April 1, 2020
As the coronavirus continues to spread across the U.S., Congress has been busy offering up various forms of relief for employees and their employers, but some of this action has triggered new obligations on those employers. With three pieces of coronavirus legislation already on the books, and a fourth under construction, let’s pause and consider what employers are required to do (and when), what they’re allowed to do, and what their insurers are up to as well.
This alert summarizes what we know today about new paid leave requirements, as well as healthcare plan mandates and related opportunities for employers to assist their employees.
Each section below includes an “action items” list, immediately following the introduction.
Benefits plan mandates and accommodations
Action items:
1. Ensure the insurer of any fully-insured medical plan, and third-party administrator of any self-funded medical plan, is prepared to honor the coronavirus-related coverage mandates recently imposed by Congress.
2. While coverage of coronavirus-related treatment without cost sharing is not yet mandated by law, some insurance carriers, serving in a claims-administration capacity for self-funded plans, are installing this benefit unilaterally, subject to an opt-out opportunity by the plan sponsor. Lockton clients with self-funded plans should contact their Lockton account service team if the plan sponsor is opposed to the cost-sharing waiver for coronavirus treatment, so that an appropriate opt-out document, if necessary, can be submitted timely.
What plans must or may cover
Under the two most recent coronavirus-related laws, and IRS guidance that predated them:
Group health plans must cover the cost of coronavirus testing and the related consultative visit with a healthcare provider, without cost sharing (deductibles, copayment, coinsurance), preauthorization or medical management requirements. This includes insured, self-insured and grandfathered plans.
Plans must cover the testing even if the test is not Food and Drug Administration-approved, as long as the manufacturer is seeking FDA or state approval. The amount the plan must pay for testing is either the negotiated (e.g., in-network contracted) rate with the provider, or a cash price charged by the provider, which the provider must publicize on a public website.
If preventive measures become available, defined as an “item, service, or immunization that is intended to prevent or mitigate” the coronavirus, then all group health plans must cover them without cost sharing. This includes insured, self-insured and grandfathered plans.
Health savings account (HSA)-compatible plans, like other healthcare plans may, in addition to paying for coronavirus testing and its related consultative visit below the high deductible, pay for coronavirus treatment below the high deductible. Through the plan year beginning in 2021, HSA-compatible plans may pay for telemedicine visits, without regard to the reason for the visit (i.e., not just preventive care or coronavirus-related illnesses) below the high deductible.
HSA, health flexible spending accounts and health reimbursement arrangements may pay for over-the-counter medicines and drugs, without a prescription, and may also reimburse tax free the purchase of menstrual products.
Health insurers, for their part, are going beyond the federal mandate regarding coverage of testing. Cigna, Aetna, Humana, UnitedHealthCare and other carriers have pledged to cover coronavirus treatment with no cost sharing in their fully insured, employer-sponsored plans, at least for several weeks or months. All groups with fully insured contracts with these carriers will have this coverage change implemented automatically, effective immediately and running through May 31, 2020 (Cigna and UHC), June 1, 2020 (Aetna), or a not-yet-defined end date (Humana).
Self-funded plans that use these entities as claims administrators will have the option to either opt in or opt out of similar provisions. Both Cigna and Aetna have suggested that these provisions will be implemented by default unless the plan sponsor submits an opt-out waiver. They’re requiring the opt-out waivers be submitted quickly. UHC says it “will work with” its self-funded customers wishing to install this benefit.
Lockton comment: A full analysis of insurer responses to the coronavirus pandemic is available here (opens a new window) from America’s Health Insurance Plans (AHIP). AHIP is posting real-time updates to this listing as new information is publicized.
Paid sick leave and expanded FMLA leave
The Department of Labor (DOL) has been issuing guidance fast and furiously over the last week on the Families First Coronavirus Response Act (FFCRA), specifically with respect to the law’s mandate to provide paid sick leave to employees and 12 weeks of expanded Family Medical Leave Act (FMLA) leave (collectively, “FFCRA leave”).
