Maintaining your organizational wellbeing during the unprecedented 2019 Novel Coronavirus (COVID-19) pandemic requires a broad view of the factors that impact your ability to achieve your business objectives while supporting the personal wellbeing of your employees. To achieve both of these goals, it is necessary to understand the priorities that will allow your organization to continue as an ongoing concern while facing significant business disruptions. Check out the action steps below to help you identify the most important concerns that you may need to address in your workplace as you make decisions impacting your employees and their benefits as you respond to COVID-19.
1. Evaluate. Support. Maintain. The COVID-19 pandemic is causing major disruption in all walks of life. At times such as these, employer-sponsored benefits play a critical role in supporting employee wellbeing. After employers tackle initial concerns such as how to handle business closures, remote work transitions, furloughs, and shelter-in-place orders, their focus should turn to how existing employee benefits can support their employees and what options they have available to modify those benefits offerings, if they so desire. For example, employers may wish to emphasize medical plan coverage for testing, telehealth contact information, and EAP benefits in employee communications. In addition, employers may wish to enhance benefits, such as waiving not only cost sharing for COVID-19 testing, but also treatment. Employers may also wish to introduce pandemic leave. For example, some employers have introduced pandemic leave of 5 to 10 days, which will allow employees who cannot work from home to take paid time off during periods of shelter-in-place orders. Other employers may wish to add medical coverage for individuals who are furloughed. Now is an opportunity to thoughtfully determine how your organization’s employee benefits can best support your employees as you work to maintain your organization as a going concern. How can your employee benefits support employees during the COVID-19 pandemic?
2. Respond. Change. Update. As organizations take steps to modify their employee benefits to expand and sometimes curtail benefits, they must remain mindful that their coverage must match any underlying contracts and plan documents, including summary plan descriptions. For example, if a plan chooses to cover COVID-19 treatment without cost sharing, that change will likely necessitate amending or modifying plan terms. For employers subject to ERISA, that will also trigger a need to deliver summaries of material modification (SMMs). Employers who wish to continue benefits for employees on furlough may need to change eligibility, continuation of coverage, and plan termination language. As always, any changes to plan terms should be addressed with insurers or stop loss carriers, as applicable. What changes are needed to your organization’s plan documents?
3. Furlough. Reduce. Extend. In response to the desire to “flatten the curve,” individuals across the country are engaging in “social distancing.” In the workplace, this translates to transitioning to telework, prohibiting gatherings of more than ten individuals, and staggering start and stop times for the workday. In addition, some employers have been forced to furlough employees or reduce hours in response to the economic changes brought on by social distancing. When employers furlough employees (meaning that they are still employed, but have zero hours of service for a period of time) or reduce employee hours of service, the action may trigger numerous issues. First, employees may no longer be eligible for coverage under their medical plans. So, employers may need to consider extending coverage. If so, then issues can arise over how to collect premiums for employees without pay and whether employees with reduced income can afford premium payments. Furthermore, insurers and stop loss carriers may be at odds with employers over when those employees should have coverage terminated and continuation coverage, such as COBRA coverage, offered. Before deciding to extend coverage to employees, employers should contemplate how current plan terms would apply. How do employee furloughs or reductions in hours impact your employees’ benefits coverage?
4. Determine. Assess. Impact. In addition to impacting eligibility for benefits coverage, a furlough or reduction in hours may impact an employee’s status for purposes of the Patient Protection and Affordable Care Act (ACA). As a reminder, an individual who is reasonably expected to work 30 or more hours per week or an individual who worked at least 30 hours per week during a prior measurement period is considered to be a full-time employee for purposes of the ACA’s Employer Mandate. Many employers tie medical plan eligibility to ACA status in order to avoid Employer Shared Responsibility penalties. For that reason, an employer who wishes to furlough an employee in a stability period as a full-time employee may expose itself to ACA penalties if that employer terminates medical coverage for the employee. For individuals whose status is determined under the monthly measurement method, the same issue would not arise. But a reduction in hours or a furlough can impact an employee’s status for ACA purposes and thus for ACA Form 1095 reporting purposes and the ACA Employer Mandate. How do employee furloughs or reductions in hours impact your employee’s ACA status?
