Blogs December 2020

The Families First Coronavirus Response Act (FFCRA) requires employers with less than 500 employees to provide employees with 80 hours of paid sick leave for specified reasons related to COVID-19. In addition, employers are required to provide up to 10 weeks of paid, job-protected leave for employees who have worked for their employer for at least 30 days and who are unable to work due to the need to care for a son or daughter whose school is closed or the unavailability of a childcare provider due to COVID-19. The legislation was due to sunset on December 31, 2020.

Extension

President Trump signed a relief bill into law on December 27, 2020. While the full FFCRA law was not extended into 2021, employers can now elect to continue allowing employees to take unused FFCRA paid sick and family leave and receive the federal tax credit for through March 31, 2021.

Employer Action Items

1. Decide whether to offer continued paid sick leave and paid family leave until March 31, 2021.
2. Communicate corporate decision and any process requirements to employees.
3. Confirm any state or local laws that impact decision.
   
   

Optional, Not Mandatory

Employers are not required to provide paid leave after December 31, 2020 (as was the case under the FFCRA through December 31, 2020). However, as of January 1, 2021, employers may voluntarily offer such leaves and may continue to take the same payroll tax credit as was previously afforded under the FFCRA.

The relief package does not change the qualifying reasons for which employees may take leave, the caps on the amount of pay employees are entitled to receive, or the FFCRA’s documentation requirements.

Same Pool of 80 Hours

The law also does not change the amount of leave that employees are entitled to take under the FFCRA. Under the FFCRA, full time employees are entitled to a one-time allotment of 80 hours of paid sick leave and 12 weeks of expanded family medical leave. Therefore, an employer is generally not entitled to a second tax credit for an employee taking leave in 2021, if that employee exhausted FFCRA leave in 2020.

Local Regulations

Despite the fact that employers are no longer required to provide FFCRA leave after the first of the year, employers should be mindful that some states and local governments have enacted COVID-19 leave laws, which may or may not expire at the end of the year. For example:

• New York: The quarantine leave law requires that New York employers provide job-protected sick leave to employees who are subject to a mandatory or precautionary order of quarantine or isolation. This does not expire at the end of the year.
• Colorado: The state-specific COVID-19 leave law sunsets on December 31, 2020. The state paid sick leave program begins phasing in on January 1, 2021.
• California: The COVID-19 leave law expires on December 31, 2020 or upon the expiration of the paid sick leave provisions of the FFCRA. Although the federal relief bill allows employers to claim a tax credit for paid sick leave provided into 2021, it does not appear to change the expiration date of the specific paid sick leave provisions of the FFCRA. Therefore, unless the state amends the law or issues guidance to the contrary, California’s leave law will likely expire at the end of the year. However, unlike the federal FFCRA, the California law allows an employee who is on leave on the date that the law expires to complete their leave, even if this extends the leave period past the law’s expiration date.

UPDATED 12-27-2020

In a marathon push before the end of the year, Congress passed the Consolidated Appropriations Act of 2021, on Dec. 21, 2020. President Trump signed the bill on December 27, 2020. This legislation is a massive package that averts a government shutdown and provides $1.4 trillion to fund the federal government through September 2021. The bill also provides $900 billion in additional COVID-19 pandemic relief, funding a panoply of needs for individuals and businesses.

The following summary outlines both general provisions of the COVID-19 relief package as well as provisions that directly impact employers and their benefit plans (listed first).

FSA Plan Flexibility

Under the bill, employers are allowed, but not required, to amend plans as follows:

• Carryover unused FSA balance from plan year ending in 2020 to plan year ending in 2021.
• Carryover unused FSA balance from plan year ending in 2021 to plan year ending in 2022.
• Extend grace period to 12 months after the end of the plan year for plan year ending in 2020 and 2021 for both health and dependent care FSAs.
• Provide employees who cease participation in a health FSA during calendar 2020 or 2021 the opportunity to receive reimbursements from unused benefits or contributions through the end of the plan year in which such participation ceased (including grace period if applicable). At this point it is not clear whether this permits reimbursement of expenses incurred after termination or is simply an extended run-out period. Additional clarification on this will likely be forthcoming.
• Increase the maximum age (by one year) for dependent care beneficiaries who aged out during the pandemic. 
• Prospective modification of election amount for health and dependent care FSAs (plan years ending in 2021).

