Year-end Deadlines & Considerations, Part 1 (Cafeteria Plans)

December 13, 2021

Employers sponsoring health and welfare plans have needed to respond to a myriad of legislative and regulatory changes throughout 2020 and 2021 arising from the COVID-19 pandemic and related laws and regulations. With the end of the year fast approaching, it is necessary to be aware of several important deadlines and considerations, and for employers to work with their claims administrators to take necessary actions.

Cafeteria Plans and FSAs

If an employer has taken advantage of any of the temporary relief opportunities offered for cafeteria plans or flexible spending accounts (FSAs) due the COVID-19 pandemic, the employer will need to adopt amendments for plan year 2020 COVID-19 relief by December 31, 2021. Likewise, amendments for COVID-19 relief for plan year 2021 are due December 31, 2022.  An amendment is required if you answer “yes” to any of the following questions.

Questions to consider regarding plan amendments

  • Will you be indexing the health FSA carryover? The $500 in 2020 became $550 in 2021, and the amount can be 20% of the health FSA annual limit hereafter.
  • Did you allow 2021 midyear changes due to COVID-19 for health FSA, dependent care FSA, and/or medical coverage enrollment, or allow an employee to add or revoke an election?
  • Did you adopt the temporary 2021 increase in the contribution limit for dependent care FSAs from $5,000 to $10,500 for the 2021 tax year?
  • Did you allow for use of dependent care dollars contributed in 2020 to be used for dependents who turned 14 in 2021?
  • Did you allow the opportunity to carry forward the full balance of a health FSA or dependent care FSA, for amounts unused as of the last day of plan years ending in 2020 and 2021 (if no grace period applies)?
  • Did the plan provide an extension of a grace period for incurring claims after the end of the year from 2.5 months to 12 months for either or both a health FSA/dependent care FSA?
  • Did you elect to reimburse health FSA expenses incurred during the applicable plan year, but after an employee’s termination of coverage (available for employees who terminate coverage in 2020 or 2021)?
  • Have you incorporated changes due to the CARES Act for defined terms of “qualified medical expenses” to include certain over-the-counter medication and menstrual care products, and amended to incorporate COIVD-19 testing and related preventive services?

Health Plan Telehealth Relief

The CARES Act amended Section 223(c) of the Internal Revenue Code to temporarily allow high deductible health plans (HDHPs) to cover telehealth for patients prior to the patient hitting their deductible without jeopardizing safe harbor status, which generally limits coverage for individuals eligible for health savings accounts (HSAs). However, this relief is ending and will not be available to plan years that begin on January 1, 2022 or later.

Upon the expiration of this temporary CARES Act relief, plans will need to apply prior limitations to the use of telemedicine within an HSA-compatible HDHP to avoid violation of IRS “first dollar rules” requiring that the HSA participant first satisfy their deductible before receiving plan coverage for most non-preventive services. Unless and until these changes are enacted into law by legislators, employers should plan to start charging for telehealth services again before the plan deductible is met and applying that fee toward the deductible and out-of-pocket maximums with the 2022 plan year.

Transparency Regulations and Consolidated Appropriations Act

The Transparency in Coverage Final Rules, published November 2020 and enacted December 2020 as part of the Consolidated Appropriations Act (CAA), introduce significant compliance requirements that plans will be able to meet only with the cooperation of their plan vendors. Group health plans and issuers are required to:

  1. Disclose to participants, beneficiaries, or enrollees upon request, through an internet self-service tool, cost-sharing information for a covered item or service from a particular provider or providers, and make such information available in paper form upon request; and
  2. Disclose pricing information to the public regarding payment rates negotiated between plans or issuers and providers for all covered items and services, the unique amounts a plan or issuer allowed, as well as associated billed charges, for covered items or services furnished by out-of-network providers, and pricing information for prescription drugs. 

Some of these requirements are already in effect. Others (out-of-network provider payments and collecting revenue sources for health insurance brokers and certain consultants) will take effect soon. Governmental enforcement of certain requirements have been delayed. However, the delay for some of the information is only six months, and the statutory date for compliance (January 1, 2022, for calendar-year plans) remains unchanged.  

See the additional article in this publication for extension deadlines that apply to COBRA.

For more information on specific details related to these changes in welfare benefits and when the different relief periods end or require action, please refer to previous Chard Snyder Compliance communications or contact your Chard Snyder Client Relationship Manager for more assistance.