3111(b) taxes imposed on wages paid for employment of all the employer’s employees. However, if the amount of the credit does exceed this amount, it is treated as an overpayment which will be refunded. Additionally, credits may be advanced.

Conclusion

Due to severe penalties for COBRA noncompliance, it is incredibly important for employers to act swiftly to identify individuals who are entitled to subsidies and to ensure notices, procedures, plans and other employee communications are updated quickly. Coordination with third-party administrators, consultants, and attorneys will also be important to ensure legal and tax compliance. It is also essential to keep in mind the expiration date of these legal changes, so that regular COBRA notices and procedures go back into effect after September 30, 2021.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

Fraser Trebilcock is committed to providing you valuable information. Please watch for upcoming alerts on these and other topics.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or bgallagher@fraserlawfirm.com.

Sixth Circuit Allows Professor to Move Forward with Lawsuit Alleging University’s Preferred-Pronoun Policy Violates his Constitutional Rights

In a recent case with important implications for higher education institutions, the U.S. Court of Appeals for the Sixth Circuit held that a university professor plausibly pled claims that his employer’s enforcement of its policy requiring employees to refer to students by their preferred pronouns violated his constitutional rights under the free speech and free exercise clauses of the First Amendment.

The case, Meriwether v. Hartop, involves plaintiff Meriwether, a professor at defendant Shawnee State University (a public university). Meriwether, a devout Christian, sought a compromise with the university that would involve him using students’ preferred pronouns while placing a disclaimer in his syllabus, “noting that he was doing so under compulsion and setting forth his personal and religious beliefs about gender identity.” This proposed accommodation for Meriwether’s sincerely held religious beliefs was rejected by the university, which argued that the syllabus disclaimer, itself, would violate the policy.

In response to complaints filed by a transgender student of Meriwether, the university’s Title IX office conducted an investigation which concluded that Meriwether’s treatment of the transgender student, including refusing to use the student’s preferred pronoun, created a “hostile environment” violating the university’s non-discrimination policy. The university placed a written warning in Meriwether’s file, and Meriwether then brought suit against the university.

Meriwether argued that the university’s actions violated his rights under both the free speech and free exercise clauses of the First Amendment, and also asserted a due-process and equal-protection claims under the Fourteenth Amendment. His complaint was dismissed by an Ohio federal district court, and he appealed the decision, with the exception of the dismissal of the equal-protection claim, to the Sixth Circuit. The Sixth Circuit panel ruled that Meriwether’s case could proceed under both his free speech and free exercise claims.

With regard to the free speech claim, the Sixth Circuit panel ruled that the First Amendment protects the academic speech of university professors. In reaching this determination, the Sixth Circuit analyzed the U.S. Supreme Court’s decision in Garcetti v. Ceballos, 547 U.S. 410 (2006). In Garcetti, the Supreme Court held that, in normal circumstances, “when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline.” However, the Sixth Circuit held, in a decision consistent with the approach of the Fourth, Fifth, and Ninth Circuits, that the ruling in Garcetti does not apply in the academic context of a public university. Accordingly, the university violated Meriwether’s First Amendment rights.

As to the free exercise claim, the Sixth Circuit concluded that the university’s policy was not applied neutrally to religion as demonstrated by university officials showing hostility toward Meriwether’s religious beliefs and request for religious accommodation. As a result, the Sixth Circuit ruled that the university violated Meriwether’s free exercise rights.

Finally, the Sixth Circuit upheld the district court’s decision to dismiss Meriwether’s due process claim. Meriwether argued that the university’s policy violates due process because it is vague. However, the court found that Meriwether had notice of the policy and understood that it prohibited his conduct.

It is important to note that the Sixth Circuit’s ruling in this case only addressed the university’s motion to dismiss the complaint. Accordingly, for purposes of the appeal, Meriwether’s factual allegations were assumed to be true. He still has to prove his claims. However, the ruling does set important Sixth Circuit precedent affecting Michigan higher education institutions on issues of free speech and free exercise.

For any questions regarding this opinion, and how it may impact higher education institutions, please contact Ryan Kauffman.

Ryan K. Kauffman is a Shareholder at Fraser Trebilcock with more than a decade of experience handling complex litigation matters. You can contact him at rkauffman@fraserlawfirm.com or 517.377.0881.