Action items: The FFCRA leave requirements apply beginning Wednesday, April 1. What should employers do right now? We suggest the following:
1. Establish if you are subject to the new leave requirements. They apply to all governmental employers and private employers with fewer than 500 employees, including joint employees like temporary employees from a staffing firm.
Lockton comment: Over the weekend the DOL clarified how to count employees: Apply the FMLA’s “integrated employers” test for purposes of both the new paid sick leave and the expanded FMLA leave requirements, not just the latter, as an earlier FAQ from the DOL had indicated. More on the “integrated employer” test below.
2. If the leave requirements apply to you, post the DOL model notice in your workplace.
3. Create any forms you wish to have employees complete to request FFCRA leave, and identify the level of proof you will accept to substantiate FFCRA leave. As a best practice, outline decisions in a written policy on how you will administer FFCRA.
4. Don’t require employees to use their other accrued paid leave before using their FFCRA leave.
5. Decide whether employees are permitted to supplement FFCRA paid leave with other accrued time to increase payments to 100% of their regular wages.
6. Employers are entitled to a refundable tax credit – claimed by withholding payroll taxes that would otherwise be forwarded to the IRS – to compensate for FFCRA leave. If your organization was taking advantage of the Employer Credit for Paid Family and Medical Leave, determine if you wish to continue using that program or if the immediate tax credit for FFCRA will be more beneficial. Work with your payroll vendor to determine the process changes necessary to allow your organization to take an immediate FFCRA tax credit.
Paid leave under the FFCRA: The details
Counting employees under the FFCRA
Over the past week the DOL has issued 59 FAQs (opens a new window) relating to the offer of FFCRA leave, a model poster, separate FAQs on the posting requirement and other matters.
The most vexing issue has been determining whether a private employer must comply with FFCRA (all governmental employers must comply). Private employers must comply if, after March 31, they have fewer than 500 employees on the date the employee’s leave begins. All U.S. full and part-time employees (plus joint employees), and employees of other entities that are considered “integrated” with the employer are counted.
Lockton comment: Refer to our updated FAQ (opens a new window) for more detailed information about the integrated employer test. The DOL recently changed its view about applying that test under the FFCRA’s paid sick leave rules.
Post a notice
Posting: The
must be posted by April 1 in a conspicuous place on the employer’s premises that is regularly visited by all employees. If employees are reporting directly to work in several different buildings, the FFCRA notice must be posted in each building.
Email or direct mail: As an alternative, an employer may email or direct mail the notice or post it on an employee information internal or external website.
Language: Employers are only required to post the notice in English, but the DOL has posted a Spanish version as well.
Maintain records
Employers must retain records adequate to prove they were entitled to any tax credits taken. Employees should be asked to provide proof that they are eligible for pay and leave under FFCRA. For the FFCRA’s expanded FMLA leave (FMLA+ leave), follow certification requirements under the FMLA.
Lockton comment: Reasonable proof from an employee taking FMLA+ leave might be an email from an employee or official of the school, place of care or child care provider that closed due to the coronavirus. For the FFCRA’s paid sick leave, certification from a healthcare provider is sufficient.
Some employees are not eligible for FFCRA leave:
Employees on furlough. Employees who are not working due to a furlough or whose worksite is closed due to a local directive do not qualify for paid sick leave or expanded FMLA leave. Likewise, employees whose hours are reduced may not use FFCRA leave for the hours they are no longer scheduled to work.
Healthcare providers and emergency responders. The law allows employers to exclude these employees from the FFCRA leave requirements.
Lockton comment: Healthcare providers include anyone employed at a doctor’s office, hospital, healthcare center, clinic, post-secondary educational institution offering healthcare instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home healthcare provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer or entity.
Emergency responders include an employee who is necessary for the provision of transport, care, healthcare, comfort and nutrition of patients, or whose services are otherwise needed to limit the spread of COVID-19. This includes military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, and public works personnel.
