FAQ - Coronavirus: Impact on Benefits and Employment

Summary

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.

The Families First Coronavirus Relief Act (FFCRA) mandate and tax credit initially expired December 31, 2020. The Consolidated Appropriations Act (CAA) of 2021 (Pub. L. 116-260, enacted December 27, 2020) did not extend the mandate, but allowed employers to continue to make the leave available and claim a tax credit through March 31, 2021. The American Rescue Plan Act (“ARP”, Pub. L. 117-2, enacted on March 11, 2021) further extended the tax credit to employers who choose to continue to make this leave available through September 30, 2021. The American Rescue Plan Act also provides a COBRA subsidy for assistance eligible individuals, as described below.

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.

Topics

COVID-19 Testing and Vaccines

Emergency Paid Sick Leave (EPSL)

Emergency Family and Medical (FMLA) Leave (EFML)

Coordinating EPSL and FMLA Leave Provisions

Notice Obligations: EPSL and EFML Leave

Tax Credit

COBRA Premium Subsidy

Employee Benefit Plan Considerations

Layoffs, Furloughs and Effects on Benefits


COVID-19 Testing and Vaccines

 

Q1.  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 (1) 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). Plans must also provide (2) related services received during emergency rooms, urgent care facilities, or in-person or telehealth visits.

Applicability date. The required coverage for testing applies to items or services furnished on or after March 18, 2020 through the end of the declared COVID-19 public health emergency. The Secretary of Health and Human Services declared the COVID-19 pandemic a public health emergency on January 27, 2020. The declaration can be renewed by the Secretary as necessary. On April 15, 2021, Secretary of HHS Xavier Becerra renewed the determination of a public health emergency due to COVID-19, effective April 21, 2021 (clickable link). The current determination lasts until July 20, 2021.

Additional information regarding types of tests that must be covered:

Information regarding workplace testing:

Information regarding billing and reimbursements for testing:

  • 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. See FAQs 9-12 relating to balanced billing and out of network costs in DOL/HHS FAQs About Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES Act) Implementation (Part 43) issued June 23, 2020 (clickable link).

Information for grandfathered plans:

Q. 2  Are vaccine or other preventive measures developed for coronavirus treatment deemed a preventive service in accordance with the Affordable Care Act?

The CARES Act provided that vaccines or other preventive measures developed would be deemed preventive services and therefore covered without cost share, in accordance with the ACA’s market provisions. The coverage must begin within 15 business days of the vaccine or preventive measure’s approval by the U. S. Preventive Services Task Force (USPSTF). The intent of this provision is to bypass the one-year delay generally required before a plan is obligated to cover a preventive service.

For the duration of the public health emergency, in-network and out-of-network vaccine administration must be covered at no cost to the individual. Generally, the ACA only requires first dollar coverage of preventive services provided in-network. At this time, it is advisable that both the medical and the pharmacy benefit, if applicable, cover the vaccine.

The Secretary of Health and Human Services declared the COVID-19 pandemic a public health emergency on January 27, 2020. The declaration can be renewed by the Secretary as necessary. On April 15, 2021, Secretary of HHS Xavier Becerra renewed the determination of a public health emergency due to COVID-19, effective April 21, 2021 (clickable link). The current determination lasts until July 20, 2021.

  • The Pfizer vaccine was granted emergency use authorization on December 11, 2020 and was designated as an ACA preventive service effective January 5, 2021.
  • The Moderna vaccine was granted emergency use authorization on December 18, 2020 and was designated as an ACA preventive service effective January 12, 2021.
  • The Johnson & Johnson vaccine was granted emergency use authorization on February 27, 2021 and was designated as an ACA preventive service effective March 19, 2021.

At this time, individuals age sixteen years and older are eligible to receive the vaccine. The vaccine product will be paid for by the federal government as long as certain conditions are met. The health plan will be responsible for the administration cost such as an office visit for the delivery of the vaccine. In no event, can an individual be balance billed, at least for the duration of the public emergency. See Q.1 in this section. This is an evolving issue and may change over time.

Q. 3  What does it mean to have emergency use authorization?

Emergency use authorization is a mechanism for the FDA to facilitate the availability of a medical item or service prior to full review. An emergency use authorization requires an explanation. The vaccine provider must provide a notice explaining the safety standards for the vaccine and indicate that the vaccine is voluntary not mandatory, see the FDA’s webpage, Emergency Use Authorization for Vaccines Explained (clickable link).

Q.4  Can (and should) the employer mandate that employees get a COVID-19 vaccine?

The EEOC suggests that employers can mandate the coronavirus vaccine as long as certain conditions are met.* The Equal Employment Opportunity Commission (EEOC) webpage, What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws, updated December 16, 2020 (clickable link), is a helpful page for employers navigating the do’s and don’ts of COVID-19 workplace options, requirements, and accommodations. It is recommended reading for any employer contemplating a vaccine strategy. On that webpage, Section K discusses COVID-19 vaccinations in relation to:

  • Americans with Disabilities Act (ADA)and Vaccinations
  • ADA and Title VII Issues Regarding Mandatory Vaccinations
  • Genetic Information Nondiscrimination Act (GINA) and Vaccinations

If an individual protected by the ADA objects to obtaining the vaccine, the individual’s employer must engage in the interactive process to determine whether a reasonable accommodation can be made that would allow the objecting individual to continue to work, without obtaining the vaccine. If it is determined that (1) no reasonable accommodation can be made and that (2) not being vaccinated creates a direct threat to the health or safety of the individual or others in the organization, the employer can exclude the individual from the workplace but cannot necessarily terminate the individual.

If an individual objects to obtaining the vaccine based on a religious ground, the employer must engage in the interactive process to determine whether a reasonable accommodation can be made that would allow the individual to continue to work.

*State law might impact the employer ability to mandate vaccine. See Q.10 in this section.

Employers with unionized workforces may need to bargain for a mandatory-vaccination program. Employers should consider whether an employee’s refusal to get vaccinated would constitute just cause for any subsequent grievance or arbitration hearings stemming from a termination.