Michigan Municipal Adult-Use Marijuana Licensing Processes Give Rise to Lawsuits

In December, 2019, Michigan authorized the sale of adult-use marijuana (i.e., recreational marijuana). Michigan municipalities are thus automatically deemed to permit adult-use businesses without restriction unless they pass ordinances restricting or prohibiting them within their jurisdictions.

The legalization of adult-use marijuana has resulted in the establishment of procedures for businesses to become licensed to sell in accordance with local regulations and restrictions on the number and types of businesses that qualify. These procedures and restrictions apply in addition to the Michigan Marihuana Facilities Licensing Act (MMFLA) and Michigan Regulation and Taxation of Marihuana Act (MRTMA).

Under MRTMA, a municipality is authorized to limit the number of marijuana establishment licenses. If a municipality does impose limitations, and the limit prevents the state from issuing a state license to all applicants, then “the municipality shall decide among competing applications by a competitive process intended to select applicants who are best suited to operate in compliance with [MRTMA] within the municipality.” MRTMA permits restrictions that go beyond limiting the number of licenses allowed within an area as long as such restrictions are not “unreasonably impracticable.” To avoid being unreasonably impracticable restrictions must not “subject licensees to unreasonable risk or require such a high investment of money, time, or any other resource or asset that a reasonably prudent businessperson would not operate the marihuana establishment.”

The process of establishing criteria for businesses seeking marijuana licenses, and reviewing business applications for licenses, is complex. There is a lot of money at stake. And unsurprisingly, in many municipalities across Michigan, the licensing process has led to significant and costly litigation.

In November, 2020, the City of Detroit announced its rules for allowing licensed adult-use marijuana sales, which included controversial provisions meant to give “social equity applicants” a competitive opportunity. Applicants are entitled to preferential treatment if they have lived in Detroit for:

15 of the last 30 years
13 of the last 30 years and are low-income
10 of the last 30 years and have a past marijuana-related criminal conviction, or
Have parents who have a prior controlled substance record and still live in the city

These rules gave rise to a lawsuit filed on March 2, 2021, in Wayne County Circuit Court, by a plaintiff who has been a Detroit resident for 11 of the past 30 years who intends to apply for an adult-use retail establishment license.

The lawsuit alleges that the “licensing scheme favors certain Detroit residents over other Michiganders based on the duration of their residency.” The plaintiff argues that the ordinance violates the U.S. Constitution’s commerce clause because it “discriminates against out-of-state residents and punishes people for moving between states.”

Detroit is not the first (and almost certainly won’t be the last) municipality to have its licensing process challenged.

In November, 2020, Traverse City was ordered by a judge to refuse to accept applications for adult-use marijuana retail and microbusiness establishments in light of pending lawsuits. One of the primary issues being litigated in the Traverse City lawsuits is whether existing medical marijuana retailers have the automatic right to sell recreational marijuana as well.

In December, 2020, the Oakland County Circuit Court issued a preliminary injunction in a case brought against the City of Berkley, enjoining Berkley from issuing licenses to marijuana establishments pursuant to the MMFLA or MRTMA. The court enjoined Berkley based on the likelihood that its process for scoring and awarding licenses violates the requirements of MRTMA.

The process of establishing rules and reviewing license applications for adult-use marijuana will remain a contentious one. Given that adult-use sales in Michigan totaled nearly $440 million in the first full year of the program, there is a lot to be won (or lost) in the process.

For assistance in the application process, or any other issues related to operating a marijuana business in Michigan, please contact Paul Mallon, Jr.

Paul C. Mallon, Jr. is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at pmallon@fraserlawfirm.com or (313) 965-9043.

Michigan Department of Treasury Confirms that PPP Loan Forgiveness will Conform to Federal Treatment

On April 19, 2021, the Michigan Department of Treasury issued a notice (the “Notice”) announcing Michigan’s conformity to the federal income tax treatment of loans (“PPP Loans”) issued under the Paycheck Protection Program. The Notice also sets forth additional guidance for individual and corporate taxpayers regarding various income tax issues raised by the federal loan program.