Employers have considerable flexibility in the timing for amending plan documents. Amendments must be made by the end of the first calendar year beginning after the end of the plan year in which the amendment is effective. For example, calendar year 2020 plan amendments must be adopted on or before December 31, 2021. Plans must operate consistently with the terms of the amendment retroactive to its effective date.

FSA Plan Action Item for Employers

Decide What to Adopt: Employers must decide which, if any, of the plan flexibility options offered by this legislation to adopt. While considerable time is allowed to actually execute formal plan amendments, decisions on these issues should be made reasonably quickly to clarify for plan participants exactly what their plans will allow.

Expect Some Confusion: Employers can expect some measure of confusion in the marketplace and from plan participants. Some employers will adopt these enhanced flexibility provisions and others will not, adding a degree of variability that FSA plans do not typically have.

Open Ended Plan Years: Employers should be aware that extending flexibility for plan participants, in terms of when claims can be incurred or submitted, comes with the consequence of not being able to close out plan years in a timely manner. For example, employers who adopted the grace period extension for 2019 plan years, technically, still cannot close out the 2019 plan year.

Administration Platforms: Software platforms for FSA plan administration do not currently include mechanisms to allow the flexibility afforded by this legislation, such as rolling over balances. Suffice it to say, they will all be scrambling to modify their platforms to accommodate these changes. The changes will certainly be accommodated, but employers should expect potential delays while administration platforms are being updated.

Clear Communication: After decisions are made, employers should distribute clear communication about any plan flexibility adopted so that plan participants understand exactly what, if any, additional flexibility is included in their plan.

FFCRA Paid Leave Credits

The FFCRA paid sick leave and expanded FMLA leave provisions have been extended for employers on a voluntary basis through March 31, 2021. The corresponding payroll tax credits for paid sick leave and expanded FMLA leave remain available for employers electing to offer the paid sick and family leave. As a reminder, employers are required to continue employee benefit plans through any such leave period.

General Provisions of the Act

Aid for Small Businesses: $325 billion in aid for small businesses struggling after nine months of pandemic-induced economic hardships. This breaks down as:

• $284 billion to the SBA for first and second-draw PPP forgivable small business loans
• $20 billion to provide Economic Injury Disaster Loan (EIDL) grants to businesses in low-income communities
• $15 billion in funding available to shuttered live venues, independent movie theaters, and cultural institutions
• $12 billion in funding available to help business in low-income and minority communities.

Individual Stimulus Payments: $166 billion for a second round of economic impact payments of $600 for individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year. Each dependent child is also eligible for a $600 economic impact payment.

Unemployment Benefits: $120 billion to provide workers receiving unemployment benefits a $300 per week supplement from Dec. 26, 2020 until March 14, 2021. This is a renewal of the federal unemployment benefits provided by the CARES Act which expired in July. This bill also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.

Rental Assistance: $25 billion in emergency rental aid directed to assist those affected by COVID-19 who are struggling to make rent. Assistance under this program will be administered by state and local governments and applies to past-due rent and future rent payment, as well as to pay utilities and prevent utility shut-offs. The national eviction moratorium was also extended through Jan. 31, 2021.

Transportation Industry: $45 billion in transportation funding, including $16 billion for airlines, $14 billion for transit systems, $10 billion for state highways, $2 billion each for airports and intercity buses, and $1 billion for Amtrak.

Colleges and Schools: $82 billion in funding for colleges and K-12 schools significantly impacted by the coronavirus pandemic. This includes support for HVAC repair and replacement to mitigate virus transmission and $10 billion in childcare assistance.

Health-Related Expenses: $22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments.

Food Assistance: $13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits.

Broadband Expansion: $7 billion for broadband expansion.

100% Deductibility for Business Meals: Temporarily allows a 100% business expense deduction for meals (rather than the current 50%) for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020 (not retroactive to the 2020 tax year) and expires at the end of 2022.

Student Loan Provisions: The law extends the provision allowing employers to contribute up to $5,250 tax-free toward an employee’s student loan debt. This provision was set to expire on January 1, 2021 but was extended to payments made prior to Jan. 1, 2026. Notably, the law does not further extend the student loan moratorium on federally-held student loans and does not extend the forbearance period, the pause in interest accrual, or the suspension of collections activity past Jan. 31, 2021.