Q.5  What are the pros and cons of offering a vaccine program vs. obtaining proof of vaccine?

According to the EEOC, the vaccine itself does not raise medical issues. However, the pre-vaccine medial questionnaire is a medical inquiry subject to the ADA and hence, must be voluntary. If the employer offers a vaccine program, it would necessarily involve a medical inquiry raising ADA compliance issues. If the employer simply asks for proof that an employee has received a vaccine, no ADA issues are raised as long as the employer is only requiring documentation of the vaccine and not the corresponding medical information. If, however, an individual declines to obtain a vaccine and if the employer asks follow-up questions about the declination. ADA issues would be raised if the declination was due to a medical reason. If the declination was due to religious opposition, Title VII and religious discrimination issues would be raised. In both instance the employer would need to engage in the interactive process to determine whether a reasonable accommodation could be made. See Q.4 in this section.

Voluntary vaccine programs generally allow broader discretion regarding incentive. See Q.7, in this section.

Q.6  Is a vaccine program a health plan?

Whether a vaccine program is a health plan depends on many factors. There is some precedent indicating that a seasonal influenza vaccine program is a health plan. If the vaccine program is determined to be a health plan, it is subject to the ACA’s market provisions and must be offered as part of the employer’s comprehensive health plan. It is possible that a vaccine program could be treated as insignificant health coverage and hence, could be included as part of a benefit plan excepted from the ACA’s market provisions, such as an Employee Assistance Program or an on-site clinic.

The DOL/HHS FAQs About Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES Act) Implementation (Part 44) issued February 26, 2021 (clickable link), affirms that an employee assistance program, an on-site clinic, or similar excepted benefit program can offer a vaccine program without losing excepted benefit status. In either instance, COBRA would apply.

Proof of vaccine from an independent third party (as in Q.5 above) is not a health plan.

Q.7  What incentive can be offered to encourage participation in a vaccine program?

The nature and amount of any incentive depends on a number of factors. If the vaccine program involves a medical inquiry or physical exam, ADA issues arise. The wellness regulations proposed in early 2021 (currently withdrawn) would have provided that there can be no more than a de minimis incentive, such as a water bottle or t-shirt, provided to encourage vaccination. Vaccine programs that are part of a HIPAA-compliant contingent wellness program can provide incentives of up to 30% of the cost of coverage.

To qualify as a HIPAA-compliant contingent wellness program, the wellness program must be outcome-based or activity-only and must meet five criteria:

  • Amount of reward, not more than 30% (50% for tobacco)
  • Eligible to qualify at least once per year
  • Available on an uniform basis to all similarly situated individuals
  • Not unduly burdensome, promote health and prevent disease
  • Reasonable alternative and notice of such

If the vaccine program incentive does not raise ADA issues (no medical inquiry or physical exam) or if the vaccine program is not a HIPAA-contingent program, the employer has broader discretion to encourage participation in a strictly voluntary program where the vaccine is obtained from an independent third party and assuming the employer does not request follow-up information about why the vaccine may have been declined.

Q.8  What are the privacy considerations for the vaccine?

Keep all vaccine records in a confidential file separate from the general HR file. HIPAA privacy should be considered if vaccine program is part of a health plan.

Q.9  How will the coronavirus vaccine be prioritized for distribution?

The Centers for Disease Control (CDC) provides each State with guidance for distribution protocols. States have discretion to implement the guidance. Each state submitted a plan to the CDC but has the right to modify their distribution plans, see Q.11 in this section.

This article by the Kaiser Family Foundation, “How are States Prioritizing Who Will Get the COVID-19 Vaccine First?” (clickable link), may be useful to those monitoring the vaccine distribution process.

Q.10  What laws should employers consider when developing a COVID-19 policy?

Anti-Discrimination Laws:

  • Title VII prohibiting discrimination based on race, color, religion, sex and national origin.
  • The Americans with Disabilities Act (ADA).
  • Some state legislatures (New York) are beginning to consider legislation mandating COVID vaccine protocols.
  • State or local protocols could either (1) mandate vaccines or (2) prohibit employers from mandating vaccines.

State/Local Mandates

COBRA and ERISA:

  • To the extent that the vaccine program constitutes a health plan, the program is subject to COBRA and ERISA.
  • In all instances, medical information must be kept confidential and must be kept in a file separate from the general HR file.
  • Workers compensation: Employers must consider this issue as it relates to a mandatory vaccine program.
  • Collective bargaining obligations. A COVID vaccine mandate might be a mandatory subject of bargaining.

ACA:

HIPAA (Privacy and Confidentiality Laws):

  • In all instances, medical information must be kept confidential and must be kept in a file separate from the general HR file.
  • Workers compensation: Employers must consider this issue as it relates to a mandatory vaccine program.
  • Collective bargaining obligations. A COVID vaccine mandate might be a mandatory subject of bargaining.

Other Laws:

  • Workers compensation: Employers must consider this issue as it relates to a mandatory vaccine program.
  • Collective bargaining obligations. A COVID vaccine mandate might be a mandatory subject of bargaining.

Q.11  What resources are available to assist employers in developing a COVID-19 policy?


 Emergency Paid Sick Leave (EPSL)

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 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 the Emergency Family Medical Leave section. The employer counts employees on the date the employee’s leave commences.

*The American Rescue Plan Act makes a tax credit available to employers who voluntarily choose to extend emergency paid sick leave and emergency paid family leave from April 1, 2021 to September 30, 2021. The tax credit is available to private for-profit and non-profit employers with fewer than 500 employees, as well as public sector employers, i.e. state and local governments that are not 501(c)(1) organizations.

Small employer exemptionThe 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 the Coordinating EPSL and EFML Provisions section.