As originally established under the CARES Act, any forgiven PPP was excluded from gross income for federal income tax purposes. However, no similar provision was enacted authorizing a deduction of the business expenses paid for by those forgiven loans. This issue was addressed in the Consolidated Appropriations Act (the “CAA”), enacted on December 27, 2020, which provided taxpayers with the ability to deduct the underlying business expenses paid for by the forgiven loan. The Notice makes clear that Michigan will conform to the manner in which the federal government is treating both PPP loan forgiveness and the deductibility of business expenses.

The Notice also provides guidance for both individual and corporate taxpayers relating to the calculation of sales factor apportionment, gross receipts, and the calculation of Total Household Resources when taking into consideration the impact of PPP loan forgiveness.

Finally, the Notice states that additional documentation substantiating a PPP loan is not required for Michigan tax return filing purposes. Taxpayers are not required to include any specific loan documentation, including proof of forgiveness or proof of expenses, with Michigan individual or corporate income tax returns. However, borrowers of PPP loans must retain sufficient documentation of their participation in the PPP loan program as part of their obligation to keep accurate and complete records necessary for an accurate determination of their tax liability.

If you have any questions about how the forgiveness of your PPP loan impacts your Michigan tax liability and the filing of your tax returns, please contact Fraser Trebilcock shareholder Paul McCord.

Fraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

American Rescue Plan – Affordable Housing – HUD

The Biden Administration American Rescue Plan contains sizeable funding for affordable housing along with other policy proposals. It totals $231 Billion in funding in 3 key areas:

Produce, preserve, and retrofit over 1 million affordable housing units to be resilient, accessible, energy-efficient, and electrified. To do accomplish this Biden proposes funding with tax credits, formula funding, grants, and project-based rental assistance. Units would be targeted to households in underserved, rural and tribal communities.

Build 500,000 affordable housing units for low and middle-income buyers. This begins to address the remarkable housing shortage in the country. Funding would come from the proposed Neighborhood Homes Investment Act. $20 Billion.

Update and Upgrade Public Housing through $40 billion in capital funding.

Leveraging existing block grant programs to increase available tax credits for clean energy. For example, Biden proposes creating a $27 billion Clean Energy and Sustainable Accelerator.

HUD announced it will make available $5 billion in new grants to states and local government for rental assistance and development of affordable housing and other services to people experiencing homelessness. This translates in about $150 million for Michigan.

If you have any questions, please contact Mary Levine.

Mary P. Levine is an attorney with Fraser Trebilcock, focusing on affordable housing and community development. Mary was the former President and Secretary of the Greater Lansing Housing Commission (GLHC). She can be reached at mplevine@fraserlawfirm.com or (517) 377-0823.

Labor Law Changes are Coming Under the Biden Administration

President Biden has signaled support for many legislative and regulatory proposals that, if enacted, will significantly change the labor law landscape. For example, on March 9, 2021, the U.S. House of Representatives passed the Protecting the Right to Organize Act, known as the PRO Act, with a largely party line vote of 225-206. The implications of the PRO Act, should it be enacted into law, are discussed below. Further, other aspects of national labor law policy are actionable within President Biden’s discretion.

NLRB Developments

NLRB Member Appointments Subject to Senate Confirmation

Readers of our column will know that appointments to positions on the National Labor Relations Board (“NLRB”) are shared 3-2 in favor of the party holding the presidential appointment power. Currently, the Board consists of four members (two Republicans and two Democrats). The one open Board seat that President Biden is expected to fill soon will tip the balance of power. President Biden has already appointed and the Senate has confirmed Lauren McFerran as the new Board Chair. Chair McFerran previously served as a Member of the Board from 2014 until 2019, prior to which her career, unlike many members, predominantly was as staff to Senate committees or elected officials.

Once the next appointment is made and confirmed it is predictable that labor relations policy as dictated by the NLRB will take a hard swing in favor of organized labor and away from protection of rights of individual workers and employers. Such areas as protected and concerted actions by employees and employee solicitation in support of unions at the workplace are likely targets for reversal of Trump-era or earlier rulings.

Some of the more vulnerable rulings include:

Reinstate Specialty Healthcare

The Biden NLRB will likely reinstate Specialty Healthcare (2011), which was overturned by the NLRB in 2017. Under Specialty Healthcare, the NLRB presumes a bargaining unit is appropriate when it is composed of employees that perform the same job at the same facility, regardless of whether other employees share a community of interest with that unit. This allows organizing efforts to focus on a smaller group of employees, called a “micro unit,” at a company. The easier it is for a labor organization to identify a permissible unit, and especially, smaller units where fewer adherents are required, the more success in organizing is expected.

