The Washington Report
July 29, 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
President Trump Signs Executive Orders on Drug Pricing
On July 24, 2020, President Trump signed four Executive Orders (EOs) related to drug pricing. The EOs address access to medication, drug importation from Canada, and directing drug rebates to patients instead of “middlemen” (i.e., health plan sponsors and pharmacy benefit managers). The fourth EO, relating to limiting prices on Medicare Part B drugs through a “most-favored nation” policy, was unavailable from the White House website at time of this publication. However, during the signing the President indicated that this EO would not be effective until August 24, 2020. The President stated he hoped that “pharmaceutical companies will come up with something that will substantially reduce drug prices,” rendering the policy unnecessary. At this time, additional details are unavailable about this particular EO and readers should refer to the White House website for any updates.
The Executive Orders are available here.
House Passes Spending Package
On July 24, 2020, the House approved a $259.5 billion spending package (H.R. 7608). The measure was passed by a 224–189 vote and is the first of two funding packages for fiscal 2021 that House Democrats would like to approve by the end of July. H.R. 7608 provides appropriations for the Departments of State, Interior, Agriculture, and Veterans Affairs and other departments and agencies.
H.R. 7608 is available here.
IRS Releases Revenue Procedure on Examination of Returns and Claims for Refund, Credit, or Abatement; Determination of Correct Tax Liability; Provides Updates for ACA Applicable Percentage Table and Employer Required Contribution Percentage
On July 21, 2020, the Internal Revenue Service (IRS) released Revenue Procedure 2020-36, which provides indexing adjustments required by statute for certain provisions under Section 36B of the Internal Revenue Code. Specifically, Revenue Procedure 2020-36 updates the applicable percentage table used to calculate an individual’s premium tax credit for taxable years beginning in calendar year 2021 and updates the required contribution percentage for plan years beginning after calendar year 2020, as part of the Affordable Care Act (ACA). This Revenue Procedure is effective for taxable years and plan years beginning after December 31, 2020.
IRS Revenue Procedure 2020-36 is available here.
PBGC Publishes Q&As on CARES Act and Single-Employer Defined Benefit Plans
On July 20, 2020, the Pension Benefit Guaranty Corporation (PBGC) issued new guidance on the impact of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-19 pandemic on single-employer defined benefit plans. The guidance was issued in the form of a Question and Answer (Q&A) page on the PBGC website. The guidance indicates that a PBGC premium filing made for a premium payment year and reflecting contributions for the prior plan year made by the filing date, cannot be amended at a later date to reflect additional contributions made after the initial filing date and on or before the amended filing date.
Other issues addressed by the PBGC guidance include the following:
- A contribution that would otherwise be due during calendar year 2020 and is deferred to January 1, 2021, (or an earlier date), as permitted by the CARES Act is not considered a “late” contribution for purposes of the missed contribution reportable event under ERISA Section 4043.
- The PBGC is continuing various aspects of its single-employer program in the current environment. For example, the PBGC continues to process distress termination applications, review specific cases to determine whether a PBGC-initiated termination is appropriate, work with plan sponsors to collect termination liabilities, and monitor transactions and events under its Early Warning Program.
The Q&As are available here.
The PBGC’s COVID-19 Resources page is available here.
The IRS Releases Temporary and Proposed Regulations on Capturing Excess Employment Tax Credits
On July 24, 2020, the Internal Revenue Service (IRS) released a temporary regulation and a proposed regulation to reconcile advance payments of refundable employment tax credits and recapture the benefit of these credits when necessary. The regulations authorize the assessment of erroneous refunds of the credits paid under both the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
The FFCRA generally requires employers with fewer than 500 employees to provide paid sick leave for up to 80 hours and paid family leave for up to 10 weeks if the employee is unable to work or telework due to COVID-19 related reasons. Eligible employers are entitled to fully refundable tax credits to cover the cost of the leave required to be paid. The CARES Act provides an additional credit for employers experiencing economic hardship due to COVID-19. Eligible employers who pay qualified wages to their employees are entitled to an employee retention credit.
The IRS has revised or is in the process of revising the Form 941, Form 943, Form 944, and Form CT-1, so that employers may use these returns to claim the paid sick and family leave and employee retention credits. Employers may also receive advance payment of the credits up to the total allowable amounts. The IRS has created Form 7200, Advance Payment of Employer Credits Due To COVID-19, which employers may use to request an advance of the credits. Employers are required to reconcile any advance payments claimed on Form 7200 with total credits claimed and total taxes due on their employment tax returns. Any refund of these credits paid to a taxpayer that exceeds the amount the taxpayer is allowed is an erroneous refund for which the IRS must seek repayment.
The temporary regulation is available here.
The proposed regulation is available here.
IRS Form 7200 is available here.
Now Available: Retirement Legal Consulting & Compliance Quarterly Update
The Retirement Legal Consulting & Compliance practice is pleased to present its Quarterly Update of recent legal developments for the third quarter of 2020. In this issue you will find the following articles:
- Assessing COVID-19’s Toll on Retirement Readines
- Say Hello to Your Retirement Plan’s Witness
- Guidance Issued on CARES Act Distributions
- Supreme Court Provides Relief to DB Plan Sponsors and Fiduciaries
- Actuarial Equivalence Litigation—First Settlement
- Fiduciary Risk Continues to Grow Due to Retirement Plan Data Security Lapses
- Easy Electronic Delivery of ERISA Disclosures Is Here!
- SPDs Are No Small Potatoes: Importance of Timely Updates
- 401(h) Accounts—Possible Alternatives for Today
- Quarterly Roundup of Other New Developments
The third quarter 2020 issue of the Retirement Legal Consulting & Compliance Quarterly Update is available here.
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