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:

  • Individual is subject to quarantine/isolation order
  • Healthcare provider has advised individual to self-quarantine
  • Individual is experiencing COVID-19 symptoms and is seeking a diagnosis
  • Individual is caring for someone who is subject to a quarantine/isolation order or who has been advised by a healthcare provider to self-quarantine
  • Due to COVID-19 precautions, the school or place of care of the individual’s son/daughter is closed, or the son/daughter’s childcare provider is unavailable
  • Other substantially similar condition as specified by Secretaries of HHS, Labor, Treasury

The American Rescue Plan Act added the following grounds of permissible sick leave:

  • Individual is awaiting COVID-19 test results
  • Employee has been exposed to COVID-19 and is unable to work pending test
  • Employee is obtaining COVID-19 vaccine
  • Employee is recovering from injury/disability/illness related to vaccine

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 Provisions section 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?

  • Full-time employees: up to 80 hours of leave for qualifying reasons.
  • Part-time employees (those regularly scheduled to work fewer than 40 hours per week): pro-rata amount of leave based on average hours worked in a two-week period.
  • Variable-hour employees: 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.

Note: The American Rescue Plan Act makes an additional 10 days of emergency paid sick leave available, beginning April 1, 2021. Employers may, but are not obligated to, make this leave available.

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. Note: employers may but are not required to allow employees to use previously unused PSL through September 30, 2021 (previously March 31, 2021). The American Rescue Plan Act “resets” the 10 day allotment for employers who choose to extend paid leave beginning April 1, 2021.

Q. 6  How much is an individual entitled to under the emergency paid sick leave law?

The maximum emergency paid sick leave amounts payable vary based on the reason for absence:

  • Employees who take leave for reasons related to their own care needs can receive compensation at their regular rate, up to a maximum of $511 per day ($5,110 total).
  • Employees who take leave for reasons related to the care needs of a family member can receive compensation of two-thirds of their regular rate, up to a maximum of $200 per day, ($2,000 total). See Q.5 in the Coordinating EPSL and EFML Provisions section for definition of son or daughter

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 Provisions section.

Q. 8  What happens if an individual is in a waiting period and then goes out on emergency paid sick leave?

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 the Notice and Obligations section.

Q. 11  Is an employer required to keep records relating to emergency PSL?

Yes. See Q.10 in the Coordinating EPSL and EFML Provisions section.

Q. 12  When does the emergency paid sick leave law take effect?

The emergency paid sick leave provision took effect April 1, 2020 and expired on December 31, 2020.It is not retroactive and any leave taken prior to April 1 will not offset available leave under these laws. The American Rescue Plan Act does not extend the mandate, but it extends the tax credit to employers who choose to continue to make this leave available through September 30, 2021.

 


Emergency Family and Medical (FMLA) Leave (EFML)

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 the Coordinating EPSL and EFML Provisions section for additional Q&As.

Q1.  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 exemptionThe 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 the Coordinating EPSL and EFML Provisions section.

*The American Rescue Plan Act makes a tax credit available to employers who voluntarily choose to extend emergency paid sick leave and emergency paid family leave from April 1, 2021 to September 30, 2021. Additional information. The tax credit is available to private for-profit and non-profit employers with fewer than 500 employees, as well as public sector employers, i.e. state and local governments that are not 501(c)(1) organizations.

Q. 2  Which employees are entitled to emergency FMLA leave?

Any employee who has worked for their employer for at least 30 calendar days is eligible for emergency family medical leave. The individual must 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.

Part-time employees are eligible for emergency FMLA leave. 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.

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 the Office of Personnel Management (clickable link) for specific guidance.

Previously, emergency medical leave was only available to employees 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. See Q.5 in the Coordinating EPSL and EFML Provisions section for the definition of son or daughter. The American Rescue Plan Act expanded the qualifying reasons to use emergency family medical leave. See Q.3., below.

Q. 3  For which reasons is emergency family leave available?

The American Rescue Plan Act greatly expanded permissible family leave to include reasons of COVID-19 testing and vaccine (and vaccine recovery), plus the reasons previously only included as emergency paid sick leave. An individual is eligible for emergency family leave for the reasons listed below:

  • Individual is awaiting COVID-19 test results
  • Employee has been exposed to COVID-19 and is unable to work pending test
  • Employee is obtaining COVID-19 vaccine
  • Employee is recovering from injury/disability/illness related to vaccine
  • Individual is subject to quarantine/isolation order
  • Healthcare provider has advised individual to self-quarantine
  • Individual is experiencing COVID-19 symptoms and is seeking a diagnosis
  • Individual is caring for someone who is subject to a quarantine/isolation order or who has been advised by a healthcare provider to self-quarantine
  • Other substantially similar condition as specified by Secretaries of HHS, Labor, Treasury
  • Due to COVID-19 precautions, the school or place of care of the individual’s son/daughter is closed, or the son/daughter’s childcare provider is unavailable
  • Due to a public health emergency, the school or place of care of the individual’s son/daughter is closed, or the son/daughter’s childcare provider is unavailable, and therefore the individual is unable to work.

Q. 4  My child’s school has announced that it is re-opening for the fall semester. Am I still entitled to take emergency FMLA leave?

It depends. The DOL issued three new FAQs on August 27, 2020 addressing several scenarios (see FAQs 98-100 here (clickable link)):

  • If a school gives an employee-parent the choice between in-person and remote learning, and if the employee-parent chooses remote learning, then the employee-parent would not be entitled to EFML.
  • If school is providing a hybrid learning methodology whereby a student can only be in-person certain days of week and must be remote other days of the week, the employee-parent is entitled to EFML only on the days the student must be remote.
  • If a school is only offering remote learning but may later change to in-person learning, the employee-parent is entitled to leave during the time remote learning is offered.  Once in-person learning is offered, EFML would become unavailable.

Q. 5  How much leave is available under the emergency FMLA leave law?

Up to 12 weeks of leave is available.

Q. 6  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 the Coordinating EPSL and EFML Provisions section.

Q. 7  How much is an individual entitled to under the emergency FMLA leave law?

As per the American Rescue Plan, effective April 1, 2021, all twelve (12) weeks of emergency family leave can be paid. Previously, 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.

Leave is paid at not less than two-thirds of the individual’s regular monthly rate of pay, not to exceed $200 per day and $12,000 in the aggregate. Emergency FMLA leave for a part-time employee would be pro-rated based on their hours worked.