PPP Round Two

The return of the PPP is of particular interest to small businesses. The first round of PPP loans helped millions of small businesses acquire $525 billion in forgivable loans during the five months the program was accepting applications. The new round of PPP, or PPP2 as some are calling it, contains many similarities to the first round of the PPP but also has several important differences. Details of the new second round of the PPP can be found in the reference section below.

Tax Deductibility of PPP Expenses

The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted and brings the policy in line with what hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion CARES Act.

COVID-19 Payroll Tax Credits

The Act also extends and expands the Employee Retention Credit (ERC) under the CARES Act. Eligible businesses may now take advantage of the ERC through July 1, 2021. The ERC program has been expanded and modified for calendar quarters beginning after December 31, 2020, as follows:

• The ERC is expanded from a 50% refundable tax credit to 70%, and the $10,000 eligible wage limit per employee will be a quarterly limit (previously, this was an annual limit). So instead of a $5,000 credit per employee credit per year, the program will allow a credit of up to $7,000 per employee per quarter.
  
  
• To be eligible for the expanded ERC in 2021, an employer must show that gross receipts for such calendar quarter are less than 80 percent of the gross receipts for the same calendar quarter in 2019, or it experienced a full or partial suspension of operations during the quarter due to a governmental order. There is also a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.
  
  
• The definition of a large employer for purposes of the ERC is modified to mean more than 500 employees (currently, this threshold is 100 employees). As such, for eligible small to midsize employers (those who averaged 500 full-time employees or fewer in 2019), qualified wages for purposes of the ERC will be wages paid to any employee during the quarter where the employer meets the gross receipts test or experienced a full or partial suspension of operations due to a governmental order. These employers also will be able to receive advances on the ERC at any point during the quarter based on wages paid in the same quarter in a previous year.

In addition, employers who receive PPP loans may still qualify for the ERC with respect to wages that are not paid with forgiven PPP proceeds. This provision is effective retroactively to the enactment date of the CARES Act.

PPP Details

Eligibility

PPP2 loans will be available to first-time qualified borrowers as well as to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million, provided they:

• Have 300 or fewer employees.
• Have used or will use the full amount of their first PPP loan.
• Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
  
  

Loan Terms

As with PPP1, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable: 

• Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
• Covered operating costs such as software and cloud computing services and accounting needs.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks, the same parameters PPP1 had when it stopped accepting applications in August.

PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum.

Simplified Application

The PPP2 program creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, borrowers will receive forgiveness if they sign and submit to the lender a certification that is not more than one page in length, include a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.

Other Special Provisions

The PPP2 also includes special allocations to support first-time and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders.

COVID-19 vaccines are starting to be rolled out, so now it’s time for employers to think about their vaccination policy! Can vaccines be mandatory in the workplace? Should they be? Can policies differ for different employees/workplace arrangements? Should they? What are the pros and cons? What is the right answer?

EEOC Guidance

On December 16, 2020, the EEOC weighed in on this issue and published specific guidance for employers. The guidance affirmed the information presented in this article (which was written and posted prior to the guidance). In a sentence, the EEOC indicated that employers may encourage or possibly require COVID-19 vaccinations, but any such policy must comply with the ADA, Title VII of the Civil Rights Act, and other workplace laws.

General Agreement

Legal experts generally agree that employers have a strong case for requiring employee vaccinations for certain segments of their employee populations. That said, there is an equally compelling argument that employers do not have a strong case for requiring vaccination of all employees, especially those employees who do not work in a public facing role, do not interface with other employees, or who work from home. Whatever vaccination policy is ultimately implemented, it must allow certain exceptions, must be applied only to jobs that have a reasonable business necessity for vaccination, and must be applied in a non-discriminatory manner.

When CAN vaccinations be required?

Employers may require employees to be vaccinated before returning to an onsite workplace if the failure to be vaccinated constitutes a direct threat to the public or to other employees in the workplace, specifically if an argument can be made that the virus could be easily transmitted in the workplace. The more likely it is that non-vaccinated employees might put customers, other employees, and/or the general public at risk, the more compelling the case will be for a vaccination mandate.

When can vaccinations likely NOT be required?

