More legislation in order to help America’s battle against the coronavirus has passed. The American Rescue Plan Act of 2021 (ARPA), signed on March 11, 2021 by President Biden includes health and welfare provisions that affect participants and plan sponsors. Below is a summary of those items.
Dependent Care Flexible Spending Account
For 2021 only, the dependent care flexible spending account annual limit is increased for married employees filing jointly from $5,000 to $10,500, and from $2,500 to $5,250 for married employees filing separately and single employees.
Plan amendments may be needed for plans that do not already allow for the maximum contribution to be made. If applicable, such amendment would need to be executed no later than December 31, 2021. This change, in tandem with the midyear election change relief under the CAA, (see our article) may allow the increased amounts to be elected by dependent care flexible spending accounts in 2021.
A 100% subsidy for COBRA premiums is provided for a maximum six-month period beginning April 1 and ending September 30 for COBRA qualified beneficiaries. This group includes any employees along with their spouses and dependent children who lose (or lost) group health plan coverage due to the employee’s involuntary termination of employment or reduction of work hours if they subsequently elect COBRA. There is no requirement that such termination or reduction of hours be related to the COVID-19 pandemic. This is an increase over the 85% subsidy currently in place.
Also offered is a special 60-day special election period to those who haven’t exhausted their original 18-month COBRA period and either did not elect COBRA when first eligible or elected COBRA but dropped it before April 1, 2021.
Please contact your Nyhart consultant on how these new rules may affect your plan.