Employees who can telework. FFCRA leave is not available to an employee who can work, including telework. Consequently, if employees work a normal number of hours but outside of the normally schedule (e.g., early in the morning or late at night), they are able to work, and leave is not available unless they cannot keep to that schedule for a qualifying reason related to the virus. Similarly, to the extent an employee can telework while caring for a child, FFCRA leave is not available simply because the child is at home.
Employees of certain small employers. A small business (under 50 employees) is exempt from FFCRA leave requirements relating to time to care for a minor child due to a school or child care provider closing or otherwise being unavailable, if providing an employee such leave would jeopardize the viability of the business.
Timing of leave, layoff or furlough. Eligible for paid leave under the FFCRA only applies to employees who, at the time they apply for leave, are currently employed (not furloughed or laid off). FFCRA leave requirements are not retroactive; no FFCRA leave is required for periods prior to April 1. But if on that date, an employee is on a leave for the reasons described in the FFCRA’s leave rules, employers should begin to treat the leave as compensable FFCRA leave. If an employee was furloughed or laid off before April 1, benefits are not payable under FFCRA. If an employee is furloughed or laid off while they are receiving benefits under FFCRA, benefits cease.
Taking FFCRA leave intermittently:
Paid sick leave: Unless teleworking, paid sick leave must be taken in full-day increments. It cannot be taken intermittently if the leave is being taken because the employee:
Is subject to a federal, state or local quarantine or isolation order related to the coronavirus
Has been advised by a healthcare provider to self-quarantine due to concerns related to the coronavirus
The employee is experiencing symptoms of the coronavirus and seeking a medical diagnosis, or
The employee is caring for an individual who either is subject to a quarantine or isolation order related to the coronavirus or has been advised by a healthcare provider to self-quarantine due to concerns related to the coronavirus.
Unless teleworking, once an employee begins taking paid sick leave for one or more of these reasons the employee must continue to take paid sick leave each day until the employee has either used the full amount of paid sick leave, or no longer has a qualifying reason for taking paid sick leave.
FMLA+: The expanded FMLA benefit under the FFCRA may be taken intermittently if the employer agrees.
Triggering events and benefit duration:
FFCRA sick pay: FFCRA sick pay is limited to 80 hours of pay (prorated for part time) and is available if the employee is:
Subject to a federal, state or local quarantine or isolation order related to the coronavirus
Advised by a healthcare provider to self-quarantine due to concerns related to the coronavirus, or
Experiencing symptoms of the coronavirus and is seeking medical diagnosis.
An employee is also entitled to sick pay when caring for another individual meeting the above criteria.
Lockton comment: Importantly, a shelter-in-place requirement or a self-imposed isolation without advice from a healthcare provider will not qualify.
Finally, FFCRA sick pay is available if the employee must care for a minor child due to a school or child care closing or unavailability due to a public health emergency related to the coronavirus.
Lockton comment: All employees, regardless of time worked for the employer, are eligible for sick pay under the FFCRA. However, only employees who have been working for the employer for at least 30 days are entitled to the law’s FMLA+ paid leave.
FMLA+ paid leave: FMLA+ leave is available for 12 weeks and only if the employee must care for a minor child whose school or place of care is closed, or child care provider is unavailable, due to the coronavirus. The first two weeks of FMLA+ leave are unpaid but may be paid under the FFCRA sick pay rules described above.
Lockton comment: If care for a minor child is required for any other reason, FMLA+ pay does not apply (although FFCRA sick pay may be available for two weeks if the child meets the criteria for sick pay to care for an individual).
For employees of employers subject to the FMLA the total amount of an employee’s FMLA leave is capped at 12 weeks during a 12-month period. Employees who have used all 12 weeks of FMLA leave are not entitled to FMLA+.
Lockton comment: Employees who have not yet become eligible for FMLA may use 12 weeks of FMLA+ after 30 days of employment but may not take FMLA for any other qualifying reason until they have satisfied the 12-month/1250-hour requirement for FMLA leave. It is unclear how the leave taken prior to traditional FMLA eligibility will affect the 12-week maximum but we assume that it will reduce the 12 weeks if taken during the 12-month period the employer is using to count satisfaction of the 12-week entitlement.