Employers who have office-based business and/or who have a remote workforce will have a more difficult time arguing the necessity of a vaccine mandate in the face of employees who value personal choice over a mandate. Even in an office environment that enables appropriate social distancing, some employees will value a vaccine mandate as they see it as important for personal safety. Other employees may find such a stance unpopular if they feel differently about personal choice. Employers will need to balance issues of personal choice, workplace safety, and attitudes toward public health safety when considering their workplace mandate policy.

Potential Liability for Not Requiring Vaccination

Facing liability for not requiring vaccination in the workplace is a potential conundrum for employers. It is possible that employees might allege that an employer has failed to provide a safe and healthy work environment if vaccination of all workers is not required. Providing a safe and healthy workplace is an Occupational Safety and Health Act (OSHA) requirement for all employers.

It would certainly be groundbreaking to hold employers liable for not requiring vaccination, but it is equally groundbreaking to hold employers responsible for potentially hosting a work environment that could incubate or create the possibility of spreading the disease. Much of this discussion hinges on whether public health authorities (federal or local) take an aggressive or conservative stance in their future guidance to employers regarding whether unvaccinated employees may be allowed in the workplace.

Current Guidance

Available guidance indicates apparent support by several government agencies for mandatory vaccination policies. For example, based on the findings of the CDC, the EEOC has determined that COVID-19 meets the "direct threat" definition. During the pandemic, employers have relied on this guidance to justify asking employees more in-depth health-related questions and performing medical screening of employees before allowing them to report for work. However, the EEOC has yet to issue guidance for how it will view mandatory vaccine policies.

For some employers, implementing a mandatory vaccination policy will be an important business consideration. For example, employers with employees in positions that provide direct health care, caretaking of children and the elderly, or serving other populations at elevated risk from COVID-19. However, it is generally thought that it will be difficult to apply a mandatory vaccine policy to ALL employees, especially those who may work at home or not be at particularly high risk for either contracting or spreading the disease.

Because of the reality that rarely do all employees of an employer face the exact same personal risk, job risk, and work circumstances, it is generally thought that it will be difficult to apply a blanket vaccination mandate for all employees. In addition, there are also several important and necessary exceptions to a mandatory vaccine policy. These exceptions require that employers offer reasonable accommodation necessary for certain employees. Thus, adopting a policy that encourages and enables, but does not require, vaccination will be easier to administer for many employers.

Reasonable Accommodations

Federal laws prohibit employers from applying a mandatory vaccination policy without allowing exceptions for disability status or religious belief. While nothing prohibits an employer from adopting a policy that requires vaccination for all employees, certain accommodations must be allowed for employees needing a disability or religious exception.

It should go without saying, but any accommodation for disability or religious reasons must be applied in a non-discriminatory manner and without retaliatory practices.

Disability: In the context of flu vaccines, the EEOC considers that employers who are subject to the Americans with Disabilities Act (ADA) generally must provide reasonable accommodations to employees with disabilities that prevent them from receiving a vaccine. Under the ADA, an employer may request information including the nature of the limitation or disability and the difficulty or issue that vaccination would cause. An employer may also require an employee to provide documentation from the worker's medical provider to confirm the employee's specific limitation or disability and the need for accommodation.

Sincere Religious Belief: Employers that are subject to Title VII of the Civil Rights Act of 1964 must reasonably accommodate individuals who notify them of sincerely held religious beliefs that prevent them from receiving the vaccine. Such accommodations can be more complicated. It should be noted that the EEOC has made it clear that protected religions are not limited to major, well-recognized faiths. Employers should note that the EEOC has indicated, "an employee's belief or practice can be 'religious' under Title VII even if no religious group espouses such beliefs or . . . the religious group to which the individual professes to belong [does] not accept such beliefs." As a rule, employers should accept that requests for religious accommodations are based on sincerely held beliefs. However, if an employee requests such an accommodation and an employer has an objective basis for questioning the sincerity of that belief or practice, the employer can request supporting information from the employee.

This information could be a first-hand explanation from the employee or may be verified by third parties. It should be noted that “sincerity” can be difficult to measure, but generally such third-party verification can be provided by others who are aware of the employee's religious practice or belief. Employers should be careful not to pry for too much information as such practices may bring rise to a claim of requiring unnecessary evidence and thus risking liability for denying a reasonable accommodation request, at best, or a discrimination claim, at worst.

Undue Hardship for Employer

If an employee requests accommodation for disability or religious reasons, the employer has an obligation to provide one unless and until doing so would impose an undue hardship. Importantly, the meaning of "undue hardship" differs under the ADA and Title VII as follows:

• ADA - Disability Accommodation: Undue hardship means "significant difficulty or expense" when considered in light of the accommodation's net cost, the employer's overall financial resources, the employer's type of operation, and the impact of the accommodation upon the employer's operation.
• Title VII - Religious Accommodation: Undue hardship has been interpreted by the Supreme Court as meaning anything more than a de minimis burden.

In either case, when such an accommodation is requested, employers should engage in an interactive dialogue with the employee to determine the nature of the disability or religious conflict, its impact on the individual's ability to perform the essential functions of the job (without compromising the safety of other employees, patients, or customers), the ability to meet the work requirements, and whether a reasonable accommodation exists that would not impose an undue hardship. Potential accommodations could include (but are not limited to) use of personal protective equipment (PPE), moving the employee’s work station or work location, a temporary reassignment, teleworking, or a leave of absence.

What about those who just don’t want the vaccine?

It is important to note that employers are not required to accommodate personal beliefs that do not fall under the ADA or Title VII. Examples include:

• Secular Beliefs: Employers are generally not required to accommodate secular beliefs about the vaccine.
• Personal Medical Beliefs: Employers are not required to accommodate personal medical beliefs, concerns, or fears about the vaccine.
  
  

Action Items

As COVID-19 vaccinations start to become available, employers will want to consider the following:

1. Policy on vaccinations for some or all segments of their employee population.
2. Anticipate requests for reasonable accommodation and think through how such accommodations will need to be adopted and the impact in workplace environments.
3. Communication plan about new vaccination policies to employees.
4. The COVID-19 public health and safety guidance from authorities is ever-changing as the pandemic evolves. As such, the EEOC has provided a robust resource page for employers.

California Governor Gavin Newsom signed into law AB 685. The law aims to thwart exposure to COVID-19 in the workplace and protect employees from any such exposure. Specifically, it outlines important employer notice, reporting, and accountability measures to protect employees. It also authorizes the California Division of Occupational Safety and Health to prohibit entry into a place of employment if it is deemed to pose an Imminent Hazard Risk to employees.

Important Steps for Employers

Employers should be aware of these new legal requirements and ensure that they have a solid COVID-19 exposure response plan in place. Being adequately prepared to meet the quick employee and government agency notice requirements will be important for employers.

Effective Date and Termination Date

This law will be in effect from January 1, 2021 through December 31, 2022.

Requirement #1: Notice of Possible Exposure to Employees

If an employer has notice that a COVID-19 Qualifying Individual was present in the workplace, the employer must, within one business day of the notice, provide written notice of possible exposure to all employees who were onsite at the same workplace as the qualifying individual within the infectious period (as defined by the California Department of Public Health). This employee notice must include the following:

• That employees may have been exposed to COVID-19 at the worksite
• Information about COVID-19-related benefits and options for which they may be eligible under applicable law (local, state and federal), including workers’ compensation, COVID-19-related leave and sick leave, as well as employee anti-retaliation and anti-discrimination protections
• Centers for Disease Control and Prevention-compliant disinfection and safety plan details that the employer plans to implement and complete

Employee representatives (unions) and employers of subcontracted employees must be included in the above notices.

Employers are required to keep records relating to any notices they provide to employees for at least three years.

* A COVID-19 Qualifying Individual is defined as someone who has a laboratory-confirmed case of COVID-19, who has a positive COVID-19 diagnosis from a licensed health care provider, who is subject to a COVID-19-related order to isolate by a public health official, or who died due to COVID-19.

Requirement #2: Notification to Local Public Health Agencies

If an employer has a COVID-19 outbreak** at a worksite, it must take the following steps:

• Notify the local public health agency within 48 hours of the outbreak
• Data reported must include:
• Number, names, occupations, and worksites of any qualifying individuals
• Business address where the outbreak occurred
• NAICS industry codes of the worksites where the qualifying individuals work and
• Continue to notify the local health department of subsequent laboratory-confirmed cases of COVID-19 at the worksite.

