On May 15, 2020, the U.S. House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act (“HEROES Act”) that was introduced by Democratic leadership as a “phase four” COVID-19 relief and stimulus package. Although the U.S. Senate seems inclined not to act on this legislation at this point and the White House opposes it, certain provisions within the Act will likely make it into a bipartisan bill later this year.
COBRA premium subsidies and revised notices
The bill provides a 100% subsidy for an election of continued health plan coverage under COBRA or provided to employees that have been laid off, furloughed, suffered reduced hours, or lost their jobs. The subsidy would be retroactive to March 1, 2020, and extend through January 31, 2021. Refundable tax credits equal to the premiums that covered individuals would have owed are available to insurers and employers that comply with specific reporting requirements.
To ensure qualified beneficiaries understand all coverage options, the legislation calls for improved COBRA election notices that would include the availability of financial assistance under the Affordable Care Act and public exchange plans. The bill directs the Department of Labor to update its COBRA notices and provide the opportunity for the public to comment to ensure the average participant understands the notices.
New health plan requirements
Under the HEROES Act, group health plans must meet several new requirements:
- During the emergency period, plans must cover costs related to the treatment of COVID-19 without any cost sharing. This requirement must be applied retroactively to the beginning of the COVID-19 emergency.
- Plans must notify members that advance prescription drug refills would be available during the emergency period.
In addition, the legislation extends and expands financial aid to healthcare providers set in the Coronavirus Aid, Relief and Economic Security Act (CARES Act). Providers that receive this financial aid may not balance-bill patients for COVID-19 testing and treatment costs that exceed any cost-sharing amount that applies for a participating provider.
Employer health plans, including self-insured plans, would be reimbursed for certain COVID-19 costs for 2020 and 2021 plan years. If the target amount, which is typically all employer and employee costs minus administrative costs, is more than 105%, the reimbursement to plans would be 75% of the added cost.
More flexibility for FSAs and cafeteria plans
The HEROES Act includes several provisions that provide more flexibility to health FSAs, dependent care FSAs, and cafeteria plans during the COVID-19 emergency period, including the following:
- Participants in health FSAs and cafeteria plans would be allowed to carry over up to $2,750 in unused benefits or contributions from the plan year ending in 2020 to the following plan year.
- Participants in dependent care FSAs and cafeteria plans would be allowed to carry over up to $5,000 ($2,500 if married and filing separately) in unused dependent care assistance contributions or benefits from the plan year ending in 2020 to the following plan year.
- The maximum allowable contribution of $5,000 for the 2020 tax year would be increased to $10,500 for cafeteria plans and dependent care FSAs.
- Participants in cafeteria plans would be allowed to carry over unused paid time off from the plan year ending in 2020 to the following plan year.
- Participants in cafeteria plans and health FSAs would be permitted to make a one-time increase or decrease to their contribution elections or paid time-off elections before December 31, 2020.
- The grace period during which unused funds from plan year 2020 could be used would be extended from 2.5 months to 12 months for cafeteria plans, health FSAs, and dependent care FSAs.
Extension of family and emergency sick leave programs
The emergency paid sick and family leave programs that were created by the Families First Coronavirus Response Act (FFCRA) would be extended through December 31, 2021. In addition, the HEROES Act would:
- Make every private sector employer subject to the FFCRA’s emergency paid sick and family leave programs, not just those with fewer than 500 employees. Larger employers would not be eligible for payroll tax credits to cover any leave costs.
- Include the necessity to self-quarantine or to care for a family member in quarantine or diagnosed with COVID-19 as a qualifying reason for leave under the Emergency Family and Medical Leave Expansion Act (EFMLA).
- Expand the definition of “family member” and require that any emergency family leave that was taken during the emergency period not be counted against the maximum 12 weeks of leave that is available to employees under the Family and Medical Leave Act (FMLA).
- Amend the Emergency Paid Sick Leave Act (EPSLA) to provide paid sick leave for any qualifying reason that is allowable under the EFMLEA.
- Increase the payroll tax credit available from $200 to $511 by repealing the lower daily wage-rate maximum for certain emergency leave under the EPSLA.
- Increase the total amount of payroll tax credits available for emergency family leave required by the EFMLA from $10,000 to $12,000.
- Permit employees to take emergency paid sick and family leave periodically or while working reduced hours.
- Make paid emergency sick and family leave tax credits available to federal, state and local government employers, regardless of size.
- Modify the FMLA’s employee eligibility requirements for nonemergency leave temporarily (through Dec. 31, 2022), reducing the required tenure to 90 days rather than 1,250 hours worked over 12 months.
Expansion of employee retention credit
The HEROES Act includes a provision that would expand the CARES Act’s employee retention credit as follows:
- Increase the employee retention credit from 50% to 80% of eligible compensation, up to $15,000 per employee in a quarter and $45,000 in total.
- Permit employers with 1,500 or fewer employees to receive the employee retention credit for any employee when that employer is operating at a reduced level or suffering a loss of revenue.
- Permit larger employers with more than $41.5 million in 2019 gross receipts to receive the employee retention credit while employees are not working.
- Expand availability of employee retention credit to local and state government employers.