Benefit amounts:
FFCRA sick pay: The FFCRA’s paid sick leave benefits are in an amount equal to regular wages but capped at $511 per day for the employee’s own sickness. If the employee is caring for an individual who is ill or a minor child due to a school or child care closing, the benefit is two-thirds of regular wages, capped at $200 per day.
FMLA+ paid leave: The Act’s FMLA+ benefit is also payable at two-thirds regular wages for weeks three through 12, with the benefit capped at $200 per day.
The dollar amount of paid leave under the FFCRA is based on the employee’s regular wages (regular rate of pay) as defined under Fair Labor Standards Act. Generally, an employee’s rate of pay is determined by using pay over a period of up to six months prior to the date on which an employee takes leave.
If the employee has worked fewer than six months, the regular rate is the average of the employee’s regular rate of pay for each week they have worked for the employer. An employer may also compute this amount for each employee by adding all compensation that is part of the regular rate over six months (or the time worked if less than six months) and divide that sum by all hours worked in the same period.
Leave is in addition to other paid leave:
FFCRA leave is in addition to other paid leave. FFCRA pay is an entitlement provided in addition to, not in lieu of, other employer-paid leave. Pay under FFCRA must be provided before other available sick pay or paid time off (PTO) is required to be used. If the employee has sick pay or PTO available, the employer may permit, but not require, the employee to use that time to supplement FFCRA wages.
Payment of supplemental benefits:
At its discretion, an employer may elect to supplement FFCRA benefits by offering additional pay up to 100% of regular pay. Supplemental wages paid directly or because of other sick leave being used to supplement pay are not eligible for a tax credit (see the tax credit discussion below).
Lockton comment: Commissions, tips or piece rates are incorporated into the above calculation to the same extent they are included in the calculation of the regular rate under the FLSA.
Tax credits
Refundable tax credits are available to employers to help offset some of the cost of providing the newly required paid leave. The IRS will allow employers to offset the credits they are due against payroll tax withholdings the employer would otherwise send to the IRS. If the amount due to the employer is greater than the offset for payroll taxes, the IRS will pay the employer the difference. See the IRS’s FAQs (opens a new window) on the tax credit.
Lockton comment: These credits are available even to private, tax-exempt employers but are not available to public entities.
Waiting periods for healthcare coverage
Employers should remember that if an employee is in a waiting period for healthcare coverage and begins a period of sick leave after having started active employment, coverage must begin after the employee has satisfied all criteria for the waiting period, even if the employee is out on sick leave. For example, if the waiting period is 30 days of employment, the employee will satisfy the waiting period 30 days from date of hire, even if on that day the employee is out on sick leave.
Other things employers can do
Tax-free disaster relief payments:
Employers can make tax-free employer payments for an employee’s unreimbursed “personal, family, living or funeral expenses.” However, the payments cannot replace lost wages or provide for paid leave.
No employee substantiation of the employee’s expense, for which reimbursement is claimed, is required if reimbursements approximate the employee's costs.
Tax-free student loan repayments for employees:
The current tax exclusion ($5,250) for employer-paid educational assistance includes employer payments for the employee’s student loans, but only for payments made before Jan. 1, 2021.
Nondiscrimination rules apply, so the payments must be made for a fair cross section of employees (e.g., cannot favor the highly compensated employees, such as individuals who earned more than $125,000 in 2019).
Tax-free payments are only available for the employee’s student loans (not a spouse’s or other family member).
Payments can be made to the employee or the student loan lender.
We have not heard the last from Congress, from insurance carriers and others with respect to their approach to the coronavirus pandemic. We’ll keep you apprised of new developments as they occur.
Compliance Services and Governmental Relations Practices
Not legal advice: Nothing in this Alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services are not privileged under the attorney-client privilege.
View alert (opens a new window)