Q. 8  Can an employer require concurrent use of available paid time off during emergency FMLA leave?

Because the American Rescue Plan now allows the first two weeks of emergency leave to be paid, an employee is not required to use their available paid time off (PTO) concurrently with emergency FMLA.

Previously, employers could require concurrent use of available paid time off (PTO) and emergency FMLA but only for the last 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 reasons. Most sick leave policies are not available for caregiver leave.

Q. 9  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. 10  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 Provisions section.

Q. 11.  Do employees and employers have any notice obligations?

Yes. See the Notice Obligations section.

Q. 12.  When does the emergency FMLA law take effect?

The FFCRA’s emergency paid FMLA mandate provision took effect on April 1, 2020 and expired on December 31, 2020.The American Rescue Plan Act does not extend the mandate, but it extends the tax credit to employers who choose to continue to make this leave available through September 30, 2021.


Coordinating EPSL and EFML Leave Provisions

Q1.  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?

Possibly. 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.  Effective September 16, 2020*,a health care provider is any individual who provides diagnostic, preventative or treatment services that are integrated and necessary for patient care including:

  • A licensed doctor of medicine, nurse practitioner, or similar licensed health care provider as defined by FMLA, such as a podiatrist, dentist, clinical psychologist, optometrist, or chiropractor.
  • An employee who provides diagnostic, preventive or treatment services, or other services that are integrated and necessary for patient care such as nurses, nurse assistants, and medical technicians, as well as employees who directly assist or who are supervised by a health care provider for providing these types of services. Employees who do not provide direct health care services to a patient but are otherwise necessary for providing services such as lab technicians, are also deemed to be health care providers. Conversely, individuals who work for a health care provider but do not provide direct care, such as IT or HR personnel, building maintenance staff, cooks and billers, are not considered health care providers.

*The DOL regulations issued on April 1, 2020 initially defined health care provider broadly to include all members of a health care provider’s workforce. This was challenged in court which resulted in the DOL revising its definition, effective September 16, 2020, to clarify the applicability of leave entitlement. See our article, Court Rules on Emergency Leave Provisions,” Aug. 5, 2020 (clickable link).

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)

(chart continued on next page)

Reasons for sick leave relating to the employee’s own care needs:

-Individual is awaiting COVID-19 test results

-Employee has been exposed to COVID-19 and is unable to work pending test

-Employee is obtaining COVID-19 vaccine

-Employee is recovering from injury / disability / illness related to vaccine

-Individual is subject to quarantine / isolation order

-Healthcare provider has advised individual to self-quarantine

-Individual is experiencing COVID-19 symptoms and is seeking a diagnosis

100% of the greater of the amount of pay (defined above) , subject to maximum of:

$511 per day

(for up to 10 days = $5,110 maximum)

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)

Reasons for sick leave relating to the care needs of the employee’s family member:

-Individual is caring for someone who is subject to a quarantine/isolation order or who has been advised by a healthcare provider to self-quarantine

-Due to COVID-19 precautions, the school or place of care of the individual’s son / daughter is closed, or the son / daughter’s childcare provider is unavailable

-Other substantially similar condition as specified by the Secretaries of HHS, Labor, Treasury

2/3 of the greater of the amount of pay (defined above), subject to a maximum of $200 per day

(for up to 10 days = $2,000 maximum)

Emergency family and medical leave (EFML)

-Individual is awaiting COVID-19 test results

-Employee has been exposed to COVID-19 and is unable to work pending test

-Employee is obtaining COVID-19 vaccine

-Employee is recovering from injury/disability/illness related to vaccine

-Individual is caring for someone who is subject to a quarantine/isolation order or who has been advised by a healthcare provider to self-quarantine

-Due to COVID-19 precautions, the school or place of care of the individual’s son/daughter is closed, or the son/daughter’s childcare provider is unavailable

-Other substantially similar condition as specified by the Secretaries of HHS, Labor, Treasury

-Due to a public health emergency, the school or place of care of the individual’s son / daughter is closed, or the son / daughter’s childcare provider is unavailable, and therefore the individual is unable to work or telework.

2/3 of the greater of the amount of pay (defined above), subject to a maximum of $200/per day,

$12,000 in the aggregate.

As per the American Rescue Plan Act, the first 2 weeks can be paid.

*See Q 5 in the Coordinating EPSL and EFML Provisions section 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 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 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 the employer to support the reason for leave as soon as practicable. 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.

For employers entitled to the tax credit, also see Q.3 and Q.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  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. 14  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. 15  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.

Q. 16.  How does the American Rescue Plan Act impact emergency leave?

The American Rescue Plan Act gives employers the option to continue to make emergency leave available for their employees from April 1, 2021 through September 30, 2021. Employers who choose to make the leave available can take a tax credit on the employer’s share of Medicare and Social Security tax.

Employers must beware and ensure that if they do make the leave available, the leave is available on a nondiscriminatory basis as to employee salary, full-time status, or tenure.


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 (clickable link) that can be used for this purpose, together with FAQs (clickable link) 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 (clickable link) and Spanish (clickable link), and Employer Paid Leave Requirements available in English (clickable link) and Spanish (clickable link), a set of FAQs (clickable link), along with other workplace guidance on its dedicated COVID-19 website (clickable link).

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.

Tax Credit

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. 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.

  • On April 21, 2021, the IRS issued a fact sheet (clickable link) regarding the tax credit made available by the American Rescue Plan Act. The tax credit is available to employers who voluntarily choose to extend emergency paid sick leave and emergency paid family leave from April 1, 2021 to September 30, 2021. Additional information:
    • The tax credit is available to private for-profit and non-profit employers with fewer than 500 employees, as well as public sector employers, i.e. state and local governments that are not 501(c)(1) organizations.
    • The tax credit is a credit against the employer’s share of the Medicare tax, and is refundable.
    • The amount of the tax credit is increased by (1) eligible health plan expenses, (2) certain collective bargain benefit contributions, and (3) the employer’s share of social security and Medicare taxes on the qualifying wages.
    • In anticipation of claiming the credits on Form 941 Employer's Quarterly Federal Tax Return, employers can retain the taxes that they otherwise would have deposited, including federal income tax withheld from employees, the employees' share of social security and Medicare taxes and the eligible employer's share of social security and Medicare taxes with respect to all employees up to the amount of credit for which they are eligible.
    • If the tax amounts that would otherwise be deposited are less than the qualifying wages, employers can request an expedited advance from the IRS by submitting claim Form 7200 Advance Payment of Employer Credits Due to COVID-19 (clickable link) to claim an advanced refund of the balance.