Reinstate the Joint-Employer Test

It is also likely that the Biden NLRB will reinstate the joint-employer test found in the Obama-era decision Browning-Ferris Industries (2015). In Browning-Ferris Industries, the NLRB expanded the joint-employer standard by holding that an employer’s status as a joint employer rests on its reserved right to control employees, either directly or indirectly. A return to this standard would enable employees to assert a right to bargain with both their direct employer and the company that contracted their services, leading to increased bargaining in many industries and likely greater leverage on the part of the labor organization.

Reinstate Purple Communications

The Biden NLRB is on our opinion likely to reinstate Purple Communications, which was overturned by the NLRB in 2019. The original ruling determined that as long as the employer makes any use whatsoever of its electronic mail system to address or counter union organizing efforts, the employer would be acting with unlawful anti-union bias if it enforced a rule prohibiting employees from using the same system for pro-union efforts and communications, despite that the employer clearly owns, controls and provides the instrumentality (the email platform). Purple Communications was at the time of its issuance, and still is, seen as a retreat by the NLRB from more traditional deference to employer property rights in opposing organizing efforts.

NLRB General Counsel

The President also has the appointment power subject to Senate confirmation over the powerful position of NLRB General Counsel. The “GC” has significant “policy-setting” authority in issuing guidance and expectations of NLRB “interpretation” of the National Labor Relations Act, and “prosecutorial” decision making authority to determine what cases and issue will – and will not – be pursued.

President Biden upon taking office dismissed former NLRB General Counsel Peter B. Robb, and on January 25, 2021, designated Peter Sung Ohr as Acting General Counsel of the NLRB.

Legislative Developments

Protecting the Right to Organize Act

President Biden has voiced his support for the PRO Act, which was passed by the U.S. House of Representatives on March 9, 2021. That proposal seeks to legislate protection for union organizing efforts, regulation of which otherwise falls under the ambit of the NLRB itself, including:

Provisions instituting financial penalties on companies that interfere with workers’ organizing efforts, including firing or otherwise retaliating against workers. Currently, remedies for such alleged “violations” of the National Labor Relations Act are crafted and determined by the NLRB, are subject to review by the U.S. Circuit Courts of Appeals, and thus are not uniform across the nation. Current NLRB-fashioned remedies are specifically intended not to be “punitive” in the sense of penalizing employers, but merely, “remedial” to protect workers determined to have been subjected to unfair labor practices.
During the election campaign, then-candidate Biden indicated he would push for legislation that goes even further than the PRO Act, seeking to impose stiffer penalties on corporations and potentially holding company executives personally liable for interfering with organizing efforts. Further, the possibility of imposition of criminal liability when election interference is deemed “intentional,” is being considered. This proposal, if adopted, would be virtually unprecedented. No labor relations law in history has even suggested criminal liability except where, for example, financial theft or fraud has been proven, for example, in the recent Chrysler/UAW series of cases.
The PRO Act would also significantly alter the standards for determining whether an independent contractor is an employee by adopting the “ABC test” established by California’s Department of Labor. The ABC test provides that an individual performing any service shall be considered an employee and not an independent contractor, unless:
- the individual is free from control and direction in connection with the performance of the service, both under the contract for the performance of service and in fact;
- the service is performed outside the usual course of the business of the employer; and
- the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

Looking Ahead

It’s all but certain that significant changes are on the way to the nation’s labor and employment laws. The extent of changes, and how they will be implemented, remains to be seen. We will continue to keep you informed of new developments and their implications for your business.

If you have any questions, please contact Dave Houston or your Fraser Trebilcock attorney.

This alert serves as a general summary, and does not constitute legal guidance. All statements made in this article should be verified by counsel retained specifically for that purpose. Please contact us with any specific questions.

Fraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

FFCRA Paid Leave Extension Until September 30, 2021 with Tax Credits

If you are a private employer with under 500 employees, were you aware you can voluntarily extend FFCRA paid leave from April 1 through September 30, 2021 and still receive a tax credit?

This is now allowed under the American Rescue Plan Act (“ARPA”), which was enacted on March 11, 2021.

