COBRA
During the State of the Emergency, are employees or employers penalized for issuing COBRA notices at a later time if they are unsure of the nature of the layoff (permanent or temporary)? As it stands today, the current law as written applies. Therefore, COBRA rules apply as they would in any layoff. Should legislation be passed that impacts current law, we will share this news as it occurs. In the event of a lay-off, how does COBRA/ Continuation apply? An employee working less than the hours required for eligibility on the group plan must be offered continuation. It is important to first distinguish whether the group is subject to Federal COBRA, or State continuation rules which differ per state. The employer may decide to pay for Federal or State continuation. However, they may not discriminate and must pay for all continuees, not just select individuals. The employer should clearly advise that an individual who elects COBRA will have to exhaust it before becoming eligible for Individual coverage and will in essence be “stuck” until COBRA runs out or the next Open Enrollment. That means they also cannot apply for a subsidy until the next Federal Open Enrollment. An individual obtaining a subsidy will not harm the employer if the individual is not working. Keep in mind that a small group (1-50 employees) may be subject to Federal FMLA or the Employer Shared Responsibility if they have exactly 50 employees or in NY since small group definition is 1-100 fulltime equivalents. State leave law plan will also need to be considered. |
ERISA: Plan Documents
Are you advising groups to rewrite their plan documents/policies to account for this temporary change to eligibility requirements? Should legislation pass that impacts eligibility requirements, we will address the need to update documents. Operating under current ERISA rules, any changes to documents currently are communicated through the SMM (Summary of Material Modifications). We would follow the current rule and use the SMM unless new legislation dictates otherwise. |
SPENDING ACCOUNTS
We currently offer our employees Dependent Care Accounts. What will happen to dependent care accounts during prolonged periods of leave? The IRS rules that govern dependent care accounts require an employee’s pre-tax dependent care contribution election to be irrevocable except in the case of a “change event.” Conversely, this change event would also allow an employee to increase his or her dependent care contributions when the day care reopens. |
ACA ESR: Variable Employees
If one of our clients (ALE) has variable hour employees, how would the temporary layoff effect their look back period? Currently, ACA Employer Shared Responsibility law applies to ALE’s. This means that service hours are what is counted during the measurement period to determine future eligibility. If variable employees are not scheduled then there are no hours to count. However, under the Employer Shared Responsibility mandate, there are Break in Service rules: Breaking Service The two methods are:
A “Continuing” Employee If later, as soon as administratively practicable (often the first of the month following the date of rehire, which is allowed under the rules). Additionally, if the returning employee was part-time when she/he left and is rehired into the same position, then s/he would be treated as part-time when s/he returns. Finally, the rules do not require the employer to offer retroactive coverage for the period the employee was gone just because the employee is rehired. For the period s/he was not employed, the employee would likely have employer coverage, if at all, only as a result of electing COBRA. |
LAYOFF VS. FURLOUGHWhat is the difference?
Important considerations:
Layoffs Furlough Employers that utilize a look back measurement period to determine eligibility for segments of its workforce are likely to have employees in a stability period. Employees in a stability period, by the terms of the plan, remain eligible for coverage as full-time employees even if they are on furlough. Employees in a stability period must be offered affordable coverage to avoid exposure under the Employer Mandate. Employees are responsible for paying their share of the premiums and can have their coverage terminated for nonpayment of premiums. An employer can choose but is not required to subsidize a greater portion of the premium for employees in a stability period. Furloughed employees that aren’t in a stability period, either because the employer does not use the look back measurement method or because the employee is in a classification that is not measured to determine eligibility, will generally lose eligibility under the terms of the plan due to a reduction of hours unless the plan contemplates continued eligibility during a furlough. The loss of eligibility is acceptable to some employers, in which case the analysis for terminated employees will apply (e.g. offers of COBRA and whether to subsidize COBRA). However, some employers wish to maintain eligibility for employees on furlough even though they would normally lose eligibility under the terms of the plan. The employer-plan-sponsor will need to amend the plan to allow for the continued eligibility and will want to get carrier approval for fully-insured plans or stop-loss approval for self-insured plans. Generally, furloughed employees that aren’t in a stability period will not prompt the same affordability concerns as employees in a stability period because they are not considered full-time employees under the Employer Mandate. Employers have more flexibility in these situations to decide how much, if any, of the premiums they want to subsidize for these employees. Premium Payment During Leave: Premiums may be collected (as determined by the employer’s policy) in one of the following manners:
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HIPAA
Does the broker have a legal responsibility to alert the employer that an employee is in contact with an individual who has symptoms of COVID-19? The broker’s obligation, as a HIPAA business associate, to the covered entity (the plan) would prohibit the broker from sharing this information with the employer. On March 17, 2020, the Department of Health and Human Service Secretary Alex Azar issued a limited waiver of certain HIPAA sanctions to improve data sharing and patient care during the pandemic. https://www.hhs.gov/sites/default/files/hipaa-and-covid-19-limited-hipaa-waiver-bulletin-508.pdf Under the waiver, hospitals will not be penalized for failing to comply with HIPAA requirements found in 45 CFR: • to obtain a patient’s agreement to speak with family members or friends involved in the patient’s care The employee may also decide to notify the employer – but the broker should not be making this report. HIPAA is clear that disclosing this PHI to the employer would be a breach of the privacy rule. HHS also released guidance reminding covered entities and business associates that they cannot disclose this information, including as it related to coronavirus or potential coronavirus infection. |
PREMIUM PAYMENTS
If employees are left on the plan for a period of time even though they are not actively at work, how are premium payments be collected? Premium Payment During Leave: Premiums may be collected (as determined by the employer’s policy) in one of the following manners: • Catch up. Some employers choose to keep employees on leave enrolled in their benefits until they return to active work, and then recoup those payments at the time the employees return to work. If there is a fairly large premium payment due at the time the employees return to work following the leave, it may be necessary for the employer to take deductions over several payroll periods. In some cases, state wage and hour laws will limit the amount that can be deducted from pay (thus the cap may be necessary). The plan sponsor should check with their legal advisor (labor and employment attorney). The main problem with the catch-up option identified by employers is that if the employee never returns to work, then it may be difficult or impossible for the employer to recover the employee’s share of premiums paid by the employer during the leave. |
FAMILIES FIRST CORONAVIRUS RESPONSE ACT
I heard that the new Act includes tax credits. For what size employers does this apply and what is the credit? Specifically addressing the tax credit, The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced in a News Release on March 20th, that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date, April 2nd and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances. The chart goes into detail about the credit for Paid Sick leave. Note: Eligible Employers receive 100% reimbursement for paid leave pursuant to the Act. Health insurance costs are also included in the credit. Employers face no payroll tax liability. And Self-employed individuals receive an equivalent credit. The next logical question is how quickly will the employer be reimbursed? If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, the IRS Notice released on 3/20 addresses Prompt Payment for the Cost of Providing Leave.
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns on Form 941 with the IRS.
Under guidance that will be released later this week, eligible employers who pay qualifying sick or childcare leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and childcare leave that they paid, rather than deposit them with the IRS.
If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure are expected to be announced this week.
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CARRIER RULES
Are carriers allowing furloughed or temporarily laid off employees to remain on the plan? |
MISCELLANEOUS STATE TESTING SITES Is there Information on COVID-19 state testing sites? This is definitely fluid information as testing sites appear to be popping up daily. Most important is to follow the recommendations of the CDC which is to consult with a medical professional. State Department of Health websites have information regarding testing instructions. |