ployees to provide: Up to 12 weeksof job-protected leave related tocaring for a child via an expansionof the Family and Medical LeaveAct (FMLA), and up to 80 hoursof emergency paid “sick” leave tofull-time employees (with specialrules for part-time employees).Employers that are not subject tothe FFCRA’s paid leave requirements – e.g., employers with 500or more employees – are potentially subject to different (andoften conflicting) state and local laws surrounding paid leave.Guidance is needed to determinewhether and to what extent affiliated employers are to be aggregated for purposes of the 500employee threshold.
Employers should review insured short- and long-term disability programs to determinewhether individuals who contract COVID- 19 are eligible forpaid benefits. Some disability insurance policies include aquarantine benefit rider, whichmay provide certain benefits ina quarantine situation, althoughgeneral work disruptions areunlikely to be covered. If an employee went out on short- andlong-term disability prior to therecent COVID- 19 quarantines,we believe those policies shouldcontinue to pay benefits in the ordinary course.
To assist employers in paying for the cost of the new federally mandated paid leave requirements, the FFCRA has provideda series of refundable tax credits.The refundable tax credits applyagainst the employer portion ofSocial Security taxes and are equalto 100% of the “qualifying” paidleave wages paid by the employer,up to a certain amount that variesbased on the type of leave. The FFCRA also provides for an increasein the tax credits associated with“qualified health plan expenses”related to paid leave. A Joint Committee summary of the FFCRAstated that the employee portionof the 6.2% Social Security tax isnot collected on qualifying paidleave wages, although this doesnot appear to be supported by thelanguage of the act itself. The IRSis expected to issue guidance detailing how these tax credits are tobe reported and obtained.
Health benefits generally donot continue during an extendedunpaid leave of absence (including temporarily layoffs, reducedhours or furloughs). Most grouphealth plans tie eligibility for coverage to the employee’s full-timeemployment status. Employersshould review insurance contractsand stop-loss policies to determine how to treat the employeeswho lose eligibility under a grouphealth plan due to an extendedunpaid leave of absence. If an employer keeps furloughed employees covered as active employees,the employer should amend theplan as necessary after obtainingagreement from the group healthplan insurer, or, in the case of aself-funded plan with stop-losscoverage, from the reinsurancecarrier.
Employers should also considerimplications under the Consolidated Omnibus Budget Reconciliation Act (COBRA), under whichfurloughed employees may electto continue group health coverageupon loss of such coverage as a result of a reduction in work hours.Some employers might want tosubsidize COBRA continuationcoverage but will need to thinkthrough administrative logisticsof collecting a furloughed employee’s share of the premium. Iffurloughed employees are receiving payments from their accruedtime-off banks, then it may bepossible to collect premiums fromthese payments.
If an employee remains covered
despite working no hours – such
as a variable hour worker in a sta-
bility period – employers should
coordinate with reporting vendors
to determine how such employees
will be treated for measurement
The Health Insurance Portabili-ty and Accountability Act (HIPAA)privacy rules require health plansand providers to maintain theconfidentiality of employees’medical records. An employerasking employees about theirhealth condition should not be aHIPAA violation. However, otherlaws, such as the Americans withDisabilities Act (ADA), containprohibitions on disclosing confidential medical information concerning employees. As a result,employers should take appropriate measures to maintain the confidentiality of medical information associated with infected orexposed individuals prior to providing notice to other employees.Similarly, if an employer screensemployees’ temperature on aworksite, the results are unlikelysubject to HIPAA, assuming thetesting is not associated with thehealth plan. However, employersshould consider implications under the ADA and other laws beforeimplementing worksite healthscreenings and other infectioncontrol practices.
The use of telemedicine pro-
grams during the COVID- 19 pan-
demic allows employees to stay
at home while seeking medical
care, thus discouraging further
spread of COVID- 19. However, an
employer should confirm with its
vendor that all screenings relat-
ing to COVID- 19 will be provided
without cost-sharing. In addition,
the employer should confirm that
its vendor complies with HIPAA’s
Security Rule, which requires that
only authorized users have access
to electronic protected health in-
formation (EPHI) and that EPHI
be protected by a secure commu-
nication system capable of moni-
toring communications contain-
ing EPHI. Employers must remain
mindful of the potential impact of
offering telemedicine programs
on an employee’s ability to make
contributions to a health savings
account (HSA). The IRS issued
Notice 2020-15 because it was
necessary to make an exception to
permit COVID- 19 testing without
making employees ineligible for
an HSA. By the same token, offer-
ing telemedicine services at no or
reduced cost could make employ-
ees ineligible for an HSA unless
similar IRS relief is provided.
Retirement benefits represent significant assets for mostemployees and retirees. Giventhe dramatic economic changescaused by COVID- 19 in recentweeks, participants that remainemployed may look to their retirement plan for resources ifthey experience a loss of income.Employers should review their retirement plans to understand theavailable in-service withdrawals,including hardship withdrawals.Under current rules, the coronavirus pandemic alone may not justify a hardship withdrawal underIRS safe harbors. With respect toemployees placed on leave, employers should review plan documents to determine whether aleave of absence period countsfor purposes of crediting serviceor vesting. Employers should alsoreview plan loan policies with respect to loan payments while anemployee is on unpaid leave.
Some employers may also belooking to suspend or reduce theirrates of match. This may requirea formal plan amendment, in addition to participant communication. Because any suspensionis likely temporary, it should notgive rise to partial plan termination issues and acceleratedvesting.
As part of the new stimulus bill,Congress is considering additional retirement plan withdrawalrules that may give affected employees access to their retirementbalances.
As with qualified retirementplans, employees participatingin a nonqualified deferred compensation arrangement maylook to the nonqualified planfor resources if they experiencea loss of income. Internal Revenue Code Section 409A imposesstringent rules regarding the timeand form of payment, althoughan “unforeseeable emergency”is a permissible payment event.Similarly, Section 409A generally precludes changes to deferral elections for nonqualifieddeferred compensation plans,although deferral elections canbe cancelled by an employer inan unforeseeable emergency.An “unforeseeable emergency”includes a severe financial hardship from an illness, such as onethat could arise in the COVID- 19pandemic. Employers shouldkeep in mind that allowing a payment on account of unforeseenemergency when an unforeseenemergency has not occurredrisks exposing the employeeto severe tax consequences fornoncompliance.
Depending upon the facts andcircumstances, some expensesincurred while an employee isquarantined may be deductibleexpenses excluded from an employee’s compensation as a working condition fringe benefit. Forexample, if an employee is quarantined while on an out-of-statebusiness trip for a temporary period, certain employee living expenses paid for by the employermay be deductible to the employee and, thus, excluded from theemployee’s compensation.
Force majeure is a legal doctrine that excuses parties fromcertain contractual obligationsresulting from unforeseeableevents beyond either party’scontrol. An insurance provideror plan administrator could invoke the force majeure doctrineto attempt to excuse itself fromcontract performance due to theCOVID- 19 pandemic. Employersshould review vendor contractsfor force majeure provisions. Employers should also consider notifying vendors that the COVID- 19pandemic is a foreseeable eventand vendors are expected to continue complying with contractualobligations. n
BenefitCONT. FROM PAGE 1
Y The pandemic has raised a number of issuesrelated to what to communicate with youremployees.
Y New laws such as the FFCRA appear to clashwith existing rules from the IRS and the ADA.
Y Experts say your HR department should be innear constant contact with vendors to ensureeveryone is following the same guidelines.