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 (clickable link) 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).

The IRS provides a couple methods for determining the daily tax credit. For both insured and self-funded plans, 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.  Must an employer report emergency leave qualifying wages in Form W-2?

Yes if employer claims tax credit for qualifying eave wages, the amount must be reported in box 14 of Form W-2.

Q. 4  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 (clickable link).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 leave is due to quarantine order or self-quarantine advice, 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. 5  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. 

COBRA Premium Subsidy

The American Rescue Plan Act provides a temporary subsidy of COBRA premiums for certain persons who have experienced a subsidy-eligible qualifying event and are eligible for COBRA continuation coverage.

Q.1.    Who is eligible for the subsidy?

An Assistance Eligible Individual is one who experienced a subsidy-eligible qualifying event as far back as October 2019 and

  • is currently enrolled in COBRA coverage
  • was previously enrolled in COBRA coverage but dropped coverage, e.g. stopped paying the premium
  • was previously eligible to enroll in COBRA coverage but declined to enroll
  • qualified beneficiaries of the above

Q.2.    What is a subsidy-eligible qualifying event?

Subsidy-eligible qualifying events include

  • reduced hours due to change in a business’s hours of operations
  • a change from full-time to part-time status
  • taking of a temporary leave of absence
  • an individual’s participation in a lawful labor strike
  • an involuntary termination of employment

Q.3.    To which plans does the premium subsidy apply?

The COBRA premium subsidy is available for

  • Group health plans sponsored by private-sector employers or employee organizations (unions) subject to COBRA rules under ERISA.
  • State or local government plans subject to Public Health Service Act continuation provisions.
  • Group health insurance required under state mini-COBRA laws.

Generally, this subsidy is not available for QSEHRAs or health FSAs.

Q.4.    To which employers does this apply?

This applies to public and private sector employers.

Q.5.    When must plans give notice of eligibility to assistance eligible individuals?

For persons currently on COBRA continuation coverage, or those who would be enrolled in in COBRA continuation coverage but for having declined enrollment or dropped coverage, notice must be provided by May 31, 2021. For subsidy-eligible qualifying events occurring on or after April 1, 2021, the subsidy information can be included with the general COBRA election notice.

Q.6.    Are model notices available?

The Department of Labor has released the following model notices:

Q.7.    Is there a deadline for Assistance Eligible Individuals to elect the subsidy?

Individuals must request the subsidy within 60 days of receiving eligibility notice.

Note that this election period is not impacted by the “outbreak period.” The “outbreak period” is the window of time during which certain plan deadlines can be disregarded. As per the IRS, Department of Labor, and Department of the Treasury, in a “Joint Notice,” the outbreak period will run until the first to occur of either 60 days after the end of the National Emergency (as declared by the President), or (2) one year. For more on this topic, see our recent article (clickable link).

Q.8.    How can an Assistance Eligible Individual request the subsidy?

The Department of Labor’s dedicated webpage has a Summary of Provisions and Application for Assistance Eligible Individuals (clickable link) that should be included with the eligibility notice. Individuals and their dependents can complete the included form and return it to their plan or employer to request treatment as an Assistance Eligible Individual.

Q.9.    Can an Assistance Eligible Individual switch plan coverage options?

Yes, if the plan chooses to provide this option. Group health plans can choose to allow qualified beneficiaries to enroll in coverage that is different from what the individual had at the time of the COBRA qualifying event. However, individuals can only switch to a lower-cost plan option. The different coverage option must also be offered to similarly-situated active employees and cannot be limited to only excepted benefits, a QSEHRA, or a health FSA.

If the plan permits individuals to change coverage options, the plan must provide the individuals with a notice of their opportunity to do so. Individuals have 90 days to elect to change their coverage after the notice is provided.

Q.10.  How long does the subsidy last?

The subsidy is available for coverage periods from April 1 to September 30, 2021. Assistance Eligible Individuals can benefit from the subsidy until the first of the following occurrences:

  • The individual becomes eligible for other coverage, such as through an employer, spouse’s employer, or Medicare.
  • The individual has reached the end of their COBRA period.
  • September 30, 2021.

Q.11.  If an Assistance Eligible individual pays the COBRA premium during the subsidy period must it be refunded?

Yes, the premium must be refunded.

Q.12.  What are an individual’s coverage options after the end of the subsidy?

If available, an individual can continue their COBRA coverage at their expense. An individual may also be eligible for Medicaid or a special enrollment period to enroll in coverage through the Health Insurance Marketplace® or to enroll in individual market health insurance coverage outside of the Marketplace. A special enrollment period is available for individuals that reach the end of their maximum COBRA coverage period. Individuals may apply for and, if eligible, enroll in Medicaid coverage at any time.

Q.13.  What if an Assistance Eligible Individual becomes eligible for another group health plan, such as a plan sponsored by a new employer or a spouse’s employer, or becomes eligible for Medicare?

Individuals receiving the COBRA premium assistance must notify their plans if they become eligible for coverage under another group health plan or for Medicare. Failure to do so can result in a tax penalty of $250 or 110% of subsidy (whichever is higher).

Note this does not apply to excepted benefits, a QSEHRA, or a health FSA.

Q.14.  Is there a tax credit for the employer or insurer?

Yes, the employer or insurer can take a quarterly tax credit against employer’s share of Medicare tax. The excess credit can be refunded or advanced. Further guidance on this issue is anticipated.

Q.15.   Are there additional information resources available?