However, be cautious. ARPA changes the rules for Emergency Paid Sick Leave (“EPSL”) and Emergency FMLA Extension (“EFMLA”). If these rules are not followed, no tax credit will be available.

Highlights of these changes are below.

Under the EPSL, in addition to the previous 6 reasons for leave, you must allow leave for 3 more reasons, namely:

When the employee is seeking or awaiting results of a COVID-19 test or diagnosis;
When the employee is obtaining a COVID-19 vaccine;
When the employee is recovering from an injury, disability, illness, or condition related to the COVID-19 vaccine.

EPSL also includes a fresh 10-day bank of leave effective April 1, 2021.

Under the EFMLA, which previously was limited to leave needed to care for children due to COVID-19 related school and place of care closures or unavailable care providers, will now include “all” of the EPSL reasons for leave, including the 3 additional reasons.

EFMLA also gets rid of the first 10 days of unpaid leave, starts paid leave immediately, and increases the maximum paid leave over 12 weeks from $10,000 to $12,000.

Additionally, both EPSL and EFMLA provide new non-discrimination rules, stating that tax credits are not available if employers discriminate in favor of highly compensated individuals, full-time employees, or employees based on tenure.

Questions arising include whether employers can pick and choose which parts of this voluntary FFCRA extension to apply.

Can we extend paid sick leave without the fresh 10-day bank?
Can we extend either EPSL or EFMLA without the new reasons?
Can we extend EPSL but not the EFMLA (or vice versa)?

Given the wording of ARPA, picking and choosing whether to apply the new reasons for leave or the fresh 10-day bank does not appear to be an option. Strict compliance is required.

However, whether an employer can extend that EPSL but not the EFMLA (or vice versa) is not as clear. While it appears to be allowable, we are anxiously awaiting updated government guidance and clarification.

In the meantime, if you intend on providing FFCRA paid leave starting April 1st, be prepared to apply it with an “all or nothing” approach.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

Fraser Trebilcock is committed to providing you valuable information. Please watch for upcoming alerts on these and other topics.

Does Low-Income Housing Affect Nearby Home Prices?

Recently, Redfin issued an analysis it performed looking at over 220,000 home sales and found NO consistent relationship between the addition of low-income housing and changes in home prices. In fact, in 4 metro areas homes sold for more after construction of low-income housing.

Redfin researched 26 metro areas in the US. However, the study also showed that there is continues to exist economic segregation with the challenge creating economic integrated neighborhoods. These types of neighborhoods are rare in the US according to Redfin.

Here is a link to the report.

If you have any questions, please contact Mary Levine.

Client Alert: Dependent Care FSA Relief, In a Big Way

The American Rescue Plan Act (“ARPA”) temporarily amends Code section 129(a) to increase the amount of dependent care expenses that may be excluded from gross income.

Dependent care FSAs have historically been capped at reimbursing $5,000 per calendar year. However, under the ARPA, and only for taxable years beginning after December 31, 2020 and before January 1, 2022, dependent care FSAs can reimburse over double! The max is now $10,500 (or $5,250 for married individuals filing single returns).

Employers, of course, must amend their plans. Although generally Code section 125 cafeteria plans cannot be amended retroactively, the ARPA states that retroactive amendments are allowed for this purpose as long as: (1) the amendment is adopted no later than the last day of the plan year in which it is effective, and (2) the plan is operating consistent with the term of the amendment as of its effective date.

This will be welcome news for all employers who were struggling with allowing carryovers or grace periods for dependent care FSAs that would exceed the $5,000 max.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

Fraser Trebilcock is committed to providing you valuable information. Please watch for upcoming alerts on these and other topics.

Client Alert: The ARPA Brings COBRA Subsidies Back!

The American Rescue Plan Act (“ARPA”) was enacted Thursday, March 11, and will have a major impact on employee health and welfare benefit plans.

In part, the ARPA brings back the requirement to provide COBRA subsidies, although this time premiums are 100% subsidized.

Background

Do you recall back in 2009 when a percentage of COBRA premiums were reimbursed by the government? We called these ARRA COBRA subsidies. The American Recovery and Reinvestment Act of 2009 (ARRA) reduced the COBRA premium in some cases. The premium reductions were available to certain individuals who experienced qualifying events that were involuntary terminations of employment during the period beginning with September 1, 2008 and ending with December 31, 2009. If one qualified for the premium reduction, s/he needed only pay 35 percent of the COBRA premium otherwise due. The premium reduction was available for up to nine months.

