Changes We Saw to Employee Benefits in Q1

employees at computer

It’s hard to believe 2021 is well underway already, but it’s true. With the first quarter wrapping up, we thought it would be a good idea to pause and take a look at what has happened this year so far.

The most pertinent information employers need to know is that there have been changes to employee benefits and surrounding laws shaped by annual updates and current events. Knowing these changes is important for employers so they can provide accurate information to their employees.

Here are the major changes we saw to employee benefits in Q1 of 2021:

Changes to health care or dependent care FSAs under the Consolidated Appropriations Act (CAA)

Former President Donald Trump signed the Consolidated Appropriations Act (CAA) into law on December 27, 2020. This Act contained several pieces of key legislation related to the COVID-19 pandemic and it contains guidance and changes for employee benefits, mainly health and dependent care flexible spending accounts. This is helpful as many individuals have large unspent balances from delaying medical and dental visits/procedures.

To summarize the provisions:

  • For plans ending in 2021, participants may carry unused FSA funds into 2022.
  • Individuals can make prospective election changes without regard to a change in status
  • Participants can receive reimbursements through the end of the year in which they ceased to participate in the program
  • Expanded options for terminated employees or employees who have become ineligible to spend their unused FSA funds
  • Expanded ability to make mid-year election changes for FSAs, LPFSA, or DCA plans ending in 2021

You can read more details about COVID-19 related changes to FSAs and other benefits here.

Employer payments of student loans

The CAA also extended a previous provision regarding student loan payments by employers. The CARES Act of 2020 allowed qualifying student loan payments made by employers to be not taxable to the employee. The CAA extended this rule for five years to cover any payment made before January 1, 2026.

Temporary changes to business meal deductions

In an effort to aid the suffering restaurant business, starting on January 1, business meals will be fully tax deductible. All employees that are resuming in-person meetings and incurring business-related meals are encouraged to take advantage as long as they can do so safely.

Extension of in-person consent requirement relief for retirement plans

The IRS recently extended its temporary relief from the physical presence requirement, which states that certain elections made by a participant in a retirement plan must be witnessed by a notary public or retirement plan representative. That temporary relief has been extended to account for continued social distancing requirements.

Extension of tax credits for paid and family sick leave

The Families First Coronavirus Response Act (FFCRA) required many employers to provide sick and family leave time above and beyond previous requirements. Tax credits were offered to cover 100% of sick or family leave wages up to a certain limit. The CAA extends that tax credit until March 31, 2021. Although the mandatory paid sick and family leave time under the FFCRA expired on December 31, 2020, employers can still claim the tax credit until the end of the first quarter.

Incentives for employee wellness programs

The Equal Employment Opportunity Commission recently released regulations that address incentives for employee wellness programs. The guidance may still be subject to change, so we won’t provide too much detail. However, in order to comply with the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act, employers may offer no more than a de minimis incentive, except in the case of wellness programs that are approved to offer the maximum incentive (up to 30% the cost of health insurance) to participate.

While this might not be an exhaustive list of the changes to employee benefits so far this year, it certainly brings to light some of the most prominent ones. Be sure to subscribe to our newsletter and stay up to date on our blog posts so you never miss an update!