The Washington Report
June 10, 2020
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
Paycheck Protection Program Flexibility Act Signed Into Law
On June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act (H.R. 7010) into law. The Senate passed it by unanimous consent on June 3. The law adds more flexibility to employer loans under the Paycheck Protection Program (PPP) in a number of ways, including:
- The law increases the forgiveness period for the loans from eight weeks to 24 weeks;
- The amount required to be spent on payroll is decreased from 75% to 60%;
- The time period within which employers must rehire certain workers is extended to December 31 (subject to exceptions); and
- Employers can defer payroll taxes even if their PPP loans are forgiven.
H.R. 7010 (116) is available here.
IRS Publishes PCORI Fee
On June 8, 2020, the Internal Revenue Service (IRS) published Notice 2020-44 announcing the applicable Patient-Centered Outcomes Research Institute (PCORI) fee for plan years that end on or after October 1, 2019, and before October 1, 2020 (e.g., the applicable PCORI fee for 2019 calendar year plans). For additional information, please see the Aon bulletin titled IRS Releases PCORI Fee for Plans and Provides 2019 Relief in the Publications section of the newsletter.
IRS Notice 2020-44 is available here.
The IRS PCORI web page is available here.
IRS Releases Proposed Regulations Addressing DPC Arrangements and HCSM Memberships
On June 8, 2020, the IRS released proposed regulations addressing the treatment of certain medical care arrangements under Section 213 of the Internal Revenue Code (Code). Section 213 of the Code allows individuals to take an itemized deduction for expenses for medical care, including insurance for medical care, to the extent the expenses exceed 7.5% of adjusted gross income.
The proposed regulations address direct primary care (DPC) arrangements and health care sharing ministry (HCSM) memberships, and provide the following guidance:
- Payments for DPC arrangements are expenses for medical care under Section 213 of the Code. Because these payments are for medical care, a health reimbursement arrangement (HRA) provided by an employer generally may reimburse an employee for DPC arrangement payments.
- Payments for membership in a HCSM are expenses for medical care under Section 213 of the Code. Because these payments are for medical care, an HRA provided by an employer generally may reimburse an employee for HCSM membership payments.
Comments on the proposed regulations are due by August 10, 2020.
The news release is available here.
The proposed regulations are available here.
CMS Issues Proposed Rule on Risk Adjustment Data Validation Program
On May 29, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to amend the methodology and other requirements for the Department of Health and Human Services’ risk adjustment data validation (HHS-RADV) program. HHS-RADV was created to strengthen the integrity of the HHS-operated risk adjustment program by validating the accuracy of data submitted by issuers that is used to calculate the amount of funds transferred among insurers based on the risks of the individuals they enroll. According to the CMS, the proposed rule would “provide states and issuers with a more stable and predictable regulatory framework, promote program integrity, and foster increased competition.” The risk adjustment program seeks to reduce the incentives for issuers to avoid high-cost, high-risk individuals. It provides payments to health insurance issuers that have higher-than-average risk enrollees, such as those with chronic conditions, which are funded through the collection of charges from issuers that have lower-than-average risk enrollees. Comments on the proposed rule are due by July 2, 2020.
A Fact Sheet is available here.
The proposed rule is available here.
IRS Provides Temporary Relief to Allow Remote Signatures for Written Consents to Retirement Plan Elections
On June 3, 2020, in response to the COVID-19 public health emergency, the Internal Revenue Service (IRS) issued Notice 2020-42, which provides temporary relief from the requirement to have a participant election that requires the signature of an individual to be witnessed in the “physical presence” of a plan representative or notary (such as the consent of a spouse to a participant’s election). The guidance accommodates local shutdowns and social distancing practices and is intended to facilitate the payment of distributions and loans from qualified plans during the coronavirus pandemic.
For the period January 1, 2020, through December 31, 2020, Notice 2020-42 allows a notary to witness consent to an election via live audio-video technology that meets the notary requirements following state laws that apply to notaries. Currently many, but not all, states allow for electronic or remote notarization. During the same period, the notice also allows a plan representative to witness a spouse’s consent using live audio-video technology as long as certain requirements specified in the notice are met.
The IRS news release is available here.
IRS Notice 2020-42 is available here.
DOL Publishes Final Rule on Fluctuating Workweek Method of Computing Overtime
On June 8, 2020, the Department of Labor (DOL) published a final rule revising its regulation for computing overtime compensation of salaried nonexempt employees who work hours that vary each week (fluctuating workweek) under the Fair Labor Standards Act (FLSA). The final rule clarifies that payments in addition to the fixed salary are compatible with the use of the fluctuating workweek method of compensation, and that such payments must be included in the calculation of the regular rate as appropriate under the FLSA. The DOL also adds examples and makes minor revisions to make the rule easier to understand. The final rule becomes effective on August 7, 2020.
A news release is available here.
The final rule is available here.
IRS Issues Regulations on Executive Compensation at Tax-Exempt Organizations
On June 5, 2020, the Internal Revenue Service (IRS) issued proposed regulations under Section 4960 of the Internal Revenue Code (Code), which imposes an excise tax on remuneration in excess of $1,000,000 and any excess parachute payment paid by an applicable tax-exempt organization to any covered employee.
The proposed regulations, which are scheduled to be published in the Federal Register on June 11, 2020, are available here.
EEOC Announces New Web Page on Commissioner Charges and Directed Investigations; Explains Important Processes to Fight Discrimination
On June 5, 2020, the Equal Employment Opportunity Commission (EEOC) posted a new document on its website explaining the role and procedures of two key EEOC processes to combat employment discrimination—Commissioner charges and directed investigations. Federal law authorizes any Commissioner to file a discrimination charge alleging that an employer violated Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, or the Genetic Information Nondiscrimination Act, after which the charge is investigated by the appropriate EEOC field office. In addition, the Age Discrimination in Employment Act and the Equal Pay Act authorize EEOC field offices to initiate investigations of possible violations of those two statutes even without a charge from an aggrieved individual. These processes are in addition to the more common procedure of EEOC field offices receiving discrimination charges from individual employees or job applicants and then evaluating and investigating those charges.
The purpose of the new web page is “to explain exactly how Commissioner charges and directed investigations work—for the benefit of employers and potential job discrimination victims alike.”
The news release is available here.
The new EEOC web page is available here.
IRS Releases PCORI Fee for Plans and Provides 2019 Relief
On June 8, 2020, the Internal Revenue Service (IRS) released Notice 2020-44 announcing the applicable Patient-Centered Outcomes Research Institute (PCORI) fee for plan years that end on or after October 1, 2019, and before October 1, 2020 (e.g., the applicable PCORI fee for 2019 calendar year plans). Notice 2020-44 also provides transition relief for calculating the average number of lives for determining the fee for those same plan years.
The Aon bulletin is available here.
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