The Washington Report
May 12, 2021
Note to subscribers: Due to the current environment, information is changing at a rapid rate. While we do our best to provide timely updates, it is possible that the information shared in the newsletter may change or be revised after our publication deadline. Stay healthy and safe! ~The Washington Report team
IRS Announces 2022 HSA Limits; Excepted Benefit HRA Maximum Amount
On May 10, 2021, the Internal Revenue Service (IRS) announced in Revenue Procedure 2021-25 the 2022 inflation-adjusted amounts for Health Savings Accounts (HSAs). For calendar year 2022, the annual limitation on deductions for an individual with self-only coverage under a high-deductible health plan is $3,650. The annual limitation on deductions for an individual with family coverage under a high-deductible health plan is $7,300.
For calendar year 2022, a “high-deductible health plan” is a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage. The annual out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) cannot exceed $7,050 for self-only coverage or $14,100 for family coverage.
The IRS also announced the maximum amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs) provided under Section 54.9831-1(c)(3)(viii) of the Pension Excise Tax Regulations. For plan years beginning in 2022, the maximum amount that may be made newly available for the plan year for an excepted benefit HRA is $1,800.
For additional information, see the Aon bulletin titled IRS Issues 2022 HSA Limits in the Publications section of the newsletter.
Revenue Procedure 2021-25 is available here.
OCR Announces That Prohibition on Sex Discrimination Includes Discrimination on the Basis of Sexual Orientation and Gender Identity; Will Enforce Prohibitions on Sex Discrimination in Line With Supreme Court Decision
On May 10, 2021, the Department of Health and Human Services (HHS) announced in a Notification of Interpretation and Enforcement that the Office for Civil Rights (OCR) will interpret and enforce Section 1557 of the Affordable Care Act (ACA) and Title IX’s prohibitions on discrimination based on sex to include: 1) discrimination on the basis of sexual orientation; and 2) discrimination on the basis of gender identity. Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in covered health programs or activities. The latest update was made in light of the U.S. Supreme Court’s decision in Bostock v. Clayton County and subsequent court decisions. The decision reverses a previous ban that was put into effect under the Trump administration.
“The Supreme Court has made clear that people have a right not to be discriminated against on the basis of sex and receive equal treatment under the law, no matter their gender identity or sexual orientation. That’s why today HHS announced it will act on related reports of discrimination,” said HHS Secretary Xavier Becerra. “Fear of discrimination can lead individuals to forgo care, which can have serious negative health consequences. It is the position of the Department of Health and Human Services that everyone—including LGBTQ people—should be able to access health care, free from discrimination or interference, period.” The OCR at HHS is responsible for enforcing Section 1557 of the ACA and regulations issued under Section 1557, protecting the civil rights of individuals who access or seek to access covered health programs or activities. Covered entities are prohibited from discriminating against consumers on the basis of sexual orientation or gender identity.
The HHS news release is available here.
The HHS Notification is available here.
IRS Publishes Notice on Taxability of Dependent Care Assistance Programs for 2021, 2022
On May 10, 2021, the Internal Revenue Service (IRS) issued guidance (Notice 2021-26) on the taxability of dependent care assistance programs for 2021 and 2022, clarifying that amounts attributable to carryovers or an extended period for incurring claims generally are not taxable. The guidance also illustrates the interaction of this standard with the one-year increase in the exclusion for employer-provided dependent care benefits from $5,000 to $10,500 for the 2021 taxable year under the American Rescue Plan Act.
Due to COVID-19, many employees were unable to use the money they set aside in their dependent care assistance programs in 2020 and 2021. Generally, under these plans, an employer allows its employees to set aside a certain amount of pre-tax wages to pay for dependent care expenses. The employee's expenses are then reimbursed from the dependent care assistance program. Carryovers of unused dependent care assistance program amounts generally are not permitted (although a 2½ month grace period is allowed). However, recent COVID-19 legislation (i.e., the Taxpayer Certainty and Disaster Tax Relief Act of 2020) allowed employers to amend their plans to permit the carryover of unused dependent care assistance program amounts to plan years ending in 2021 and 2022, or to extend the permissible period for incurring claims to plan years over the same period.
Notice 2021-26 clarifies for taxpayers that if these dependent care benefits would have been excluded from income if used during taxable year 2020 (or 2021, if applicable), these benefits will remain excludible from gross income and are not considered wages of the employee for 2021 and 2022.
Additionally, Notice 2021-15 (issued in February 2021) states that if an employer adopted a carryover or extended period for incurring claims, the annual limits for dependent care assistance program amounts apply to amounts contributed, not to amounts reimbursed or available for reimbursement in a particular plan or calendar year. Therefore, participants in dependent care assistance programs may continue to contribute the maximum amount to their plans for 2021 and 2022.
The IRS news release is available here.
IRS Notice 2021-26 (May 2021) is available here.
IRS Notice 2021-15 (February 2021) is available here.
DOL Withdraws Independent Contractor Rule
On May 5, 2021, the Department of Labor (DOL) announced in a final rule the withdrawal of the “independent contractor rule,” to maintain workers’ rights to the minimum wage and overtime compensation protections of the Fair Labor Standards Act (FLSA). According to the DOL, the rule is being withdrawn for several reasons, including:
- The independent contractor rule was in tension with the FLSA’s text and purpose, as well as relevant judicial precedent.
- The rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship.
- The rule would have narrowed the facts and considerations comprising the analysis of whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.
The final rule became effective on May 6, 2021.
The DOL news release is available here.
The final rule is available here.
IRS Issues 2022 HSA Limits
On May 10, 2021, the Internal Revenue Service (IRS) issued inflation-adjusted limits for contributions to a health savings account (HSA) for calendar year 2022 (Revenue Procedure 2021-25). In addition, the IRS provided revised minimum deductible amounts and maximum out-of-pocket limits.
The Aon bulletin, which contains a chart providing the limits for calendar years 2020 through 2022, is available here.
Aon White Paper: Lump Sum Windows - Emerging Trends and New Opportunities Amidst a Pandemic
This new Aon white paper reviews emerging trends, highlighting active windows as a new strategy for employers to consider. We also review the evolution of lump sum windows and 2020 experience. There is a deep dive on election rate and rollover experience, as we analyze how the COVID-19 pandemic impacted results.
The “Lump Sum Windows - Emerging Trends and New Opportunities Amidst a Pandemic,” white paper is available here.
Aon White Paper: 2021 U.S. Pension Risk Transfer Annuity Settlement Market Update
This Aon white paper summarizes 2020 transactions, trends in the market, an overview of the insurer landscape, and three interesting case studies demonstrating de-risking strategies in action. It also provides a look towards 2021.
The Aon “2021 U.S. Pension Risk Transfer Annuity Settlement Market Update,” white paper is available here.
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