5. Address. Qualify. Provide. Employers will soon be faced with employees who need time off, not only for purposes of sheltering-in-place or self-isolation but also because of a positive diagnosis of COVID-19. Questions then arise as to how to treat the time off. For private employers with fewer than 500 employees or governmental employers, employees would likely be eligible for Emergency Paid Sick Leave of up to two weeks under the Families First Coronavirus Response Act (FFCRA). This leave must be made available in addition to any existing paid sick leave provided by an employer. In addition, long-term school closures are causing issues for parents who do not otherwise have caregivers for their children. Employees who cannot work remotely and must take time off to care for their school-aged children are now eligible for two types of leave under the FFCRA – Emergency Paid Sick Leave for the first two weeks and Public Health Emergency Leave for up to twelve weeks. Additionally, employees diagnosed with COVID-19, particularly those requiring inpatient care, may qualify for Family and Medical Leave Act (FMLA) leave for up to twelve weeks for their own serious health condition. These issues create additional challenges for employers seeking to administer leave. How will you address organizational needs to provide time off for an employee who may have COVID-19?
6. Curtail. Recognize. Trigger. Employers faced with even more drastic decisions around ongoing viability may need to consider curtailing employee benefits. That curtailment may range from a reduction in benefits to a termination of benefits. In cases of reductions in benefits, employers should be cognizant of potential issues, including, but not limited to, whether a reduction in benefits is a sufficient curtailment to trigger COBRA rights for covered individuals, whether reductions are so significant that medical coverage offered no longer meets minimum value standards under the ACA, whether reductions trigger HIPAA nondiscrimination issues, or Section 125 or 105(h) nondiscrimination issues (if reductions favor highly compensated employees). Termination of benefits may trigger significant notification issues and must be done according to plan document terms. If your organization curtail benefits, what compliance issues will that trigger?
7. Obtain. Apply. Protect. Employers will likely receive information about whether their employees – and perhaps even their visitors or even building tenant mates – have had contact with individuals who have tested positive for COVID-19 or who have themselves tested positive for COVID-19. This often raises questions about how the privacy of that information should be handled. First, employers should consider whether the privacy protections under the Health Insurance Portability and Accountability Act (HIPAA) apply. If an employer learns of an employee’s health status from its health plan, then the information will be protected health information (PHI) and cannot be shared for employment purposes (e.g., notifying other employees) without express written authorization from the employee or the employee’s designated personal representative. However, if the employer learns, for example, that an employee is COVID-19 positive or may be COVID-19 positive from the employee, then that information is not PHI. Still, it may be protected by the Americans with Disabilities Act (ADA), FMLA, or a state privacy law, such as the California Consumer Protection Act. Note that the Equal Employment Opportunity Commission (EEOC) has issued guidance on how to handle privacy concerns for employees in this context. Generally, employers may not reveal the identity of an individual who has tested positive for or been exposed to COVID-19, but they may take steps to protect individuals who may have been exposed in the workplace. What privacy laws apply to information obtained about an employee’s or other individual’s COVID-19 exposure or diagnosis status for your workplace?
8. Maintain. Handle. Recoup. Many employers faced with temporary shutdowns or furloughs in the face of COVID-19 wish to continue benefits coverage for their employees – at least for a short period of time. Employers can pay the employees’ portions of their contributions during the furlough, they can require employees to send in checks for their contributions, or they can cover the employees’ cost while on furlough and then require the employees to make catch-up contributions (i.e., recoup those payments from employees) upon returning to work. If an employer allows catch-up contributions upon returning to work, those can be made on a pre-tax basis under your Section 125 cafeteria plan. The downside is that if an employee does not return, the employer may have difficulty getting repaid. The downside of the pay-as-you-go method is that employees will have to pay by check (post-tax), and it will be an additional administrative burden to track all those payments. How will your organization handle employee premium payments during a shutdown or furlough due to COVID-19?