Well, COBRA subsidies are back! And employers must pay close attention.

ARPA of 2021: 100% Subsidy

Under the American Rescue Plan Act (“ARPA”), any assistance eligible individual shall be treated as having paid the full amount of the COBRA premium from April 1, 2021 through September 30, 2021.

Moreover, any assistance eligible individual (“AEI”) may, within 90 days after notice, elect to switch from one group health plan offered by the plan sponsor (i.e., employer in most cases) to another coverage offered by the plan sponsor, if:

the employer permits the switch;
the premium for such different coverage does not exceed the premium for coverage in which the individual was enrolled at the time of the qualifying event;
the different coverage is also offered to similarly situated active employees of the employer; and
the different coverage is not only for excepted benefits, a qualified small employer HRA, or an FSA.

However, the 100% subsidy is not available to AEIs for months beginning on or after the earlier of:

the date the individual is eligible for coverage under another group health plan (other than excepted benefits only, qualified small employer HRAs, or FSAs);
the date the individual is eligible for Medicare; or
the date COBRA expires, which is the earlier of: (a) the date the maximum COBRA period ends; or (b) the date the maximum COBRA period should have ended if it had been originally elected or not discontinued.

AEIs must notify the group health plan when they are no longer eligible for subsidies due to being eligible for other group health plans or Medicare.

Assistance Eligible Individuals (AEIs) & New Election Rights

AEIs include individuals who, from April 1 through September 30, 2021, are COBRA qualified beneficiaries who:

are eligible for COBRA due to involuntary termination (for reasons other than the employee’s gross misconduct) or reduction in hours; and
elect such coverage.

However, with regard to COBRA election periods, for individuals who do not have a COBRA election in effect as of April 1, 2021 (but could have had they elected COBRA or not dropped COBRA coverage early), the ARPA allows such individuals to elect COBRA any time beginning April 1, 2021 and ending 60 days after receiving notice that they are allowed to do so…

For these new elections, COBRA will begin on or after April 1, 2021 and cannot extend beyond the original date of COBRA had it originally been elected or not discontinued.

New Notice Requirements

Premium Assistance Notice

For AEIs who become entitled to elect COBRA at any point from April 1 through September 30, 2021, the COBRA election notices must include the following:

the availability of the premium assistance if eligible;
the option to enroll in different coverage (if the employer permits);
the forms necessary to establish eligibility for the premium assistance;
the name, address, the phone number to contact the plan administrator (or TPA, etc) regarding the premium assistance;
a description of the extended election period;
a description of the qualified beneficiary’s obligation to notify the plan of their eligibility for other group health plan coverage or Medicare and the penalty if they fail to do so (which, for intentional failures, is sizable under the ARPA); and
a description of the right to the subsidized premium as well as the conditions for receiving it.

This can be accomplished by amending the current notices or including a separate document with the notices to describe the above.

Model notices are to be provided by the Department of Labor within 30 days of the ARPA’s enactment.

Re-Opened Election Rights Notice

For AEIs who previously failed to elect COBRA or discontinued it, but may now elect under the extended election period, the above notice must be provided within 60 days of April 1, 2021.

Subsidy Ending Notice

Additionally, the plan administrator (i.e., the employer or TPA in most cases) must provide clear notice when the premium assistance expiration date is approaching, as well as notice that the individual may be eligible to continue COBRA without the premium subsidy or other group health plan coverage (if eligible).

Notice must be provided between 45 days before such expiration and ending 15 days before the expiration date. This notice requirement does not apply if the individual will be losing the subsidy due to being eligible for another group health plan or Medicare.

Here again, the Department or Labor will be providing model notices, but within 45 days of the ARPA’s enactment.

COBRA Penalties

Employer Tax Credit

Conclusion

Due to severe penalties for COBRA noncompliance, it is incredibly important for employers to act swiftly to ensure notices, procedures, plans and other employee communications are updated quickly. Coordination with third-party administrators, consultants, and attorneys will also be important to ensure legal and tax compliance. It is also essential to keep in mind the expiration date of these legal changes, so that regular COBRA notices and procedures go back into effect after September 30, 2021.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

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