The Department of Labor has created a dedicated web page for issues related to the COBRA Premium Assistance made available under the American Rescue Plan Act of 2021. The web page contains the documents referenced above as well as a 10-page FAQs for Employees and Employers.


Employee Benefit Plan Considerations

Health and Other Benefit Plans


Q. 1  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 (see Q.1 in the COVID-19 Testing and Vaccines section), 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 the Layoffs, Furloughs, and Effects section.

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 (clickable link) 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. 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 (clickable link) 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. 2  How are employers subject to the Service Contract Act or the Davis Bacon Act impacted by these leave laws?

According to guidance (clickable link) 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 (clickable link)).  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 CBIZ article (clickable link), whereas the Secretary of Health and Human Services has declared a public health emergency due to the COVID-19 pandemic, the Departments of Labor and Treasury issued guidance on April 28, 2020 providing an extension of certain plan actions.  The DOL and IRS declared a period known as the “outbreak period,” and declared, that for the duration of the outbreak period, certain deadlines can be disregarded for up to a period of one year. While the “outbreak period” may last longer than one year, applicable deadlines that fall within the outbreak period can be disregarded only for a period of up to one year.

The “outbreak period” is the window of time during which certain plan deadlines can be disregarded. As per the IRS, Department of Labor, and Department of the Treasury, in a “Joint Notice,” the outbreak period will run until the first to occur of either 60 days after the end of the National Emergency (as declared by the President), or (2) one year from the deadline that is being temporarily disregarded. For more on this topic, see our recent article and See Q.4. in this subsection for additional information.

Note: As of April 2021, both the National Emergency (as declared by the President) and the Public Health Emergency (as declared by the Secretary of Health and Human Services) are ongoing. On April 15, 2021, Secretary of HHS Xavier Becerra renewed the determination of a public health emergency due to COVID-19, effective April 21, 2021 (clickable link). The current determination lasts until July 20, 2021.

Following is an example of how a HIPAA special enrollment period would be tolled:

Mary has a baby on April 15, 2021.  The national emergency period is declared to end on July 31, 2021.  The outbreak period would end September 29, 2021.  Thus, Mary would have 30 days beyond that date (or, October 29, 2021) to enroll the baby, the result of which would effectuate coverage retroactive to the date of birth (April 15, 2021). 

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 one-year disregard 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

Q.4     Is the outbreak period ending soon?

Is it time to write the post-script on the outbreak period?  As a reminder, in the spring of 2020 regulations were issued suspending time frames for certain employee benefit actions for the duration of what is called the outbreak period.  Examples of employee benefit actions that are impacted include COBRA election and premium payment period, HIPAA special enrollment, claims period and external review periods among others.  For a more detailed summary of these rules, see At Issue supplement: Benefit Plan Regulatory Relief (clickable link)

Note: the outbreak period is not directly imposed upon public sector entities such as state and local governments, although Health and Human Services indicated that they encourage state and local governments to follow the outbreak rules.

The “outbreak period” is not an official, statutorily-defined designation. For purposes of exercising the option to disregard deadlines for 1 year, the relief period = the “outbreak period.” It is the window of time during which certain plan deadlines can be disregarded. As per the IRS, Department of Labor, and Department of the Treasury, in a “Joint Notice,” defined the “outbreak period” as beginning March 1, 2020 and ending either:

  • 60 days after the end of the National Emergency (as declared by the President), or
  • Such other date as announced by the Agencies.

Note: During the outbreak period, deadlines can still only be disregarded for only 1 year.

Normally, pursuant to ERISA Section 518 and IRC Section 7508, a national emergency can last only one year.  Since this national emergency commenced on March 1, 2020, this would mean it would end February 28, 2021.  Like most everything related to 2020 and the coronavirus situation, the duration of this national emergency is unprecedented.  This is the first time a national emergency has come close to reaching the one year limit.  This has created a bit of uncertainty until February 26, 2021 when the Department of Labor issued Disaster Relief Notice 2021-01 (clickable link) affirming that the outbreak period permitted by ERISA section 518 and Internal Revenue Code section 7508 is a maximum of one year measured from the occurrence of the need. 

The outbreak period that began on March 1, 2020 ends on February 28, 2021 with no additional 60-day extension for those whose occurrences happen on or around that date.  What this means is that the election period, premium payment, or grace periods that were suspended during the outbreak period begin to run on March 1, 2021.  Notably, the one year measurement period, according to this notice, is unique to each individual.   While this is favorable to individuals, it will create significant complications for plan administrators because each impacted individual will have his/her own measurement period equaling the first to occur of the emergency’s end plus 60-days or a one year period.

The notice affirms that the Treasury and the Internal Revenue Service agree with the Department of Labor’s interpretation and the notice also recognizes that individuals may continue to experience difficulties as a result of the ongoing public emergency and encourage plans and plan sponsors to be accommodating.  Plans can always be designed to be more generous than the minimum requirements of the law as long as all documents including by way of example, insurance contracts and stop loss contracts, reflect this.

Plan sponsors and their plans should provide explanatory notices to impacted individuals, particularly those whose relevant event occurred on or around March 1, 2020, advising them that relevant election notice or premium payment periods will now begin to run.  It might also be prudent to provide a notice to all individuals impacted by the outbreak period informing them that the outbreak period will end on the first to occur of 60-days following the end of the declared emergency, or one year from the date the individual’s relevant event occurred.

Q.5.    What is the difference between the “national emergency,” the “public health emergency”?

