FAQ: What are some group health plan compliance issues that employers should consider at the beginning of 2021?

January 5, 2021

There are some compliance items that apply in January and February each year regardless of the group health plan year start date. First, by January 31, employers must report the value of group health plan coverage on employees’ Forms W-2. (There is an exception to this reporting for employers that filed fewer than 250 Forms W-2 in the previous calendar year.) While most employers rely on payroll providers (as they prepare W-2s on behalf of many employers), it’s important to work closely with the provider in ensuring proper reporting.

Second, employers will have to prepare for employer mandate reporting (IRS Forms 1094/95-C and/or 1094/95-B). Due to IRS extensions, there are three different dates to consider for reporting, all in March. By March 1, 2021, employers must file 2020 Forms 1094/95-C with the IRS (if filing by paper). By March 2, 2021, employers must distribute 2020 Form 1095-C (or a similar statement) to employees. By March 31, 2021, employers must file 2020 Forms 1094/95-C with the IRS (if filing electronically, which is required if filing 250 or more forms). In connection with those three dates, during January and early February employers should work closely with payroll providers and filing vendors in gathering information relating to the reporting, including offers of coverage, enrollment, waivers and required employee contribution amounts.

Third, employers will have to consider pandemic-related extensions to FFCRA leave tax credits and to COBRA elections and premium payments. On FFCRA tax credit extensions, end-of-2020 legislation allows (but does not require) employers to provide FFCRA-related leave and receive the associated tax credits through March 31, 2021. Employers will have to decide whether to extend FFCRA leave availability to employees, considering the continued availability of the tax credits. On COBRA election and premium payment extensions, as the end of the so-called “outbreak period” approaches (by statute, it will end on February 28, 2021), employers will need to work closely with COBRA vendors on any additional communications to affected employees (or former employees). The extension rules place the burden of employee notification on both the employer and the vendor (the employer, as plan sponsor, has the fiduciary obligation to ensure notification, though). Thus, employers should review whether the extensions were communicated properly to affected employees or former employees (at the time of the COBRA event), and whether additional communications are necessary.

Lastly, MEWA sponsors must file Form M-1 with the DOL by March 1. MEWA sponsors will need to work with their administrator and potentially with outside counsel in preparing and filing Form M-1.

For employers with calendar year plans (i.e., those with plan years beginning on January 1), there are additional items to consider in January. First, employers should review nondiscrimination tests (for self-insured plans, cafeteria plans, and both health and dependent care FSAs) to assess whether the plan will somehow favor the more highly compensated employees. While adjustments can be made at any point before the end of the plan year to bring the plan into compliance with the tests, knowing early whether adjustments are necessary will help with difficult conversations with those highly compensated employees (whose elections may need to be adjusted).

Second, and similarly, employers should double check their election and enrollment systems to ensure employees’ elections were properly administered. Catching errors earlier in the year helps avoid more difficult administrative problems (and employee conversations) later in the year.

Finally, employers should prepare their Medicare Part D disclosure to CMS form, which is due within 60 days of the plan year start date (March 1, 2021, for calendar year plans). The CMS disclosure is meant to notify CMS whether the employer’s prescription drug coverage is on par with Medicare Part D. Filing is straightforward and can be completed online.