Nevertheless, the Affordable Care Act Persisted

On June 17, 2021, the U.S. Supreme Court issued its ruling in California v. Texas on a challenge to the constitutionality of the Affordable Care Act (“ACA”). This was the third major challenge to the ACA since it was enacted in 2010.

In this case several states and two individual plaintiffs alleged that the individual mandate penalty, which was reduced to zero dollars under the Tax Cuts and Jobs Act of 2017, was unconstitutional, and, as a result, the entire ACA should fall. By a vote of 7-2, the justices held that the plaintiffs did not have legal standing to challenge the individual mandate because they did not show a past or future injury that would be traceable to any allegedly unlawful Government conduct in enforcing the individual mandate.

Because the case was dismissed for a lack of standing, the U.S. Supreme Court did not review or decide whether the penalty-less individual mandate or the rest of the ACA is constitutional.  Accordingly, the ACA remains in full effect, and this decision has no practical impact on individuals, plan sponsors, insurers, the health care system and beyond.

New IRS Guidance on COVID-19 Related PPE Expenses

On March 26, 2021 the IRS released Announcement 2021-7, which provides that amounts paid for personal protective equipment for the primary purpose of preventing the spread of COVID-19 are treated as amounts paid for medical care under Section 213(d) of the Internal Revenue Code.  This means that amounts paid for things such as masks, hand sanitizer and sanitizing wipes may be:

  1. eligible to be paid or reimbursed under a health FSA, HSA, or HRA, if the plan terms allow, or
  2. claimed as an itemized deduction on a taxpayer’s income tax return provided that (a) the amounts are not reimbursed by insurance or otherwise, and (b) the taxpayer’s total medical expenses exceed 7.5% of the taxpayer’s adjusted gross income.

This guidance also provides that a health FSA, HSA or HRA that does not currently allow for reimbursement of COVID-19 related PPE expenses may be amended to allow for reimbursement of such expenses incurred on or after January 1, 2020.  Accordingly, employers who sponsor a health FSA, HSA or HRA may want to review their cafeteria plan or other relevant plan documents to determine if an amendment is needed.  Plans may be amended retroactively as long as the amendment is adopted no later than the last day of the first calendar year beginning after the plan year in which the amendment is effective, no retroactive amendment is adopted after December 31, 2022, and the plan is operated consistent with the terms of the amendment.

New MHPAEA Requirements Effective February 10, 2021

The Consolidated Appropriations Act, 2021 (“CAA”), which is the spending bill passed by Congress on December 27, 2020, imposed new requirements on group health plans to ensure compliance with the Mental Health Parity and Addiction Equity Act of 2008’s (“MHPAEA”).  Generally, the purpose of the MHPAEA is to prevent group health plans and health insurance issuers that provide mental health or substance use disorder (“MH/SUD”) benefits from applying financial requirements or treatment limitations to MH/SUD benefits that are more restrictive than those that apply to medical/surgical benefits.

The new requirements added by the CAA focuses on nonquantitative treatment limitations (“NQTL”). NQTLs are items like prior authorization, step therapy, medical necessity reviews, or other limitations or conditions that are not tied to a number.  The current rules allow participants to request information about the processes, strategies, evidentiary standards, and other factors used to apply a NQTL to MH/SUD benefits as compared to medical/surgical benefits.  The CAA added additional requirements effective February 10, 2021, including the following:

  1. health plans and health insurance issuers that impose NQTLs on MH/SUD benefits are required to perform and document a comparative analysis demonstrating that the processes, strategies, evidentiary standards and other factors used to apply the NQTLs to MH/SUD benefits, as written and in operation, are comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to medical/surgical benefits; and
  2. upon request, health plans and health insurance issuers must make this comparative analysis available to state insurance regulators and/or the Secretary of Labor, the Secretary of Health and Human Services and/or the Secretary of the Treasury (the “Secretaries”) along with other information described in the CAA.

The CAA also requires the Secretaries to request at least 20 such analyses per year from health plans and health insurances issuers.  If the comparative analysis is found to be non-compliant, the health plan or health insurance issuers must specify the actions it will take to come into compliance and must provide a new, compliant analysis within 45 days.  If the new analysis is still determined to be non-compliant, the health insurance plan or health insurance issuer must inform all enrolled individuals of the non-compliance.

The Secretaries have 18 months to issue joint guidance and regulations on these new MHPAEA requirements; however, health plans and health insurance issuers should be prepared at any point after February 10, 2021 to submit this information.  Accordingly, plan sponsors should work closely with their insurance carriers or third-party administrators to document compliance with MHPAEA’s NQTL requirements and ensure they are prepared to respond to a request for the NQTL comparative analyses.


On December 9, 2020, the IRS issued Notice 2020-86 addressing certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) affecting certain safe harbor plans. This notice provides guidance in the form of questions and answers with respect to Sections 102 and 103 of the SECURE Act, and it is intended to assist employers while the Treasury Department and IRS develop regulations to fully implement these provisions. Below is a high-level overview of Sections 102 and 103 of the SECURE Act and some of highlights of the guidance included in Notice 2020-86.

Section 102 of the SECURE Act generally increases the maximum automatic elective deferral percentage under an automatic enrollment safe harbor plan from 10% to 15%. With respect to Section 102, this Notice includes the following guidance:

  • A qualified automatic contribution arrangement (QACA) safe harbor 401(k) plan is not required to increase the maximum elective deferral percentage provided under the plan in order to maintain its qualified plan status.
  • A plan that incorporates by reference the maximum elective deferral percentage under the Internal Revenue Code may needed to be amended to provide an explicit maximum percentage, if the employer does not intend to use the new 15% maximum. The amendment deadline is generally December 31, 2022 for non-governmental plans, and December 31, 2024 for governmental or collectively bargained plans.

Section 103 of SECURE Act eliminates certain safe harbor notice requirements for plans that provide safe harbor nonelective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans. With respect to Section 103, this Notice includes the following guidance:

  • The SECURE Act did not alter the notice requirements for plans that use safe harbor matching contributions.
  • To retain the ability to reduce or suspend safe harbor nonelective contributions during the plan year, a plan must still satisfy the requirements outlined in the Treasury regulations, include providing some type of notice to employees.
  • An amendment to adopt a nonelective contribution safe harbor design can be adopted any time before the last day for distributing excess contributions for the plan year, if the nonelective contributions are at least 4% of each employee’s compensation.

The full text of IRS Notice 2020-86 is available at

IRS Provides Tax Filing Relief for Victims of Hurricane Laura

The IRS recently announced that victims of Hurricane Laura now have until December 31, 2020, to file various individual and business tax returns. This relief is available to any area designated by the Federal Emergency Management Agency (FEMA) as an area qualifying for individual assistance. A current list of designated areas is available on the disaster relief page on and

Pursuant to this relief, individuals and businesses who have a valid extension to file their 2019 income tax returns on October 15, 2020, will now have until December 31, 2020, to file. However, this relief does not extend the payment deadline for the federal tax payments related to these 2019 returns, which were due on July 15, 2020.

The December 31, 2020 deadline also applies to quarterly estimated income tax payments due on September 15, 2020, and the quarterly payroll and excise tax returns due on November 2, 2020.  Additionally, any penalties on payroll and excise tax deposits due after August 22, 2020, and before September 8, 2020, will be abated as long as the deposits are made by September 8, 2020.

The IRS will automatically provide this filing and penalty relief to taxpayers with an IRS address of record located in the disaster area. If an affected taxpayer receives a late filing or late payment penalty notice from the IRS, the taxpayer should call the number on the notice to discuss having the penalty abated.

Visit the IRS disaster relief page for additional information: