FAQ - Coronavirus: Impact on Benefits and Employment
Frequently Asked Questions
The Families First Coronavirus Response Act (“FFCRA”, H. R. 6201, Public Law 116-127) enacted on March 18, 2020 and the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 (“CARES Act”, H. R. 748, Public Law 116-136) address many issues. Specific to employee benefits, these laws provide for mandated health coverage for coronavirus testing and related services, emergency paid sick leave, and emergency family and medical leave, as well as tax credits for providing emergency leave and continuation of health coverage for employers impacted by the COVID-19 situation. Following are some FAQs relating to these laws.
Please refer to the CBIZ Benefits & Insurance Services’ Employer Compliance Handbook: COVID-19's Impact on Benefits and Employment for additional information on COVID-19-driven employement laws and regulations, state law actions, and benefit plan considerations,
Emergency Paid Sick Leave
Emergency Family and Medical (FMLA) Leave
Coordinating Emergency PSL and FMLA Leave Provisions
Employee Benefit Plan Considerations
Layoffs, Furloughs and Effects on Benefits
Notice Obligations: EPSL and EFML Leave
Emergency Paid Sick Leave
Note: Certain FAQs released by the Department of Labor impact both the Emergency Paid Sick Leave provisions as well as the Emergency Family and Medical (FMLA) Leave Provisions. Please refer to the Coordinating EPSL and EFML Leave Provisions section for additional Q&As.
Q. 1 Which employers are subject to the emergency paid sick leave law?
For-profit and not-for-profit private sector employers who employ between 1 and 499 employees, and most public sector employers including state and local governments of any size are subject to the emergency paid sick leave law. A private sector employers determines employer size in the same manner as the federal Family and Medical Leave (FMLA) law. The employer counts all full-time and part-time employees on its US payroll, including all states, the District of Columbia and US territories and possessions. Both the joint employer and integrated employer tests used for FMLA purposes apply (see Q. 1 in Emergency Family and Medical (FMLA) Leave (EFML). The employer counts employees on the date the employee’s leave commences.
Small employer exemption. The law includes a small employer exemption available to employers employing fewer than 50 employees if providing the child care related leave would result in economic hardship (see Q. 1 in Coordinating EPSL and EFML Leave Provisions).
Q. 2 Which employees are entitled to emergency paid sick leave?
An employee, employed for any length of time, is entitled to emergency paid sick leave if he/she:
- Is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- Has been advised by a health care provider to self-quarantine related to COVID-19;
- Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
- The employee is unable to work/telework due to:
- Care for individual under federal/state/local quarantine or advised by health care provider to self-quarantine;
- Care of child whose school or place of care is closed for COVID-19 reasons; or
- The individual experiencing any other substantially similar condition as specified by HHS/Labor/IRS.
Part-time employees (those regularly scheduled to work fewer than 40 hours per week) are eligible for the benefit of the law. To determine the amounts available, hours are averaged over a two-week period. If the individual is a variable employee, hours are averaged over a 6-month period. If the individual has not been employed for 6 months, the average hours agreed to at the time of hire should be used and if that is not available, then the hours expected to have been scheduled should be used.
Q. 3 What constitutes advice from a health care provider to “self-quarantine”?
The DOL regulations clarify that the advice rendered by the provider to self-quarantine is based on the belief that the employee has or may have COVID-19; or is particularly vulnerable to COVID-19; and as such, the provider’s advice to self-quarantine prevents the employee from being able to work, either at his/her normal workplace or by telework. See Q. 12 in the Coordinating EPSL and EFML Leave Provisions for a definition of health care provider.
The regulations also clarify the terms of quarantine and isolations orders. A quarantine or isolation order includes quarantine, isolation, containment, shelter-in-place, or stay-at-home orders issued by any Federal, State, or local government authority, that cause the employee to be unable to work even though his/her employer has work for the employee but for the order. This also includes when a Federal, State, or local government authority has advised categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter in place, stay at home, isolate, or quarantine, causing these categories of employees to be unable to work even though their employers have work for them.
Q. 4 How much leave is available is under the emergency paid sick leave law?
The law provides up to 80 hours of leave for qualifying reasons. Individuals who work part-time receive a pro-rata amount of leave, based on their average hours worked in a two-week period.
Q. 5. If a person changes jobs, is he/she entitled to another 80 hours of emergency PSL with the new employer?
No. Individuals are only entitled to one allotment of 80 hours of emergency PSL during April 1, 2020 and December 31, 2020, without regard to whether an individual terminates his/her current employment and becomes employed by a different employer.
Q. 6 How much is an individual entitled to under the emergency paid sick leave law?
The maximum paid sick leave amounts payable vary based on the reason for absence:
- For employees who are quarantined or experiencing symptoms and seeking diagnosis would be compensated at their regular rate, up to a maximum of $511 per day ($5,110 total).
- Employees caring for another individual diagnosed or quarantined due to the virus, or who are caring for a son or daughter (see Q 5 in Coordinating EPSL and EFML Leave Provisions for definition of son or daughter) due to school closure or unavailable child care provider would receive two-thirds of their regular rate, up to a maximum of $200 per day ($2,000 total).
Q. 7. Must health coverage be continued during the emergency paid sick leave?
Yes. Employer provided group health coverage must be continued during the leave period (see Q. 6 in the Coordinating EPSL and EFML Leave Provisions).
Q. 8 What happens if an individual is in a waiting period and then goes out on emergency paid sick
Generally, the time-out of employment due to an emergency paid sick leave event will not extend a plan’s waiting period. The individual will become eligible for coverage based on the originally established waiting period. Check the terms of the health plan for specific language about its waiting period.
Q. 9. Is emergency paid sick leave in addition to any other available leave?
Yes. The emergency PSL is in addition to any other federal, state and local paid time off laws available. It is also in addition to any employer-provided paid leave, including any paid leave available through a collective bargaining agreement. An employer cannot require an employee to first use any other paid leave or unpaid leave to which he/she is entitled prior to using emergency PSL.
Q. 10 Do employees and employers have any notice obligations?
Yes. See Notice Obligations: EPSL and EFML Leave.
Q. 11 Is an employer required to keep records relating to emergency PSL?
Yes. See Q.10 in Coordinating EPSL and EFML Leave Provisions.
O. 12 When does the emergency paid sick leave law take effect?
The emergency paid sick leave provision takes effect April 1, 2020 and expires on December 31, 2020. It is not retroactive and any leave taken prior to April 1 will not offset available leave under these laws.
Emergency Family and Medical (FMLA) Leave
Note: Certain FAQs released by the Department of Labor impact both the Emergency Paid Sick Leave provisions as well as the Emergency Family and Medical (FMLA) Leave Provisions. Please refer to the Coordinating EPSL and EFML Leave Provisions section for additional Q&As.
Q. 1 Which employers are subject to the emergency FMLA leave law?
For-profit and not-for-profit private sector employers who employ between 1 and 499 employees, and most public sector employers including state and local governments of any size are subject to the emergency family and medical leave (FMLA) law. A private sector employers determines employer size in the same manner as the federal Family and Medical Leave (FMLA) law. The employer counts all full-time and part-time employees on its US payroll, including all states, the District of Columbia and US territories and possessions.
Both the joint employer and integrated employer tests used for traditional FMLA purposes apply, as follows:
Integrated employers. If two or more employers are considered to be integrated, they will be deemed to be a single employer for purposes of the FMLA. Factors in determining whether or not the employers are integrated include common management, interrelationship between operations, central control of labor relations, and degree of common ownership (financial control).
Joint Employment. Under the FMLA, if an employee is considered to be jointly employed by two or more employers, each employer must count that individual in determining whether or not the employer is subject to the law. Only the primary employer is responsible for providing leave to the employee in question and providing the requisite notices. Factors to be considered in determining joint employment include the degree of control or supervision of the work, payroll issues, and the right to hire, fire or modify the employment conditions of the worker. Joint employment is particularly relevant in the case of a temporary or leasing agency. In these situations, the temporary agency or leasing company is generally considered to be the primary employer.
Small employer exemption. The law includes a small employer exemption available to employers employing fewer than 50 employees if providing the child care related leave would result in economic hardship (see Q.1 in Coordinating EPSL and EFML Leave Provisions, below).
Q. 2 Which employees are entitled to emergency FMLA leave?
Any employee who has:
- Worked for the employer for at least 30 calendar days, and
- Is unable to work or telework due to a need for leave to care for a son or daughter (see Q 5 in Coordinating EPSL and EFML Leave Provisions for a definition of son or daughter) as a result of a closure of the child’s school or day care facility, or the child care’s provider is unavailable, due to a coronavirus-declared emergency.
Part-time employees are eligible for the benefit of the law. To determine the amounts available, hours are averaged over a two-week period. If the individual is a variable employee, hours are averaged over a 6-month period. If the individual has not been employed for 6 months, the average hours agreed to at the time of hire should be used and if that is not available, then the hours expected to have been scheduled should be used.
Emergency FMLA leave is available to individuals who have been on the payroll for 30 calendar days as of the date the leave begins. For example, if an individual is eligible on April 1, 2020, then the individual must have been on the payroll as of March 2, 2020. The CARES Act (enacted March 27, 2020) clarifies that rehired employees are eligible for emergency FMLA leave if he/she was laid off prior to March 1, 2020, had worked for the employer at least 30 days of the last 60 calendar days prior to the layoff, and was rehired by the employer.
Q. 3 Is the emergency PSL and emergency FMLA leave available to government employees?
Generally, the emergency PSL and emergency FMLA leave are available to state and local government employees. Federal employees may be entitled to emergency PSL, but are generally not entitled to emergency FMLA leave. Federal employees should check with Office of Personnel Management for specific guidance.
Q. 4 How much leave is available under the emergency FMLA leave law?
Up to 12 weeks of leave is available.
Q. 5 Are there exemptions to these leaves for health care workers and emergency responders?
Yes. Certain health care workers and emergency responders are exempt from emergency leave – see Q. 3 in Coordinating EPSL and EFML Leave Provisions.
Q. 6 How much is an individual entitled to under the emergency FMLA leave law?
The first 10 days of the leave could be unpaid, though, an individual could, at his/her discretion, choose to use available paid time off such as vacation, personal leave or other available PTO. In many instances, the emergency paid sick leave described above could be used for this purpose. After 10 days, the leave would be paid at not less than two-thirds of the individual’s regular monthly rate of pay, not to exceed $200 per day and $10,000 in the aggregate. Emergency FMLA leave for a part-time employee would be pro-rated based on their hours worked.
Q. 7 Can an employer require concurrent use of available paid time off during emergency FMLA leave?
The employee may choose to, or the employer may require, concurrent use of available paid time off (PTO) and emergency FMLA but only for the 10 weeks of emergency FMLA leave. The employer cannot mandate that an employee choose to use available PTO for the first 2 weeks of otherwise unpaid emergency PSL. Note: the employer can only mandate the use of PTO if the PTO would be available for caregiver type reasons. Most sick leave policies are not available for caregiver leave.
Q. 8 If an employer is subject to traditional FMLA, how is the emergency FMLA leave coordinated with traditional FMLA?
An individual is entitled to a combined 12 weeks of traditional FMLA leave and emergency FMLA leave. For example, if an employer’s 12-month FMLA measurement period is based on the calendar year, and if an employee has taken 4 weeks of traditional FMLA leave in January, 2020, then the individual would become eligible for up to 8 weeks of emergency FMLA leave beginning April 1, 2020.
Q. 9 What other benefits are available under the emergency FMLA leave law?
The emergency FMLA leave law, like the traditional FMLA leave law, provides job protection. Further, employer-provided health coverage must be continued during the leave period (see Q. 6 in the Coordinating EPSL and EFML Leave Provisions, below).
Q. 10. Do employees and employers have any notice obligations?
Yes. See Notice Obligations: EPSL and EFML Leave section.
Q. 11. When does the emergency FMLA law take effect?
The emergency paid FMLA provision takes effect April 1, 2020 and expires on December 31, 2020. It is not retroactive, and any emergency FMLA leave taken prior to April 1 will not offset available leave under these laws.
Coordinating Emergency PSL and FMLA Leave Provisions
Q. 1 Is a small employer ever exempt from the requirement to make emergency paid sick leave and emergency FMLA leave available?
A small employer who employs fewer than 50 employees, including a religious or nonprofit organization, is exempt from providing emergency paid sick leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons and emergency FMLA leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern. A small employer may claim this exemption if an authorized officer of the business has determined that:
- The provision of both emergency paid sick leave and emergency FMLA leave would result in its expenses and financial obligations to exceed its business revenues, and cause it to cease operating at a minimal capacity;
- The absence of the employee(s) requesting the emergency paid sick or emergency leave would entail a substantial risk to its financial health or operational capabilities due to the employee’s specialized skills, knowledge of the business, or responsibilities; or
- There is an insufficient amount of workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employees requesting the leave, and such services are needed for the small business to operate at a minimal capacity.
Q. 2 Are there special exemptions for employers employing fewer than 25 employees?
Under the emergency FMLA leave law, an employer who employs fewer than 25 employees could be exempt from the job protection aspect of the law, if the individual’s position is lost as a result of the coronavirus situation. If the job becomes available within 12 months, however, the individual would need to be offered a position.
Q. 3 Are health care providers and emergency responders excluded from eligibility for emergency paid sick leave and emergency FMLA leave?
Yes, a health care provider may be excluded from eligibility for both emergency leave laws if circumstances warrant it. However, the DOL indicates that interest of containing the spread of the coronavirus, the exemption be issued judiciously. For this purpose, a health care provider* includes:
- Anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity; and any individual employed by an entity that contracts with any of these institutions, employers, or entities to provide services or to maintain the operation of the facility.
- Anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments.
*Note: A recent court decision limits the definition of health care provider to those employees with direct health care responsibilities – see Court Rules on Emergency Leave Provisions (Aug. 5, 2020)
Further, emergency responders may be excluded from eligibility under both emergency leave laws. These individuals include members of the 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.
Q. 4. How is the rate of pay calculated under these laws?
An individual is entitled to be paid the greater of his/her regular rate of pay (subject to caps described below), the federal minimum wage or the state minimum wage.
Type of leave
Reasons for leave
Amount of pay
(greater of regular rate of pay, federal minimum wage or state minimum wage)
Emergency paid sick leave (EPSL)
- Individual subject to federal/state/local quarantine or isolation order
- Individual advised by health care provider to self-quarantine
- Individual experiencing COVID-19 symptoms and seeking medical diagnosis
100% of the greater of the amount of pay (defined above) , subject to maximum of:
$511 per day or
$5,110 in the aggregate
Employee unable to work/telework due to:
- Care for individual under federal/state/local quarantine or advised by health care provider to self-quarantine
- Care of child whose school or place of care is closed for COVID-19 reasons
- The individual experiencing any other substantially similar condition as specified by HHS/Labor/IRS
2/3 of the greater of the amount of pay (defined above), subject to maximum of
$200 per day or
$2,000 in the aggregate
Emergency family and medical leave (EFML)
Individual is unable to work or telework due to a need for leave to care for a son or daughter* as a result of a closure of the child’s school or day care facility or the child care’s provider is unavailable, due to a coronavirus-declared emergency.
Maximum of 12 weeks
- First 10 days: Unpaid (individual can choose to use available PTO or EPSL)
- Next 10 weeks: 2/3 of the greater of the amounts above, subject to a maximum $200/per day or $10,000 in the aggregate
Combined EPSL and EFML
Individual is unable to work or telework due to a need for leave to care for a son or daughter*, as a result of a closure of the child’s school or day care facility or the child care’s provider is unavailable, due to a coronavirus-declared emergency.
$200 per day or
$12,000 in the aggregate
*See Q 5 in Coordinating EPSL and EFML Leave Provisions for definition of son or daughter.
Regular rate of pay is determined by averaging an employee’s rate of pay over the prior 6 months or such shorter time as the individual has been employed. In determining rate of pay, if an individual would be scheduled for over-time, it would be included in the calculation.
As an example, emergency PSL is available to any qualifying employee without any length of service obligation; the maximum number of hours worked is 80 hours in a two-week period. If an individual would be scheduled to work 50 hours in the first week of leave, then individual would have 30 hours of available emergency PSL in week two. Again, subject to the daily and aggregate caps described above.
Q. 5 Who is a considered a son or daughter for purposes of the emergency leave provisions?
For both types of emergency leave, as well as traditional FMLA, a son or daughter is one who is:
- Under age 18 (biological, adopted, foster, stepchild, legal ward, or a child for whom the individuals is standing in loco parentis); or,
- An adult son or daughter aged 18 or older who has a mental or physical disability, and is incapable of self-care because of that disability.
Q. 6 Is an employer obligated to continue health coverage during the emergency paid sick leave and emergency FMLA leave periods?
Yes. Employer provided group health coverage must be continued during emergency PSL and emergency FMLA leave on the same terms as if the individual continued to work, including family coverage. Individuals must continue to make their contributions toward the cost of coverage. A tax credit is available to employers for continuing health coverage (see the Tax Credit section).
Further, if an employer provides a new health plan or benefits, or changes health benefits or plans while an employee is on emergency leave, the employee is entitled to the new or changed plan/benefits on the same terms as if the individual were not on leave. Any other plan changes such as change in coverage, premium, deductibles and the like that apply to all employees of the workforce would also apply to those taking emergency leave. Notice of any opportunity to change plans or benefits must be provided to those individuals on emergency leave.
If an employee on emergency leave chooses to terminate group coverage and is then reinstated, he/she is entitled to be reinstated on the group plan on the same terms as prior to taking the leave, including family or dependent coverages, without any additional qualifying period, physical examination, or preexisting condition exclusions.
If the individual does not return to work at the end of the leave, then COBRA or state continuation benefits may be available. Refer to your health plan’s eligibility criteria and continuation of coverage events in your plan.
Q. 7 Can an individual receive both employer-provided paid time off (PTO) and emergency leave at same time?
Generally, an individual cannot receive employer provided PTO and emergency leave at same time. However, an employer can choose to top off any emergency leave provided.
Q. 8 If I choose to supplement emergency leave, will I receive a tax credit for it?
No. You will not receive a tax credit for amounts in excess of the maximum limits for each type of emergency leave.
Q. 9 Are individuals entitled to unemployment while receiving paid leave?
Generally, individuals are not entitled to receive unemployment while receiving paid leave. Individuals may receive unemployment while on furlough. State unemployment laws apply. Consult with your state’s unemployment office for specific information. Individuals can also find information about unemployment from the CareerOneStop website.
Q. 10 As an employer, may I request documentation from an employee requesting emergency paid sick leave or emergency FMLA leave?
Yes. An employee is obligated to provide appropriate documentation to support of the reason for the leave prior to taking such leave*. Such documentation should include:
- The employee’s name, date(s) for which leave is requested, the reason for the leave and an oral or written statement he/she is unable to work due to the specified reason provided.
- If the leave is due to quarantine order or self-quarantine advice, the employee should also include the name of the governmental entity ordering quarantine, or the name of the health care provider advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
- If the leave request is due to a school closing or child care provider unavailability, the employee should include the name and age of the child(ren) requiring care, the name of the school that has closed or place of care that is unavailable, and a statement that no other person will be providing care for the child during the leave period, and any other statement relating to special circumstances.
*Note: A recent court decision removes the obligation that employees must provide documentation in advance – see Court Rules on Emergency Leave Provisions (Aug. 5, 2020)
For employers entitled to the tax credit, also see Q3 and 4 in the Tax Credit section for additional documentation that may be required for substantiating the tax credit.
Q. 11 How long does an employer have to keep records relating to these emergency leave laws?
Employers are required to retain all documentation relating to the emergency leave provisions, including oral statements made by employees, for four years, without regard to whether leave was granted or denied. For employers entitled to the tax credit, also see Q3 and 4 in the Tax Credit section for additional documentation that must be maintained for purposes of substantiating the tax credit.
Q. 12 Who is a health care provider for purposes of certifying an individual’s need to isolate for quarantine?
A health care provider is defined broadly to include a licensed doctor of medicine or osteopathy, and individuals providing health care services such as a nurse practitioner or physician assistant, podiatrists, dentists, clinical psychologists, optometrists, chiropractors, Christian Science Practitioners or other health care provider as defined by traditional FMLA.
Q. 13 Can the emergency paid sick leave law and emergency FMLA leave law overlap?
If an individual qualifies for both laws, i.e., the need for leave is child care responsibilities due to daycare or school closings, the individual could qualify under both laws. The emergency paid sick leave could subsidize the first 10 work days since the emergency FMLA leave need not be paid for the first 10 day period of emergency FMLA leave.
Q. 14 What is the relationship between emergency paid sick leave and traditional FMLA?
One of the reasons an individual could qualify for emergency paid sick leave is when the individual is diagnosed with, or experiencing symptoms of, coronavirus and is being evaluated. If this constitutes a serious health condition as defined under traditional FMLA, it is possible that the individual would be entitled to both leaves. If an individual has used his/her full 12 weeks of traditional FMLA prior to April 1, 2020, the individual would remain entitled to 80 hours of emergency paid sick leave.
Q. 15 How does an employer’s own paid leave program integrate with the emergency FMLA leave law?
An employer should review its existing paid leave policy and determine whether its policy would be available for the type of leave for which the emergency FMLA leave is being granted. Note, many state and local jurisdiction leave laws specifically provide for leave in the event of emergency closures of schools and the like.
Q. 16 What are the consequences if an employer fails to allow its employees to take emergency leave?
An employer is prohibited from discharging, disciplining or discriminating against an employee exercising his/her right to emergency leave. Violation of these provisions could result in monetary penalties assessed by the DOL’s Wage and Hour Division, as well as private causes of action.
Employee Benefit Plan Considerations
Health and Other Benefit Plans
Q. 1 What does the Families First Coronavirus Relief and CARES Act require a health plan to cover?
The Families First Coronavirus Relief Act, as amended by the CARES Act, requires individual and group health plans, including insured, self-funded plans and grandfathered health plans to provide:
- First dollar coverage for testing of COVID-19, including FDA-approved tests, as well as tests provided by labs on an emergency basis, state-developed tests, and any other tests determined appropriate by the Department of Health and Human Services (HHS). To assist in determining approved tests, the Food and Drug Administration (FDA) provides a list of FDA-approved laboratories and manufacturers offering COVID-19 tests.
Further, the DOL/HHS FAQs provide that serological testing (antibody testing) must be covered at no cost to participant once it becomes available, as well as screening for other respiratory illnesses that is performed at the time the individual is being assessed for coronavirus.
A set of FAQs issued by the DOL/IRS/HHS on June 23, 2020 clarify that at-home testing is covered by the mandate as long as it is ordered by a health care provider and is deemed medically appropriate (see FAQ 4). Multiple diagnostic COVID tests must be covered when ordered by a health care provider and are deemed medically appropriate (see FAQ 6). Coverage for COVID testing is not required if used for general surveillance or employment purposes, such as for return to work purposes (see FAQ 5)
With regard to costs for coronavirus testing, health plans are required to reimburse both in-network and out of network costs of testing, in accordance with rates negotiated prior to the declared coronavirus emergency. If there had been no prior out of network negotiated rates in place, then the plan is obligated to reimburse the cost based on the provider’s cash price for the testing. Such amount must be publicly displayed on the provider’s website. The intent of this provision is to mitigate the ability of an out of network provider to send a “surprise bill” to an affected individual; however, the law does not necessarily eliminate surprise medical billing from occurring. Also see FAQs 9-12 relating to balanced billing and out of network costs in a set of FAQs issued by the DOL/IRS/HHS on June 23, 2020.
- Related services received during emergency rooms, urgent care facilities, or in-person or telehealth visits.
The DOL/HHS FAQs clarify that a health plan’s grandfathered status will not be jeopardized as a result of providing this additional coverage. Further, the DOL/HHS FAQs state that employee assistance programs (EAP) and on-site health clinics, which are generally excepted from market requirements of ACA, will not lose their excepted status as result of covering coronavirus testing.
Applicability date. The required coverage for testing applies to items or services furnished on or after March 18, 2020 through the applicable COVID-19 public health emergency period. At this point, we do not know when the national emergency outbreak period will end.
Q. 2. If a vaccine or other preventive measure is developed for coronavirus treatment, will it be deemed a preventive service in accordance with the Affordable Care Act?
The CARES Act provides that if a vaccine or other preventive measure is developed, it will be deemed a preventive service and covered without cost share in accordance with the ACA’s market provisions within 15 days of it being recommended by the U. S. Preventive Services Task Force (USPSTF) or vaccine recommended by the Advisory Committee on Immunization Practices (ACIP). The intent of this provision is to ensure immediate coverage of a preventive service without waiting a one-year delay that is typically required before plan obligated to cover it.
Q. 3 What are some considerations for health plans and other benefit plans?
Expanding benefits. While both insured and self-funded health plans are required to provide coverage for coronavirus testing described in Q. 1, above, health plans may choose to expand coverage for items such as:
- Coronavirus treatment;
- Telehealth and other remote care services; or
- Over-the-counter medications without a prescription.
Review Eligibility Provisions. The eligibility criteria contained in a health plan should be reviewed, with particular focus on the impact on eligibility in the event of termination or reduction in hours, and whether the plan provides for continuation of benefits during a leave of absence. Also see Q. 3 through Q. 6 in Layoffs, Furloughs and Effects on Benefits.
Further, health plans should be reviewed for continuation and conversion rights that may be available to participants, and if so, whether the employer has an obligation to notify affected individuals of their continuation or conversion rights.
Other benefit plans, such as dental, vision, life and disability plans, should be reviewed with particular attention to eligibility as impacted by such factors as a change in hours worked, a change in income, and whether a plan contains an actively at work requirement or a waiver of premium provision.
With regard to a Code Section 125 cafeteria plan, the eligibility provisions contained in each component plan such as a flexible medical spending account (FSA) plans or a dependent care assistance plan, should also be reviewed. In particular, review the eligibility provisions during leave of absence and the payment options that may be available to participants to continue their benefits during a LOA. Typically, there are three options available - a pre-pay, pay as you go, or catch up.
If any plan provisions are not consistent with the employer’s intent, then the plan should be amended, and such change would then be communicated to participants (see Amending Plan Documents and Participant Communications, below).
With regard to coronavirus treatment and telehealth and other remote health care services, it should be noted that some state insurance laws may require coverage of certain of these items or services.
Generally, a telehealth or other remote health care program that provides a medical benefit is deemed to be a health plan subject to the market reform provisions of the Affordable Care Act (ACA). In order to satisfy this requirement, the telehealth program must be offered in conjunction with comprehensive health plan. A set of DOL/IRS/HHS FAQs released on June 23, 2020 provides temporary relief by allowing large employers (those employing 50 or more employees) to offer their telehealth or other remote health care program to certain individuals who are not otherwise eligible for the employer’s comprehensive health plan (see FAQ 14). This temporary relief applies for plan years beginning during the declared emergency. These types of programs are provided relief from complying with the ACA’s market reform provisions but remain subject to certain requirements, such as the prohibition of pre-existing condition exclusions, the prohibition of discrimination against individuals based on health status, the prohibition of rescissions, and the requirements of the federal mental health parity laws (MHPAEA).
With regard to wellness programs, certain contingent wellness programs require individuals to perform an activity or achieve a goal in order to receive a reward. The coronavirus pandemic may have created difficulty for individuals to accomplish the task in order to receive these goals or rewards. A set of DOL/IRS/HHS FAQs released on June 23, 2020 clarify that if a wellness program cannot be properly administered due to coronavirus situation, the employer can choose to waive standards for obtaining a wellness reward, including reasonable alternatives, under a health-contingent wellness program as long as it does so for all similarly situated individuals.
Q. 4. How are employers subject to the Service Contract Act of the Davis Bacon Act impacted by these leave laws?
According to guidance issued by the Department of Labor, if an individual is receiving only EPSL or EMFL benefits, the fringe benefit rate need not be included in the wage determination. If the individual is receiving health coverage in satisfaction of the fringe benefit obligation, then health coverage must be continued during any EPSL or EMFL (see Questions 7 and 8 regarding pay requirements under the FFCRA). If an individual is receiving EPSL or EFML and other paid leave, then the employer would continue providing the fringe benefit rate of up to a maximum of 40 hours per week (2,080 hours annually) on each contract.
Premium Holidays or Credits
Q. 1 Some insurers are offering premium holidays or premium credits. Must these be shared with participants?
In determining whether a premium holiday or premium credit must be shared with plan participants, the first step is to review the relevant plan document to determine how it defines the requirement to share a premium holiday or credit. If the plan document is silent on the matter, then the plan assets rules must be considered. Under these rules, participant contributions always constitute plan assets.
The shared amount of a premium holiday or credit would be based upon how the premium is paid by the employer and employee. For example:
- If an employer pays 80% of the premium and employee pays 20%, the premium holiday or credit would be shared on an 80/20 basis.
- If the employee pays fixed amount and the employer pays the balance, the employer can take full premium holiday or credit once it has been made whole; the balance would go to the participant. The same formula would apply in a reverse scenario if the employer pays a fixed amount and the participant pays the balance.
If the participant is going to receive the benefit of a premium holiday or credit, make certain to review the terms of a cafeteria plan to ensure that the plan contains language allowing an automatic increase or decrease in salary reduction dollars. Further, make certain that the plan language is broad enough to include changes arising out of actions taken by the employer, the employee, or third party.
Extended Timeframes for Certain Benefit Plan Obligations
Q. 1 I’ve heard that there are some required extensions of times for certain plan actions. What are these changes?
The timeframe for individuals to enroll in a health plan based on a HIPAA special enrollment event such as loss of group or other health coverage including coverage under Medicaid or the Children’s Health Insurance Program, or upon the acquisition of a dependent by birth, marriage, adoption, or placement for adoption, is generally 30 days from the event, or, 60 days for CHIPRA-related events. As discussed in our At Issue Supplement and CBIZ article, the Departments of Labor and Treasury issued guidance on April 28, 2020 providing an extension for certain plan actions. The DOL and IRS determined that a period of time, called an “outbreak period” will not count toward the HIPAA special enrollment timeframe. The “outbreak period” began March 1, 2020 (the beginning of the national emergency declared by the President) and will expire 60 days following the end of the national emergency period. At this point, we do not know when the national emergency period will end. Following is an example of how a HIPAA special enrollment period would be tolled:
Mary has a baby on April 15, 2020. The national emergency period is declared to end on July 31, 2020. The outbreak period would end September 29, 2020. Thus, Mary would have 30 days beyond that date (or, October 29, 2020) to enroll the baby, the result of which would effectuate coverage retroactive to the date of birth (April 15, 2020).
Keep in mind that retroactive special enrollment is only available in the case of birth, adoption or placement for adoption. Special enrollment resulting from loss of other coverage or marriage is prospective only.
Q. 2 Are some of the COBRA timeframes extended?
Yes. As discussed above in Q. 1, the DOL and IRS guidance provides for an outbreak period extension (beginning March 1, 2020 and ending 60 days following the end of the national emergency period) for the following COBRA obligations:
- The employer’s 30-day deadline to notify the plan administrator of a qualifying event such as termination or reduction in hours, death, Medicare entitlement, or the employer commencing a bankruptcy proceeding;
- A qualified beneficiary’s 60-day deadline to notify the plan administrator of a divorce or legal separation, loss of dependent child status under the plan, or second qualifying event;
- The 60-day deadline for individuals to notify the plan of a determination of disability;
- The 14-day deadline for plan administrators to furnish COBRA election notices;
- The 60-day deadline for participants to elect COBRA; and
- A COBRA continuee’s 45-day deadline in which to make a first premium payment, as well as the 30-day deadline for subsequent premium payments.
Q. 3 Do the benefit plan relief extensions apply to claims, appeals or external review?
Yes. The extended relief discussed above in Q 1 applies to the following claims, appeals and external review procedures:
- Deadlines for filing claims or appeal of adverse determination
- Deadline for seeking state or federal external review process following exhaustion of internal appeals procedures
- Deadline for filing information to perfect request for external review
- No extension for plan’s obligation to respond to claims, appeals and external review
Health Savings Accounts
Q. 1 Does the coronavirus situation raise any HSA issues?
The extension of the federal tax filing due date to July 15, 2020 announced by the IRS likewise extends the 2019 health savings account (HSA) contribution due date. As a reminder, an HSA contribution for a tax year can be made any time up to the individual’s tax filing due date. The 2019 HSA contribution limitations continue to apply. But, if an individual did not max out his/her HSA contribution for 2019 and would like to do so, the individual has until July 15, 2020 to make the contribution. The account holder should identify the contribution as being for the 2019 tax year.
Q. 2 Does telemedicine raise any issues for HSA eligibility?
As a reminder, to be HSA-eligible, the individual must be covered by a high deductible health plan (HDHP) that includes a statutory minimum deductible. Generally, no medical expenses including telemedicine or telehealth services can be reimbursed prior to satisfaction of the HDHP minimum deductible. The CARES Act provides that an HSA-compatible HDHP can generally reimburse telemedicine services, not just those limited to coronavirus testing, prior to satisfaction of the minimum statutory deductible without jeopardizing HSA eligibility. This provision applies to plans years beginning on or before December 31, 2021 (effectively before 2022 plan year).
Note, the CARES Act does not modify prior IRS guidance issued on March 11, 2020 (IRS Notice 2020-15) that includes a similar safe harbor relating to HSA eligibility if an HSA-compatibility HDHP covers in full, or in part, the cost for testing and treatment of the coronavirus. That safe harbor was provided for the sole purpose of encouraging and facilitating diagnosis and treatment of the coronavirus. IRS Notice 2020-29 (issued May 12, 2020) makes the HSA-telehealth service rules applicable retroactively to January 1, 2020. For example, if an otherwise eligible individual covered under an HDHP received telehealth or other remote care services under an HDHP on February 15, 2020, prior to satisfying the HDHP deductible, then he/she would not be disqualified from contributing to an HSA during 2020. This guidance also allows for first dollar coverage for ancillary testing prescribed by a provider in conjunction with coronavirus.
Q. 1 If my health plan, whether insured or self-funded, offers a voluntary special enrollment event, would this permit individuals to change their Section 125 cafeteria plan election?
Generally, a Section 125 cafeteria plan election is binding for 12 months. The election can only be changed if certain status change events occur. Included among the permissible status change events of a cafeteria plan is when there is a change in cost or coverage. The relevant cafeteria plan document must specify the status change events in the plan and any change made must be consistent with the event. Also see Q. 6 in Layoffs, Furloughs and Effects on Benefits.
Whether a voluntary special enrollment event would entitle an individual to make an election change depends on facts and circumstances, and whether the Section 125 cafeteria plan contains the specific language that would allow an election change. If it is determined that the salary reduction election cannot be changed, then determine whether the payroll system can accommodate an after-tax employee contribution methodology.
Temporary mid-year election changes. As discussed in our At Issue and CBIZ article, the IRS recently issued guidance (IRS Notice 2020-29) that temporarily permits, but does not require, Section 125 cafeteria plans to allow mid-year election changes by participants, on a prospective basis. The types of permitted election changes applicable to employer-sponsored group health coverage are:
- Elect previously declined coverage;
- Change existing coverage to another option, or type of coverage (single to family); and/or
- Drop previously elected coverage. In this instance, the individual must attest, in writing, that he/she has other coverage.
For this purpose, health coverage is broadly interpreted to include vision and dental coverage. These status change opportunities do not apply to benefits such as life insurance, disability, vacation buying and selling, and similar programs, by way of example.
Employers considering offering voluntary mid-year enrollment opportunities must confirm with their insurer and stop loss carrier (as applicable) that their plan(s) can be amended to likewise allow these enrollment opportunities.
Further, if one or more of these changes is elected by the employer/plan sponsor, the relevant plan must be amended to provide for the change(s). An amendment for the 2020 plan year must be adopted on or before December 31, 2021, and may be made applicable back to January 1, 2020. At the point a decision has been made to accommodate any election changes, the plan must be administered in accordance with the change prior to the actual date the plan is amended. Individuals eligible to participate in the relevant plan must be notified of the change(s). Be aware of all other applicable rules, including discrimination rules as a result of making any changes.
Q. 2 Can an individual ever change his/her spending account limits in a flexible medical spending
account (FSA) plan or dependent care assistance plan (DCAP)?
As mentioned above in Q. 1, elections made in an FSA plan or DCAP are binding for 12 months. The election can only be changed if certain status change events occur. For 2020 only, the IRS is temporarily allowing, but are not requiring, these types of plans to permit individuals to revoke their elections, make a new election, or decrease or increase an existing election on a prospective basis (see our discussion in the At Issue and CBIZ article).
If one or more of these changes is elected by the employer/plan sponsor, the relevant plan must be amended to provide for the change(s). An amendment for the 2020 plan year must be adopted on or before December 31, 2021, and may be made applicable back to January 1, 2020. The plan must be administered in accordance with the change prior to the actual date the plan is amended. Individuals eligible to participate in the relevant plan must be notified of the change(s). To minimize the risk of loss, consider only allowing changes to those who have not already overspent their FSA or DCAP account. Be aware of all other applicable rules, including discrimination rules as a result of making any changes.
Q. 3 What happens if an individual has money in their FSA or DCAP that they could not use before
the end of the plan year?
If an employer offers a plan year that ends in 2020, or a grace period (a period of time during which claims can continue to be incurred) that ends in 2020, an FSA plan or DCAP may, but is not required to, allow individuals to incur claims through December 31, 2020. If the plan decides to allow this feature, the plan will need to be amended, which must be accomplished by December 31, 2020; but the plan must be administered in accordance with the change prior to the actual date the plan is amended. And, the change must be communicated to participants. Be aware of all other applicable rules, including discrimination rules as a result of making any changes.
It is also important to note that unused monies left in an FSA plan account or DCAP account cannot be refunded to plan participants, i.e., no cash out of the account is permitted.
Q. 4 I’ve heard that there are changes to the carryover rule applicable to FSA plans. If so, what
An FSA plan may, but is not required to, include a provision that allows unused dollars to be carried over to the subsequent plan year. The maximum amount that a plan can allow to be carried over has historically been capped at $500. The law has been permanently changed such that the limit is now tied to a cost of living adjustment (see our discussion in the At Issue and CBIZ article). The indexed limit equals 20% of the salary reduction limit, currently $2,750 for 2020. The first adjustment of the maximum amount of the carryover is increased from $500 to $550.
Amending Plan Documents and Participant Communications
In all instances where the terms of a benefit plan change, the insurer, and by stop loss insurer for a self-funded health plan, must be consulted and agree to any change. The change should be documented in accordance with the plan’s amendment process contained in the relevant plan. Once the change has been made to the plan document or contract, it must also be communicated to participants (see Q. 4 below).
Q. 1 Are any plan amendments required as a result of the coronavirus situation?
Yes. An amendment to a health plan may be required, such as for inclusion of the COVID-19 testing mandate imposed by the FFCRA and CARES Act (see Q. 1 under Health and Other Benefit Plans, above).
Q. 2 Are there other plan amendments that may be needed as a result of the coronavirus
Possibly. See Q. 3 in Health and Other Benefit Plans (above) discussing potential changes that could be made in health plans and other benefit plans. Further, if one or more of the temporary status changes discussed above in the Cafeteria Plan section is elected by the employer/plan sponsor, the relevant plan(s) must be amended to provide for the change(s).
Q. 3. How is a plan amended?
The plan document should include a procedure to accomplish amendments.This procedure should be followed.
Q. 4 How should a change to a benefit plan be communicated?
If a benefit plan requires an amendment, and such amendment has been accomplished in accordance with the plan’s amendment process, and such change has been approved by the insurer, and by the stop loss insurer for a self-funded plan, then confirm with the insurer as to whether it will be communicating the plan changes to participants.
As a general rule, plans subject to ERISA are obligated to communicate plan changes through a summary plan description (SPD). The general timing rule for distributing an SPD reflecting plan changes is once every five years following its initial distribution. A summary of material modification (SMM) is a document that can be used to communicate changes occurring between issuances of an SPD. Generally, a SMM need not be provided until 210 days following the close of the plan year, unless the change results in a reduction of benefits, in which case, a special notice must be provided. Specific to health plans, if a change results in material reduction in benefits, a special notice of the benefit reduction must be provided to plan participants within 60 days of adopting the change. Since coronavirus testing would be a material enhancement, rather than a reduction of benefits, the special 60-day notice would not be required. However, an SMM reflecting a plan change must be communicated as soon as practicable.
With regard to a summary of benefits and coverage (SBC), if the information contained in the SBC is changed mid-year, the general rule requires a 60-day advanced notice of the change. Recent DOL/HHS FAQs affirm that no violation will be asserted by the agencies for coronavirus-related changes that are not communicated timely, as long as they are communicated as soon as possible.
Q. 5 Are there any extensions for providing an SPD or SMM to plan participants?
Yes. The DOL issued a Disaster Relief Notice that provides certain relief for plan sponsors with regard to their general ERISA compliance obligations, such as a plan administrator’s obligation to provide a summary plan description (SPD) or summary of material modification (SMM) and the like within the required timeframes but only as long as the failure to timely provide the required documents is solely attributable to COVID-19 related issues, and as long as the plan administrator is working in good faith to otherwise comply with its reporting and disclosure obligations. The DOL/IRS/HHS FAQs affirms that as long notification of any plan change is provided as soon as practicable, and as long as it is clear about the duration of the change, then the plan sponsor will be deemed to have timely informed participants. Based on this guidance, it is prudent to make certain that any SMM is clear about the duration of any temporary benefit enhancement. The DOL sanctions the use of electronic media for communicating required plan communications to participants through the use of email, text messages, and continuous access websites.
With regard to individual coverage health reimbursement arrangements (IC-HRA), the employer/plan sponsor is obligated to provide a written notice about the availability of the program to all eligible employees at least 90 days prior to the beginning of each plan year. Because there may be delays for individuals enrolling in individual coverage who wish to participate in an IC-HRA, and because 2020 may be the first year that an IC-HRA is offered, the DOL/IRS/HHS FAQs encourage employer/plan sponsors to notify these individuals as soon as practicable about the importance of enrolling in individual health coverage through an open or special enrollment period for those who newly gain access to an IC-HRA. The notice should be provided in advance of the first day to which the IC-HRA is available so that they individuals have sufficient time make an informed decision as to whether or not to enroll in the IC-HRA or take advantage of a special enrollment opportunity.
Layoffs, Furloughs and Effects on Benefits
Q. 1 What is a layoff?
A layoff is a reduction in force resulting in a termination of employment.
Q. 2 What is a furlough?
A furlough is a temporary suspension of work that does not constitute a termination of employment.
Q. 3 What happens to benefit eligibility during a lay-off or a furlough?
For health coverage purposes, the first step is to review the eligibility language contained in the health plan and/or insurance contract. If the eligibility language is contingent on working a set number of hours and if the furlough causes the individual to lose eligibility due to the reduction in hours, then COBRA or a state continuation coverage would apply because there is a reduction in hours that results in a loss of coverage. In this instance, COBRA should be offered. The employer could choose to subsidize all or a portion of the COBRA premium for a period of time. If this is done, it should be made very clear in the election process.
If the eligibility language is not contingent on being regularly scheduled to work a certain number of hours in a week, for example, if the eligibility language mirrors an ACA’s employer shared responsibility provision relating to an employer’s stability period, then the furlough would not cause a loss of coverage. The employer should explain how individuals should pay their premiums during the leave. The employer would continue to pay its share.
Keep in mind failure to pay premium typically results in loss of coverage. A loss of coverage resulting from a failure to pay premium is not a COBRA qualifying event.
Q. 4 How should employee contributions toward their benefit programs be paid during a leave of absence?
The employer should follow the terms of its health plan and its past practices with regard to employee contributions, as well as other benefit programs, during a leave of absence (LOA). Make certain to review any IRC Section 125 cafeteria plan provisions regarding continued participation and method for payment of premium during an LOA. Generally, cafeteria plans offer three methods for payment of premium: a pay as you go option, catch up option or pre-pay option. Make certain to communicate all obligations to employee/participants clearly, and as soon as possible.
Q. 5 What happens to eligibility under benefits such as life insurance and disability?
The terms and conditions of the governing plan and insurance contract govern. Be aware of actively at work provisions contained in the plan and insurance contract that could affect continued eligibility. Review the plan/contract for any leave of absence provisions. If eligibility is lost, be aware and communicate any conversion options available to the employee/participant. For life insurance, be aware of any waiver of premium standards contained in the contract.
Q. 6 Can individuals change cafeteria plan elections?
The terms and conditions of the cafeteria plan govern. Look for status change events contained in the plan documents. Be aware that any status change event must satisfy the consistency rule. Also note, many plans include an election change resulting from change in cost of coverage or change in benefit availability. Note, a change in cost of coverage does not allow a change to an individual’s flexible medical spending account. For 2020, certain temporary relief has been granted - see Temporary mid-year election changes in the Cafeteria Plan section above.
With regard to a dependent care assistance plans (DCAP), the plan could allow a participant to change his/her election in the event of a change in daycare provider. However, a DCAP participant can only claim expenses under a DCAP when he/she is gainfully employed or when seeking employment. A short absence is permissible without causing the individual to allocate the time as ‘time not worked’. If the individual’s hours are reduced or the individual is laid off, then he/she would not be able to use monies from the DCAP to stay home to care for child. For 2020, certain temporary relief has been granted - see Qs 2 and 3 in the Cafeteria Plan section above.
Q. 7 If my place of business is closed, or my employees are laid off or furloughed prior to requesting leave, whether occurring before or after April 1 when the law takes effect, are impacted employees entitled to either types of emergency leave?
No, employees are not entitled to either types of emergency leave if they have been furloughed, or, if the place of business has closed, either before or after the emergency leave laws take effect.
Q. 8 If an individual is receiving emergency leave of either type, and then my business has to close, do I need to continue to pay for leave?
No. You would only need to pay for leave provided prior to the date the business is closed.
Q. 1 How does an employer get a tax credit for providing these leaves?
In both types of emergency leave, the employer pays for the leave but is entitled to a dollar for dollar reimbursement through a refundable tax credit. Note, the tax credit is only available to private sector employers employing between 1 and 499 employees who provide the leave.
The IRS together with the Departments of Labor and Treasury, issued guidance on March 20, 2020 addressing how an employer can get an immediate reimbursement for the emergency paid sick leave and emergency FMLA leave provided to affected employees. While employers are obligated to compensate employees for the emergency PSL and emergency FMLA leave to which an employee becomes entitled, employers can re-coup, dollar for dollar, amounts paid out, up to the prescribed caps. According to this guidance, an employer can retain both federal income tax withholding, and the employer and employee share of FICA (Social Security and Medicare) for all employees to compensate itself for disbursement of emergency PSL and emergency FMLA amounts. On March 27, 2020, the IRS released further guidance (Notice 2020-21) relating to how both types of leave apply to wages and compensation paid for periods beginning on April 1, 2020 and ending on December 31, 2020.
On March 31, 2020, the IRS released a set of FAQs to assist employers on how to claim tax credit. If the amount with which the employer can reimburse itself for insufficient, the employer can file a Form 7200, Advance Payment of Employer Credits Due to COVID-19 to claim an advanced refund of the balance. All amounts taken for emergency leave tax credits are reported on the Form 941.
These FAQs also clarify what amounts are available for the tax credit. Of particular note:
- FAQs 20-24 address how to determine amount of tax credit for purposes of emergency paid sick leave wages
- FAQs 25-30 address emergency FMLA wages
- FAQs 31-36 address how to calculate qualified health plans expenses.
The tax credit is based on an individual’s regular rate of pay (or, if higher, the federal minimum wage or any applicable state or local minimum wage), not to exceed the maximum amounts provided under the relevant paid leave laws. Included in the credit amount is the employer’s portion of Medicare tax imposed on paid leave wages and allocable health plan expenses. Special rules apply for those subject to the Railroad Retirement Tax Act.
Q. 2. Is there a tax credit for providing health coverage during emergency paid sick leave and emergency FMLA leave?
Yes. A tax credit is available for cost of health coverage continued during a period of leave.
IRS FAQs 31-36 address how to calculate qualified health plans expenses. An employer can take the tax credit for both the employer and employee share of health coverage. The employee share taken is based on the amount paid on pre-tax basis through a Section 125 (cafeteria) plan. Any portion paid by the employee with after-tax dollars cannot be taken as part of the credit.
Further, amounts paid on behalf of individuals to a health reimbursement arrangement (HRA) including an individual coverage-HRA and a flexible medical spending account (FSA) plan are included. However, no tax credit is available for employer contributions to an individual’s health savings account (HSA), Archer MSA or a qualified small employer HRA (QSEHRA).
These FAQs provide a couple methods for determining the daily tax credit. Generally, for both insured and self-funded plans, the IRS indicates that a reasonable method can be used; for example, both types of plans can use the COBRA equivalent rate. A self-funded plan could use an actuarial determination.
An insured plan can use a one average premium rate for all employees, or a similar method based on average premium determined separately for employees with single and family coverage. The pro rata calculation can be based on the employer’s overall annual premium for the employees covered by the policy, divided by the number of covered employees, divided by the average number of work days during the year by all covered employees. The IRS provides the following example:
An employer sponsors an insured group health plan covering 400 employees, some with self-only coverage and some with family coverage. Each employee is expected to have 260 work days a year (5 days a week for 52 weeks.) The employees contribute a portion of their premium by pre-tax salary reduction, with different amounts for self-only and family. The total annual premium for the 400 employees is $5.2 million (this includes both amounts paid by the employer and employees salary reduction).
For an employer using one average premium rate for all employees, the average annual premium rate is $5.2 million divided by 400, or $13,000. For each employee expected to have 260 work days a year, this results in a daily average premium rate equal to $13,000 divided by 260, or $50. That $50 is the amount of qualified health expenses allocated to each day of paid sick or family leave per employee.
For part time employees, the IRS guidance indicates that employers can use any reasonable method for calculating their work days.
Q. 3 As an employer, what records can I request from my employees, and what records to I need to substantiate the tax credit?
The IRS provides a list of documents that employers can request from their employees in FAQs 44 and 45. Generally, these include:
- The employee’s written request for the leave, the dates and reasons for the leave, and whether the individual is unable to work or telework.
- If the leave is due to quarantine order or self-quarantine advice, the employee should also include the name of the governmental entity ordering quarantine, or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
- If the leave request is due to a school closing or child care provider unavailability, the employee should include the name and age of the child(ren) requiring care, the name of the school that has closed or place of care that is unavailable, and a statement that no other person will be providing care for the child during the leave period, for which the employee is receiving emergency FMLA leave and, with regard to the employee’s inability to work or telework due to the need to provide care for a child older than 14 during daylight hours, and any other statement relating to special circumstances.
In addition, an employer should keep the following records:
- Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave;
- Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages;
- Copies of any completed and submitted Forms 7200; and
- Copies of the completed and submitted Forms 941.
Q. 4 How long is an employer required to keep these tax credit records?
The IRS requires all records of employment taxes to be kept for at least 4 years following the date the tax becomes due or is paid, whichever comes later.
Notice Obligations: EPSL and EFML Leave
Q. 1 Do employers have a notice obligation?
Yes. Both the emergency paid sick leave and emergency FMLA leave impose an employer notice obligation. The DOL issued a model poster (available in 9 languages) that can be used for this purpose, together with FAQs about the posting requirement.
Q. 2. What are the methods for providing the notice to employees?
Generally, the poster must be placed in a conspicuous place where the employer generally places its other federal workplace postings. Given that many employees are now working remotely, the DOL states that the poster can also be posted on the employer’s internal or external website, or it can be emailed or otherwise electronically delivered to employees. The DOL affirms that the poster need not be provided to applicants nor does it need to be provided to individuals laid off. It does, however, need to be provided to new hires. Currently, the poster does not need to be provided in any language other than English, but the DOL indicates that it will prepare it in other languages.
In addition, the DOL provides fact sheets for Employee Paid Leave Rights (available in English and Spanish), and Employer Paid Leave Requirements (available in English and Spanish), a set of FAQs, along with other workplace guidance on its dedicated COVID-19 website.
Q. 3 Do employees have a notice obligation?
Generally, an employee requesting emergency leave should do so in accordance with the employer’s existing leave of absence policy. For purposes of requesting emergency paid sick leave or emergency FMLA leave, employees are obligated to provide reasonable oral or written notice to the employer of the need to take the leave as soon as practicable. Such notice need not be required to be provided in advance, and can only be required following the first workday the employee takes the emergency leave. Notice can be provided by the employee’s spouse, adult family member, or other responsible party if the employee is unable to do so personally.
If the employee fails to give proper notice, the employer should notify the individual about his/her notice obligation, and provide an opportunity to provide the required documentation prior to denying the request for leave.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.