9. Recognize. Meet. Comply. While it is hopeful that federal and state agencies will grant relief for filing deadlines over the next several months, it is worth recognizing that those agencies are grappling with the same issues that all other employers are. Thus, while organizations may anticipate relief for filing deadlines, employers should be aware that employee benefits filing deadlines may not be extended. For example, the March 31st filing electronic filing deadline for Forms 1094 and 1095 remains in effect. Furthermore, deadlines for Forms 1095 and upcoming quarterly taxes remain effective. So, employers must recognize and remain on target to meet these filing deadlines until relief is granted. What upcoming reporting or filing deadlines remain in effect for your employer-sponsored benefits?
10. Return. Return. Return. Although we are all in the early stages of the impact of COVID-19, we should not lose sight of the fact that this too shall pass. Employees will return to work. Businesses will eventually resume normal operations. Charities will return to their good works. Churches will return to their meetings. And with that, employers will be faced with handling return-to-work issues. For example, employers with employees who were diagnosed with COVID-19 must determine whether to require fitness for duty reports from returning employees. Although that may be acceptable under the ADA, the Centers for Disease Control (CDC) cautions against such a requirement in order to avoid overburdening the healthcare system further. In addition, employers who furloughed employees will be faced with decisions about collecting missed premiums. Choices about collecting back due premiums may range from waiving the premiums to deducting them from paychecks after leave ends. Other issues may arise when individuals qualified for FMLA leave and are entitled to return to the same or a similar job position. Other individuals may have been eligible for a leave of absence as a reasonable accommodation under the ADA. All of these situations, and likely more, will impact employees and employers as organizations return to normal operations. What requirements will you impose upon employees returning to work after leaves due to COVID-19 to meet?
Compliance is a series of actions, not a final destination. As a trusted advisor, Gallagher has developed this Priorities and Perspectives series to help you pursue a path through employee benefits compliance issues as part of an overall continuing compliance plan. Employers should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law. If you have any questions about one or more of the compliance destinations listed above, or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits in order to support employers in their compliance efforts, please contact your Gallagher representative.
The intent of this analysis is to provide you with general information. It does not necessarily fully address all your organization’s specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization’s general counsel or an attorney who specializes in this practice area.
1. Evaluate. Support. Maintain. The COVID-19 pandemic is causing major disruption in all walks of life. At times such as these, employer-sponsored benefits play a critical role in supporting employee wellbeing. After employers tackle initial concerns such as how to handle business closures, remote work transitions, furloughs, and shelter-in-place orders, their focus should turn to how existing employee benefits can support their employees and what options they have available to modify those benefits offerings, if they so desire. For example, employers may wish to emphasize medical plan coverage for testing, telehealth contact information, and EAP benefits in employee communications. In addition, employers may wish to enhance benefits, such as waiving not only cost sharing for COVID-19 testing, but also treatment. Employers may also wish to introduce pandemic leave. For example, some employers have introduced pandemic leave of 5 to 10 days, which will allow employees who cannot work from home to take paid time off during periods of shelter-in-place orders. Other employers may wish to add medical coverage for individuals who are furloughed. Now is an opportunity to thoughtfully determine how your organization’s employee benefits can best support your employees as you work to maintain your organization as a going concern. How can your employee benefits support employees during the COVID-19 pandemic?
2. Respond. Change. Update. As organizations take steps to modify their employee benefits to expand and sometimes curtail benefits, they must remain mindful that their coverage must match any underlying contracts and plan documents, including summary plan descriptions. For example, if a plan chooses to cover COVID-19 treatment without cost sharing, that change will likely necessitate amending or modifying plan terms. For employers subject to ERISA, that will also trigger a need to deliver summaries of material modification (SMMs). Employers who wish to continue benefits for employees on furlough may need to change eligibility, continuation of coverage, and plan termination language. As always, any changes to plan terms should be addressed with insurers or stop loss carriers, as applicable. What changes are needed to your organization’s plan documents?
