On December 20th, the Further Consolidated Appropriations Act, 2020 was signed into law. This federal spending bill enacts several changes to tax provisions that affect certain employee benefits.
In December, our corporate office provided a Newsbrief outlining the changes related to health insurance: the repeal of the “Cadillac” tax, health insurance industry fee, and medical device excise tax, and the funding extension of the Patient-Centered Outcomes Research Institute (PCORI) for 10 more years.
As a reminder, fully-insured medical plans pay PCORI fees indirectly through the carrier as part of their premiums. Employers sponsoring self-funded medical plans (including HRAs) have been filing and paying PCORI fees directly to the IRS by July 31st of each year. We are waiting on guidance from the IRS on the reinstatement of PCORI fees.
The spending bill also contains several benefits-related provisions that affected employers should review with a qualified tax advisor, including:
The increase in Unrelated Business Taxable Income (UBTI) for certain fringe benefits, including qualified transportation expenses (parking and transit), has been retroactively repealed. The UBTI increase created a new tax obligation for many non-profit organizations when it was added to the tax code by the Tax Cuts and Jobs Act in 2017. With the retroactive repeal, non-profit organizations should consult with their tax advisor regarding eligibility for a refund of any overpaid tax on UBTI in 2018.
Extended for another year:
The employer tax credit for Paid Family and Medical Leave programs (created by the Tax Cuts and Jobs Act for 2018-2019) was extended through 2020. Under this provision, employers may be eligible for a tax credit if they provide at least 2 weeks of qualified paid leave to employees under a written plan specifically for family and medical absences. Employers should review the IRS FAQ to determine whether they qualify for this tax credit for 2019 and what they might to do qualify for 2020.
Please contact your OneDigital account team if you have any questions.