  • National Emergency: The President issues a Declaration of National Emergency.  The COVID-19 outbreak was declared a National Emergency on March 13, 2020, pursuant to the National Emergency Act and the Stafford Act.  This declaration is ongoing, and there is currently no announced end date. On February 24, 2021, President Biden issued a letter to Congress confirming the continuation of the National Emergency.
  • Public Health Emergency: The Secretary of Health and Human Services can declare a public health emergency.  The COVID-19 outbreak was declared a public health emergency on January 31, 2020.  This declaration lasts for a period of 90 days, and can be renewed. The Secretary of Health and Human Services declared the COVID-19 pandemic a public health emergency on January 27, 2020. The declaration can be renewed by the Secretary as necessary. On April 15, 2021, Secretary of HHS Xavier Becerra renewed the determination of a public health emergency due to COVID-19, effective April 21, 2021 (clickable link). The current determination lasts until July 20, 2021.
  • Medically-indicated COVID-19 testing must be covered at no cost to participants, whether it’s delivered in-network or out-of-network. This includes testing for asymptomatic individuals, as per the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security Act (CARES Act) guidance issued on February 26, 2021.
  • COVID-19 vaccine must be covered as a “preventive service,” both in-network and out-of-network.
  • The vaccine must still be covered as an Affordable Care Act in-network “preventive service” beyond the public health emergency period, as per the CARES Act. 

For the duration of the public health emergency:

Vaccines that must be covered as ACA preventive services:

  • The Pfizer vaccine was granted emergency use authorization on December 11, 2020 and was designated as an ACA preventive service effective January 5, 2021.
  • The Moderna vaccine was granted emergency use authorization on December 18, 2020 and was designated as an ACA preventive service effective January 12, 2021.
  • The Johnson & Johnson vaccine was granted emergency use authorization on February 27, 2021 and was designated as an ACA preventive service effective March 19, 2021.



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 (clickable link) 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 (clickable link)) 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) (clickable link) 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.


Cafeteria Plans

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 the Layoffs, Furloughs, and Effects section.

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 (clickable link) and CBIZ article (clickable link), the IRS recently issued guidance (IRS Notice 2020-29 (clickable link)) 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 (clickable link) and CBIZ article (clickable link).

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, 2021; 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 changed?

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 (clickable link) and CBIZ article (clickable link).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.

Q. 5  What changes were made to FSA and DCAP by the Consolidated Appropriations Act (CAA)?

  • Status change: The law continues the relaxation of status changes events initially allowed by Notice 2020-29 (see Q 1 above). As a reminder, in the absence of this temporary relief, status changes in a FSA and DCAP are only allowed for events specifically listed in the plans and only if the consistency rule is satisfied.
  • Carry-over: The law allows a temporary carry-over for plan years ending in 2020 and plan years ending in 2021 for FSA and DCAP. This temporary relief is particularly relevant for DCAP. In the absence of this temporary relief, a DCAP is not permitted to allow a carry-over. The law does not appear to include a limit on the amount of carry-over. Note: a plan cannot have both a grace period and a carry-over in the same plan year.
  • Grace periods: The law allows FSA and DCAP to expand the otherwise available 2 ½ month grace period to a 12-month grace period for plan years ending in 2020 and plan years ending in 2021.Note: allowing the carry-over or grace period expansion impacts HSA-eligibility.
  • Spend down feature: The law allows a FSA to include a “spend-down” feature. Effectively, a plan could permit an individual who has terminated employment to spend down any unused FSA. This means the individual can continue to incur claims and seek reimbursement through the end of the plan year plus any related grace period. A DCAP is already permitted to include this type of spend down feature.
  • Dependent care age limit: The DCAP relaxes the age 13 limit specifically for a child who reaches age 13 for the 2020 plan year plus any 2020 carry-over into the 2021 plan year.

An employer is not required to permit any of these changes. If the employer does intend to allow some or all of these changes, the plan must be amended by the end of the calendar year following the plan year to which it takes effect.

Q.6  Has the IRS provided any guidance on additional cafeteria plan relief?

The Consolidated Appropriations Act, 2021 (CAA) provides relaxation of certain cafeteria plan spending account requirements (see our At Issue (clickable link)).Generally, a cafeteria plan including spending account elections are binding for 12 months and can only be changed in limited circumstances prescribed by the plan.

2020 and the coronavirus situation caused a bit of havoc for participants and their spending accounts. The IRS provided guidance in 2020 relaxing many of the rules (see Qs 1-4 above).The CAA extends and expands upon this relief applicable to plan years ending in 2020 and 2021.In summary, Notice 2021-15 (clickable link) provides temporary relief for cafeteria plans, health FSAs and dependent care FSAs and offers guidance on how these provisions should be implemented. Notably, Notice 2021-15 extends some of the Notice 2020-29 and Notice 2020-33 guidance that was not provided for in the CAA. Specifically, it continues the relaxation of the status change rules applicable to health, dental and vision plans, meaning that a plan may, but is not required, to allow individuals to make changes in coverage mid-year without a status change event. Individuals can increase, decrease or change their election. Note, if an individual elects to opt out of coverage, the individual can only do so if he/she attests to enrollment in other health coverage.

Health FSA and Dependent care FSA

The guidance affirms that there can be no cross pollination among spending accounts. Said another way, health FSA funds can only be used for health FSA purposes and dependent care FSAs can only be used for dependent care purposes. Further, the guidance confirms that there can be no cash out of either type of program. The guidance provides that both types of plans can allow an unlimited carry-over and either type of plan can have a grace period that extends up to 12-months.Though a plan cannot have a carry-over and grace period for the same plan year.

Effectively, this makes a carry-over and a grace period quite comparable. The only real distinction between the two relates to the health FSA spend down feature. The spend-down feature allows a health FSA to allow an individual upon termination of participation in the plan to continue to incur claims and seek reimbursement for the balance of the plan year plus any grace period (does not apply to carry-over).The health FSA can be designed to limit access to funds already contributed less amounts reimbursed.

Allowing the spend-down does not change the obligation to offer COBRA if the termination of participation was caused by a COBRA qualifying event. Note: a spend-down feature has been permissible in a dependent care assistance plan for many years.

HSA-compatibility

The guidance provides several clarifications relating to options to allow HSA-eligibility. As a reminder, if an individual is covered by a general purpose health FSA, the individual is HSA-ineligible. If an individual moves to a HSA-compatible high deductible health plan (HDHP), the guidance provides that on a participant by participant basis, the health FSA:

  • May allow forfeitures of available carry-overs or grace periods
  • Conversion to a HSA-compatible limited purpose health FSA; or
  • An automatic conversion to a HSA-compatible limited purpose health FSA.

