IRS Releases 2021 Affordability Percentage for Premium Tax Credits
This week, the IRS released Rev. Proc. 2020-36, which includes the updated percentage for 2021 to determine whether an individual applying for marketplace coverage was offered affordable employer-sponsored coverage. For 2021, coverage will not be considered affordable if the employee’s contribution exceeds 9.83% of an individual’s household income. The percentage has increased from the 9.5% baseline and from 9.78% for 2020. Large employers using Pay or Play affordability safe harbors or that generally want to ensure affordable coverage should take note of this adjustment. For the 2021 calendar-year plans using the Federal Poverty Level (FPL) affordability safe harbor, the required employee contribution cannot exceed 9.83% of the FPL for a particular area — $12,760 for mainland US — or $104.52 per month. The remainder of the data in Rev. Proc. 2020-36 addresses an individual’s required contribution for marketplace coverage depending upon household income. Alliant’s Comprehensive Table of Limits has been updated to reflect this new information. For more information on Affordability under the ACA see our Alliant Insight, An In Depth Look at Affordability.
Additional DOL FFCRA Questions and Answers (Q&As 94-97)
On July 20, 2020, the DOL added four new questions to its increasing number of Families First Coronavirus Response Act (FFCRA) leave FAQs. The FFCRA generally requires employers with fewer than 500 employees to provide paid leave beginning on April 1, 2020 and ending December 31, 2020 due to certain circumstances related to the COVID-19 crisis. Specifically, the FFCRA includes two separate paid leave provisions: (1) Emergency Paid Sick Leave (EPSL), and (2) Emergency Family and Medical Leave (EFMLA). For details on these leaves see our COVID-19 Compliance Guide. First, the new FAQs provide that if an employee used EPSL to care for a sick family member and was advised by a health care provider to self-quarantine because of symptoms of COVID-19, his or her employer can, under certain circumstances, require the employee to telework or take additional leave until he has tested negative for COVID-19. Next the FAQs confirm that if an employee used 80 hours of EPSL before furlough they do not have any additional EPSL entitlement on return from furlough. Employees are limited to a total of 80 hours of EPSL under the FFCRA. The FAQs next address the 12 week entitlement to FMLA and EFMLA leave. If an employee used four weeks of FMLA or EFMLA leave before being furloughed, when the employee returns from furlough he or she will be eligible for eight additional weeks of FMLA or EFMLA leave for a qualifying reason. Lastly, the FAQs confirm that an employer cannot extend a specific employee’s furlough because that employee would need to take FFCRA leave to care for a child if called back to work. The FAQs are available in full here.
FFCRA Leave Employer Tax Credits-Delay in Advanced Payments
The Families First Coronavirus Act (FFCRA) generally requires employers with fewer than 500 employees to provide paid leave beginning on April 1, 2020 and ending December 31, 2020 due to certain circumstances related to the COVID-19 crisis. The FFCRA also provides covered employers with tax credits to cover the cost of providing the leave. For details see our COVID-19 Compliance Guide. Generally, eligible employers can claim tax credits for qualified leave wages paid to employees on their federal employment tax returns (Form 941, Employer’s Quarterly Federal Tax Return), but under certain circumstances employers can request an advance payment of the credits by submitting Internal Revenue Service (IRS) Form 7200, Advance Payment of Employer Credits Due to COVID-19. The IRS began processing these requests in April 2020, and has started sending letters to employers who have experienced a delay in the processing of their Form 7200. A taxpayer will receive letter 6312 if the IRS either rejected Form 7200 or made a change to the requested amount of advance payment due to a computation error. This letter will explain the reason for the rejection or, if the amount is adjusted, the new payment amount will be listed on the letter. Employers will receive letter 6313 if the IRS needs written verification from a taxpayer that the address listed on their Form 7200 is the current mailing address for their business. The IRS will not process Form 7200 or change the last known address until the employer provides it. More information on employer tax credits is available here.