Congress has passed, and the President has signed, legislation intended to ease the economic consequences stemming from the COVID-19 pandemic. The legislation is titled Families First Coronavirus Response Act, H.R. 6201. It includes a number of provisions addressing social concerns as well as four provisions that directly impact employers and group health plans.
Group health plans and insurers must cover FDA-approved diagnostic products to detect the virus that causes COVID-19.
No Cost Share
The testing benefits must be provided without any cost-sharing, preauthorization, or other medical management requirements. Coverage requirements include related services furnished during urgent care, emergency room, or in-person or tele-health provider visits that result in an order for or administration of a covered diagnostic test.
This requirement applies to all health plans. This includes self-funded plans and fully insured plans, as well as to ACA grandfathered plans. However, it appears that excepted benefit plans and retiree-only plans are not subject to this provision.
Effective Date and Duration
The mandate is effective from the date of enactment for the duration of the public health emergency declared by the Secretary of HHS.
Employers with fewer than 500 employees (as well as federal and state employers of any size) must provide paid sick time to employees who are unable to work (or telework) for specified virus-related reasons.
Eligibility for Sick Leave
Ten (10) days of paid sick time must be provided to full-time employees. Part-time employees are entitled to sick time based on their average hours worked over a two-week period. Benefits are available immediately regardless of the employee’s length of employment.
Sick Leave Maximum Benefit
Benefits are calculated based on the employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work. The maximum benefit varies based on the reason for absence as outlined below:
Employee Who Is: (1) subject to a quarantine or isolation order, (2) advised by a health provider to self-quarantine, or (3) experiencing symptoms and seeking diagnosis.
Pay Rate: 100% of regular pay
Maximum Daily Benefit: $511 per day
Maximum Total Benefit: $5,110 total
Employee Who Is: Caring for an individual described in category (1), (2), or (3), caring for a son or daughter whose school or place of care has been closed.
Pay Rate: 66.67% of regular pay
Maximum Daily Benefit: $200 per day
Maximum Total Benefit: $2,000 total
Employers may not require that an employee use any other paid time program offered by the employer before using this sick leave. Additionally, the paid sick time does not carry over to the following year. Employers are also not required to reimburse employees for paid sick time not used by the employee when the employee leaves the job.
Effective Date and Duration
The effective date of the paid sick leave mandate is no later than 15 days after enactment (March 18, 2020).The mandate expires December 31, 2020.
The legislation includes the Emergency Family and Medical Leave Expansion Act, which provides a temporary expansion of the FMLA to cover a new category of leave related to COVID-19. Employers with fewer than 500 employees are required to provide paid leave due to the public health emergency.
Eligibility for Paid Leave
The emergency leave generally is available when an employee is unable to work (or telework) due to a need for leave to care for a son or daughter under age 18 because a school or place of care has been closed, or a childcare provider is unavailable, due to a COVID-19 public emergency declared by a federal, state, or local entity. To be eligible, employees must have been employed for at least 30 days (rather than the standard 12-month period for other types of FMLA leave). Similarly, the 50 employees within a 75-mile radius requirement does not apply.
Paid Leave Benefit Amount
Benefits are calculated based the employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work.
The first 10 days of leave may be unpaid. After Day 10, paid leave must be provided.
The maximum benefit of $200 per day results in 50 days of paid leave. A daily rate of $100 per day (approximately $4,500 in monthly compensation) results in 100 days of paid leave.
Notably, no changes have been made to the FMLA’s health benefit provisions. However, the additional leave rights may result in more employees taking FMLA leave, which will affect administration of group health plans. Employers should review their policies and procedures in light of the changes (e.g., new definitions and temporary timeframes). Certain exemptions and special rules apply, and a tax credit may be available (see below).
Effective Date and Duration
The effective date of the paid FMLA paid leave extension is no later than 15 days after enactment (March 18, 2020). The mandate expires December 31, 2020.
The bill provides refundable tax credits to help employers cover the cost of providing these new paid leave benefits. The credits apply against the employer portion of Social Security taxes due and are equal to 100% of the qualifying paid leave wages paid by the employer, up to certain limits.
Tax Credits – Paid Sick Leave
The sick leave credit is limited to $511 per day per employee if qualified sick leave was taken by the employee for his or her own needs or $200 per day per employee if qualified sick leave was taken to provide care for others. In either case, the maximum number of days that may be taken into account in calculating the tax credit is 10 per employee, across all quarters.
Tax Credits – Paid FMLA Leave
The credit is limited to $200 per day per employee, with an aggregate $10,000 cap per employee, if taken for qualified family medical leave.
Tax Credits – Health Plan
The FMLA-related and emergency paid sick leave credits can be increased to include amounts employers pay for an employee’s health plan coverage while the employee is on leave.
Timing of Credit
Tax credits are computed on a quarterly basis and are available for Q2, Q3, and Q4 2020. Because of the effective date, (15 days after action by the Secretary), enactment will take too long for the credit to have any application in Q1.
To the extent that a covered employer elects to receive the credit, the credit amount must be taken into the employer’s gross income, which effectively eliminates any potential double benefit because the employer will have deducted the sick leave wages it paid.
Wages and Taxation
The qualified sick leave wages paid are not “wages” for the employer-portion of the Social Security tax. The legislation has no effect on the employee-portion of the Social Security tax, nor does it have any effect on employer or employee-portion of the Medicare tax.
An employer must post a notice for employees about the requirements of the law.
After the first workday that an employee receives paid sick time, the employer may require the employee to follow “reasonable notice” procedures in order to continue receiving the paid sick time. “Reasonable notice” is not defined in the bill.
The employer may not require that the employee find or search for a replacement to cover the hours the employee will be on sick leave.
Although employers with 500 or more employees are exempt from the paid sick leave mandate in this bill, it is useful for all employers to understand the approach taken by Congress since additional legislation may still be introduced to cover larger employers.
Also, we do not yet know whether related employers (such as members of a controlled group) may or must aggregate employees to reach the 500-employee threshold, or if the 500-employee threshold is determined on an entity-by-entity basis without considering whether the entities are related. We anticipate implementing guidance from the Department of Labor and/or the Internal Revenue Service on this issue in the next two weeks.
In addition to legislation, administrative actions are likely to affect employers and their benefit plans over the coming weeks and months. Action is likely at the federal, state, and local levels. Given the nature of the emergency, most of these actions will demand immediate attention, so it is important to stay closely attuned. The team at Vita will keep you apprised of critical benefits-related issues.
Vita clients in need of sample language to update their policies or handbooks can refer to ThinkHR. If you need assistance with your access, please reach out to your Vita representative for assistance.