This is more generous relief than is typically available. Generally, only for carry-overs can the election be participant by participant. For grace period, it must be uniform for all impacted participants.

The notice affirms that if an individual changes his/her election, all salary-reductions are prospective, however, the guidance does affirm that spending account funds can be used for claims incurred from the beginning of the plan year, meaning prior to the salary reduction change.

The guidance affirms that the temporary dependent care carry-over is to be treated similar to a dependent care assistance grace period. Specifically, the employer reports the elected amount on the individual’s Form W-2 in Box 10.It is then incumbent upon the individual to report the amount used, using Form 2441 when the individual files his/her personal tax return. Effectively, an individual can only exclude up to $5,000 per calendar year for dependent care assistance.

The notice provides many examples that may be useful for plan administrators to further understand how the guidance is to be implemented. Among these examples are some useful illustrations showing how this temporary relief ends as plans move forward into 2023, particularly as it relates to the expanded rules for carry-overs and grace periods.

Operation and amendment

As a reminder, changes allowed by the CAA are temporary and permissive. Notice 2021-15 gives the plan sponsor broad discretion in designing its plans to provide for some, all or none of this relief. The notice reminds employers that plans must be operated in accordance with the intended changes and must be amended by the end of the calendar year following the plan year for which the change takes effect.

The notice also clarifies that the Cares Act provision providing that OTC medication and women’s menstrual products can be reimbursed from spending accounts, such as health FSAs and health reimbursement arrangements, can be amended retroactive to January 1, 2020.


Retirement Plans

 

Q. 1  Did the CARES Act make any changes for retirement plans?

Among the provisions of the CARES Act, the law provides for early penalty-free withdrawals and expands instances for obtaining plan loans relating to the coronavirus situation. In both instances, the relevant plan would need to be amended to provide for the changes to hardship distributions and/or plan loans (see the Amending Plan Documents subsection below).

The COVID-related early withdrawal and plan loan provisions are only available to qualified individuals. This determination was broadened from the initial CARES Act definition by way of IRS Notice 2020-50 (clickable link) issued on June 19, 2020.As such, a qualified individual is a plan participant:

  • Who is diagnosed, or whose spouse or dependent is diagnosed, with COVID-19 with SARS-CoV-2 or COVID-19 by a test approved by the Centers for Disease and Control, including a test authorized under the Federal Food, Drug, and Cosmetic Act; or
  • Who experiences adverse financial consequences as a result of the individual, his/her spouse, or a member of the individual's household, i.e., someone who shares the individual's principal residence who is:

With regard to hardship distributions, the CARES Act relaxes the 10% early distribution penalty otherwise applicable to withdrawals from qualified retirement plans taken before age 59½.This allows individuals to withdraw up to $100,000 across all plans sponsored by a control group that would not be subject to the early 10% withdrawal penalty during the period of January 1, 2020 to December 31, 2020.Income tax on the distribution would continue to apply and may be paid ratably over a 3-year period. Alternatively, the amount of distribution can be repaid to any eligible defined contribution plan or IRA at any time over the three-year period commencing on the date the distribution.

With regard to plan loans, the CARES Act increases the dollar amount (from $50,000 to $100,000) and the percentage test limits of a participant’s vested account (from 50% to 100%), reduced by any outstanding loans, for loans from qualified plans. This provision applies to loans made from March 27, 2020 through September 22, 2020 (the 180-day period beginning on the CARES Act enactment date).Further, repayment of existing plan loans outstanding on or after March 27, 2020 (date of enactment) is delayed by one year, provided the payment is otherwise due on or before December 31, 2020. 

Q. 2  What changes were made to the minimum distribution rules?

The SECURE Act (enacted on December 20, 2019) increased the required minimum distribution (RMD) age from 70½ to age 72 for distributions required to be made after December 31, 2019.The CARES Act waives this requirement for distributions from defined contribution plans, profit sharing plans, IRAs, 403(b) and 457(b) plans for RMDs required to be made in 2020.This also applies to 2019 RMDs based on age 70½.This waiver, however, does not extend to defined benefit plans.

For those individuals who already took an RMD in 2020, the IRS provides an opportunity for them to roll those funds back into either the plan from which they came, or another qualified retirement vehicle, as long as the receiving plan accepts rollovers and as long as the rollover is accomplished by August 31, 2020 (see IRS Notice 2050-51 (clickable link)).



Amending Plan Documents and Participant Communications


In all instances where the terms of a benefit plan change, the insurer, stop loss insurer for a self-funded health plan, TPA, service provider or other vendor affiliated with the 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 in the COVID-19 Testing and Vaccines section.

Q. 2  Are there other plan amendments that may be needed as a result of the coronavirus situation?

Possibly. See Q. 1 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).In addition, an employer/plan sponsor who intends to add the COVID-related early withdrawal or plan loan features (see the Retirement Plan section above) would have to amend its plan(s) to provide for these features.

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. The DOL/HHS FAQs About Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES Act) Implementation (Part 42) issued April 11, 2020 (clickable link) 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 (clickable link) 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/HHS FAQs About Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES Act) Implementation (Part 43) issued June 23, 2020 (clickable link) 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/HHS FAQs About Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES Act) Implementation (Part 43) issued June 23, 2020 (clickable link) 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.

About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Kansas City office.

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.


FAQ - Coronavirus: Impact on Benefits and Employmenthttps://www.cbiz.com/Portals/0/Images/NFP-COVID-CBIZ.jpg?ver=2020-12-08-092814-303https://gp-stage.cbiz.com/Portals/0/liquidImages/WebReady/FAQ_Image2.jpgThe Families First Coronavirus Response Act hits on many aspects of benefits and employment. From mandated health coverage to emergency paid sick leave and more. Get all those details here....2021-03-04T17:00:00-05:00

The Families First Coronavirus Response Act hits on many aspects of benefits and employment. From mandated health coverage to emergency paid sick leave and more. Get all those details here.

Regulatory, Compliance, & LegislativeEmployee BenefitsEmployee Benefits ComplianceCOVID-19Yes