Updated January 14, 2021
Co-authored by Kelly Eckman
Happy Holidays from Washington, D.C.! As an early holiday gift to Americans, Congress came together on December 21, 2020 to pass the Consolidated Appropriations Act of 2021 (the “Act”), notably the longest bill signed into law in history. The Act includes COVID-19 relief and economic stimulus provisions totaling $900 billion. It’s part of a larger bill to fund the federal government through September 30, 2021, including much needed economic relief for individuals and small businesses, and funds dedicated to COVID-19 vaccine procurement and distribution.
In a surprise move, President Trump threatened to veto unless stimulus payments to individuals were increased from $600 to $2,000. However, in a change-of-mind on December 27, President Trump signed the original bill and avoided a government shutdown.
One thing is relatively certain at this stage – pandemic relief is coming. Below is a look at highlights of the Act and how they will likely affect your organization and employees.
Impact on Individuals
The Act provides for direct payments to individual taxpayers and their dependents. Payments are capped based on income, using 2019 earnings. Payments include:
- $600 for individuals with a 2019 adjusted gross income up to $75,000 or $1,200 for joint filers with a 2019 adjusted gross income up to $150,000
- Reduced checks for those earning between $75,000 and $87,000 if single or up to $174,00 if filing jointly.
- No stimulus check for individuals or couples earning more than the amounts listed above.
- An additional $600 per dependent child under 17 in the household
Federal unemployment benefits have been extended. Details include:
- An additional $300 per week benefit for up to 11 weeks. This additional amount will not be retroactive. It applies to unemployment insurance weeks beginning after December 26, 2020 and ending on or before March 14, 2021.
- An additional $100 per week for self-employed and gig workers who are ineligible for the $300 per week benefit above but who earned $5,000 or more in self-employment income in the year prior to the individual’s application for assistance.
Benefits for rental assistance include funds dedicated to emergency rental assistance for individuals and an extension of in-force eviction moratoriums until January 31, 2021.
Supplemental Nutrition Assistance Program (SNAP)
The Act provides dedicated funds to increase benefits for those currently receiving SNAP benefits – a 15% increase for six months for all members. Funds will also aid food banks and programs that provide food for seniors, all of which have seen an uptick in individuals using their services since the pandemic began.
Small Business Provisions
Paycheck Protection Program
Additional loans will be available under the following terms.
- Loans will not exceed $2 million, which is down from the CARES Act allowance of up to $10 million.
- Under these new provisions, loans of $150,000 or more are not eligible for forgiveness.
- Eligible businesses include those with fewer than 300 employees (down from 500 employees in the initial PPP funding) who can demonstrate a revenue reduction of at least 25%.
- There are dedicated funds for live venues and cultural institutions, both of which have been hit hard by pandemic closures.
Schools and Child Care Centers
This round of financial relief provides dedicated funds to help child care centers reopen safely and remain open. Additional funds are also provided for schools and colleges to mitigate virus transmission and allow schools to remain open.
Healthcare and Benefits Provisions
COVID-19 Vaccines and Testing
The Act dedicates funds to COVID-19 vaccines, as well as state-led testing and contract tracing initiatives. Specifically:
- $68 billion is allocated to purchase and distribute COVID-19 vaccines, including making the vaccine available at no cost to individuals. Health plans may be billed an administrative fee that is estimated right now to be approximately $49 for a two-dose vaccine. This cost cannot be passed through to plan participants.
- The Act also allocates additional funds to help states continue to conduct COVID-19 testing and pursue contact tracing measures.
Ending Surprise Medical Billing
In both a surprising and widely popular move, Congress included a prohibition on surprise medical billing effective January 1, 2022. Surprise billing generally happens when a patient receives care at an in-network facility but is treated by providers who are out-of-network. Patients later receive a bill that can sometimes range from thousands to tens of thousands of dollars.
Under this new law, providers will be required to provide an honest cost estimate to patients three days before scheduled procedures. They will also be prohibited from balance billing when someone is treated at an in-network hospital but are unknowingly treated by an out-of-network provider or lab. Balance billing will be prohibited when someone seeks emergency care or is transported by air ambulance. Finally, billing disputes would be subject to arbitration so that expensive litigation is not required for resolution.
Creating Additional Flexibility for Flexible Spending Accounts
Because of the delay in elective procedures and the closure of day care facilities, many flexible spending account holders find themselves with positive balances in 2020 that would ordinarily be subject to forfeiture on December 31, 2020 under existing IRS rules. The Act provides two new options to allow participants to avoid the “use it or lose it” rule and use unspent money during the upcoming plan year. Two different options to avoid forfeitures are available:
- The FSA plan can be amended to allow participants to carry over unused funds in both Health FSA and Dependent Care FSA plans into the 2021 plan year. The same rule applies for the 2022 plan year.
- If the plan provides a grace period, the grace period for plan years ending in 2020 or 2021 may be extended to 12 months after the end of the plan year. In other words, participants have until the end of the next following calendar year to exhaust their FSA balances.
The plan may permit an employee who terminates employment during the year to continue to receive reimbursements through the end of the plan year or grace period. It’s unclear whether this is an extension of the run-out period, or if the terminated employee can actually submit expenses incurred after termination. Finally, the Act extends prior guidance to allow prospective modification of a participant’s election.
It’s important to note that these options are permitted but not required. Employers choosing to include these relief provisions in the flexible spending plans they sponsor are required to amend the FSA plan on or before December 31, 2021.
Impact to Paid Leave under Families First Coronavirus Response Act
The Act contains a key extension of the FFCRA for employers. Specifically, the tax credits available to employers providing paid leave under FFCRA are now available until March 31, 2021. This is a three-month extension of the original FFCRA provisions, which were set to expire December 31, 2020. It’s important to note that this change does not give employees additional leave time if they have already used their FFCRA qualifying leave, but it does allow employees who have not used the leave and now have a need to do so to receive pay for qualified reasons through March 31, 2021.
Unlike at FFCRA’s inception, the three-month extension is voluntary for employers. Employers that choose to continue offering paid leave can receive the tax credits, but employers will not be required to continue to offer paid leave after December 31, 2020.
Student Loan Assistance
Although originally thought to be omitted from the final version of the Act, at the 11th hour Congress included an extension of tax-free student loan assistance. Specifically, the Act extended Cares Act provisions that allow employers to reimburse up to $5,250 annually in employees’ student loan payments. Payments made are nontaxable to employees. This provision has been extended until December 31, 2025.
What Was Left Out?
As is clear from the details shared above, the Act tackles a lot of key issues facing employers and individuals who find themselves in difficult times due to the pandemic. One notable exception is the call for additional stimulus checks for individuals. Although the legislation was enacted with the $600 stimulus provision, with Democrats now in control of both houses of Congress, it will likely be addressed again in short order.
First Person’s advisory and compliance teams will continue to monitor legislative developments. Please feel free to reach out to me via email or LinkedIn or a member of our advisory team with any questions.