3. Furlough. Reduce. Extend. In response to the desire to “flatten the curve,” individuals across the country are engaging in “social distancing.” In the workplace, this translates to transitioning to telework, prohibiting gatherings of more than ten individuals, and staggering start and stop times for the workday. In addition, some employers have been forced to furlough employees or reduce hours in response to the economic changes brought on by social distancing. When employers furlough employees (meaning that they are still employed, but have zero hours of service for a period of time) or reduce employee hours of service, the action may trigger numerous issues. First, employees may no longer be eligible for coverage under their medical plans. So, employers may need to consider extending coverage. If so, then issues can arise over how to collect premiums for employees without pay and whether employees with reduced income can afford premium payments. Furthermore, insurers and stop loss carriers may be at odds with employers over when those employees should have coverage terminated and continuation coverage, such as COBRA coverage, offered. Before deciding to extend coverage to employees, employers should contemplate how current plan terms would apply. How do employee furloughs or reductions in hours impact your employees’ benefits coverage?
4. Determine. Assess. Impact. In addition to impacting eligibility for benefits coverage, a furlough or reduction in hours may impact an employee’s status for purposes of the Patient Protection and Affordable Care Act (ACA). As a reminder, an individual who is reasonably expected to work 30 or more hours per week or an individual who worked at least 30 hours per week during a prior measurement period is considered to be a full-time employee for purposes of the ACA’s Employer Mandate. Many employers tie medical plan eligibility to ACA status in order to avoid Employer Shared Responsibility penalties. For that reason, an employer who wishes to furlough an employee in a stability period as a full-time employee may expose itself to ACA penalties if that employer terminates medical coverage for the employee. For individuals whose status is determined under the monthly measurement method, the same issue would not arise. But a reduction in hours or a furlough can impact an employee’s status for ACA purposes and thus for ACA Form 1095 reporting purposes and the ACA Employer Mandate. How do employee furloughs or reductions in hours impact your employee’s ACA status?
5. Address. Qualify. Provide. Employers will soon be faced with employees who need time off, not only for purposes of sheltering-in-place or self-isolation but also because of a positive diagnosis of COVID-19. Questions then arise as to how to treat the time off. For private employers with fewer than 500 employees or governmental employers, employees would likely be eligible for Emergency Paid Sick Leave of up to two weeks under the Families First Coronavirus Response Act (FFCRA). This leave must be made available in addition to any existing paid sick leave provided by an employer. In addition, long-term school closures are causing issues for parents who do not otherwise have caregivers for their children. Employees who cannot work remotely and must take time off to care for their school-aged children are now eligible for two types of leave under the FFCRA – Emergency Paid Sick Leave for the first two weeks and Public Health Emergency Leave for up to twelve weeks. Additionally, employees diagnosed with COVID-19, particularly those requiring inpatient care, may qualify for Family and Medical Leave Act (FMLA) leave for up to twelve weeks for their own serious health condition. These issues create additional challenges for employers seeking to administer leave. How will you address organizational needs to provide time off for an employee who may have COVID-19?
6. Curtail. Recognize. Trigger. Employers faced with even more drastic decisions around ongoing viability may need to consider curtailing employee benefits. That curtailment may range from a reduction in benefits to a termination of benefits. In cases of reductions in benefits, employers should be cognizant of potential issues, including, but not limited to, whether a reduction in benefits is a sufficient curtailment to trigger COBRA rights for covered individuals, whether reductions are so significant that medical coverage offered no longer meets minimum value standards under the ACA, whether reductions trigger HIPAA nondiscrimination issues, or Section 125 or 105(h) nondiscrimination issues (if reductions favor highly compensated employees). Termination of benefits may trigger significant notification issues and must be done according to plan document terms. If your organization curtail benefits, what compliance issues will that trigger?
7. Obtain. Apply. Protect. Employers will likely receive information about whether their employees – and perhaps even their visitors or even building tenant mates – have had contact with individuals who have tested positive for COVID-19 or who have themselves tested positive for COVID-19. This often raises questions about how the privacy of that information should be handled. First, employers should consider whether the privacy protections under the Health Insurance Portability and Accountability Act (HIPAA) apply. If an employer learns of an employee’s health status from its health plan, then the information will be protected health information (PHI) and cannot be shared for employment purposes (e.g., notifying other employees) without express written authorization from the employee or the employee’s designated personal representative. However, if the employer learns, for example, that an employee is COVID-19 positive or may be COVID-19 positive from the employee, then that information is not PHI. Still, it may be protected by the Americans with Disabilities Act (ADA), FMLA, or a state privacy law, such as the California Consumer Protection Act. Note that the Equal Employment Opportunity Commission (EEOC) has issued guidance on how to handle privacy concerns for employees in this context. Generally, employers may not reveal the identity of an individual who has tested positive for or been exposed to COVID-19, but they may take steps to protect individuals who may have been exposed in the workplace. What privacy laws apply to information obtained about an employee’s or other individual’s COVID-19 exposure or diagnosis status for your workplace?
8. Maintain. Handle. Recoup. Many employers faced with temporary shutdowns or furloughs in the face of COVID-19 wish to continue benefits coverage for their employees – at least for a short period of time. Employers can pay the employees’ portions of their contributions during the furlough, they can require employees to send in checks for their contributions, or they can cover the employees’ cost while on furlough and then require the employees to make catch-up contributions (i.e., recoup those payments from employees) upon returning to work. If an employer allows catch-up contributions upon returning to work, those can be made on a pre-tax basis under your Section 125 cafeteria plan. The downside is that if an employee does not return, the employer may have difficulty getting repaid. The downside of the pay-as-you-go method is that employees will have to pay by check (post-tax), and it will be an additional administrative burden to track all those payments. How will your organization handle employee premium payments during a shutdown or furlough due to COVID-19?
9. Recognize. Meet. Comply. While it is hopeful that federal and state agencies will grant relief for filing deadlines over the next several months, it is worth recognizing that those agencies are grappling with the same issues that all other employers are. Thus, while organizations may anticipate relief for filing deadlines, employers should be aware that employee benefits filing deadlines may not be extended. For example, the March 31st filing electronic filing deadline for Forms 1094 and 1095 remains in effect. Furthermore, deadlines for Forms 1095 and upcoming quarterly taxes remain effective. So, employers must recognize and remain on target to meet these filing deadlines until relief is granted. What upcoming reporting or filing deadlines remain in effect for your employer-sponsored benefits?
10. Return. Return. Return. Although we are all in the early stages of the impact of COVID-19, we should not lose sight of the fact that this too shall pass. Employees will return to work. Businesses will eventually resume normal operations. Charities will return to their good works. Churches will return to their meetings. And with that, employers will be faced with handling return-to-work issues. For example, employers with employees who were diagnosed with COVID-19 must determine whether to require fitness for duty reports from returning employees. Although that may be acceptable under the ADA, the Centers for Disease Control (CDC) cautions against such a requirement in order to avoid overburdening the healthcare system further. In addition, employers who furloughed employees will be faced with decisions about collecting missed premiums. Choices about collecting back due premiums may range from waiving the premiums to deducting them from paychecks after leave ends. Other issues may arise when individuals qualified for FMLA leave and are entitled to return to the same or a similar job position. Other individuals may have been eligible for a leave of absence as a reasonable accommodation under the ADA. All of these situations, and likely more, will impact employees and employers as organizations return to normal operations. What requirements will you impose upon employees returning to work after leaves due to COVID-19 to meet?
Compliance is a series of actions, not a final destination. As a trusted advisor, Gallagher has developed this Priorities and Perspectives series to help you pursue a path through employee benefits compliance issues as part of an overall continuing compliance plan. Employers should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law. If you have any questions about one or more of the compliance destinations listed above, or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits in order to support employers in their compliance efforts, please contact your Gallagher representative.
The intent of this analysis is to provide you with general information. It does not necessarily fully address all your organization’s specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization’s general counsel or an attorney who specializes in this practice area.