** COVID-19 Outbreak is currently defined by the California Department of Public Health as three or more laboratory-confirmed cases of COVID-19 among employees who live in different households within a two-week period of time.

Requirement #3: Imminent Hazard Notice at the Workplace

The law empowers the California Division of Occupational Safety and Health to prohibit the entry into or operation of a workplace that exposes employees to the risk of infection with COVID-19. It allows the OSH to impose such a prohibition to the extent that it constitutes an “imminent hazard” to employees. Lastly, employers are required to post a notice at the workplace if such a closure is mandated.

Need More Info?

The California Department of Industrial Relations has published FAQs to help employers navigate the requirements of this new law.

Cal/OSHA adopted COVID-19 regulations to protect workers from hazards related to COVID-19. The new standards impose significant requirements on employers. Key provisions require most companies with California-based employees to maintain certain standards, provide specific benefits, and follow certain protocols. Following are the key standards:

1. Paid Leave (for individuals with COVID exposure)
2. Written Prevention Plan
3. Outbreak Requirements
4. Testing
5. Exclusion and Return to Work Parameters
6. Training and Instruction for COVID safety
   
   

Effective Date and Duration

The temporary standards are effective on November 30, 2020 (pursuant to the anticipated approval by the Office of Administrative Law). If approved, the emergency standards will remain in effect for at least 180 days and may be extended.

Covered Employers

Generally, all California employers are subject to the new standards. There are three specific exceptions:

1. Employees working from home
2. Employers with one employee who does not have contact with other individuals
3. Employees covered by Cal/OSHA’s Aerosol Transmissible Diseases standard, which is generally applicable to work at certain health care facilities, laboratories, etc.
   
   

#1. Paid Time Off Requirement

In General: Any employee excluded from the workplace due to a workplace-related positive COVID-19 test must be provided paid sick leave for the duration of the period of exclusion. There are two exceptions:

1. If the employee is unable to work for reasons other than needing to protect other persons at the workplace from possible COVID-19 transmission
2. The employer can demonstrate that the COVID-19 exposure is not work-related. Note that this exception is narrow given the California presumption clause under Workers Compensation law that an employee who was working at a facility and contracted COVID-19 contracted that infection at work.

Compensation and Benefits: Employers must continue and maintain an employee’s earnings, seniority, and all other employee rights and benefits, including the employee's right to their former job status, as if the employee had not been removed from their job.

Integration with Other Leave Benefits: Employers may use employer-provided employee sick leave benefits for this purpose and may consider benefit payments from social sources in determining how to maintain earnings, rights and benefits when not covered by workers’ compensation.

Open COVID Paid Leave Questions: There are several important questions that are not addressed in the regulations:

1. Multiple COVID Leaves: The proposed standards do not specifically address whether employees are limited to only one such COVID leave. The absence of such a specific limitation would lead to a likely interpretation that paid leave benefits must be provided for any workplace exposure, even if an employee is excluded from the workplace on more than one occasion.
2. Existing PTO Integration: Employers can satisfy the paid time off obligations through existing employer-provided employee sick leave benefits and/or supplemental paid sick leave offered in response to COVID-19. However, it is unclear what paid leave must be provided when an employee has exhausted his or her regular employer-provided paid leave entitlements. This scenario is occurring more regularly now as employees have used their paid sick leave and FFCRA earlier in the year.
   
   

#2. Written COVID-19 Prevention Plan

In General: The new standards set forth that employers must provide a written COVID-19 Prevention Plan, the elements of which mirror the requirements of California’s Injury and Illness Prevention Plan. Required elements include:

• A system for communicating with employees about COVID-19 prevention procedures, testing, and systems for reporting potential exposure without fear of retaliation
• Identifying, evaluating, and correcting any COVID-19 hazards
• Procedures for investigating and responding to positive COVID-19 cases in the workplace
• Training and instruction for employees
• Procedures for physical distancing and face coverings
• PPE evaluation
• Cleaning and disinfecting standards
• Engineering and administrative controls
• Recording positive COVID-19 cases and informing public health departments of any outbreaks
• Exclusion of COVID-19 cases from workplace
• Return to work criteria

Details: The regulations contain significant detail on all of the elements that must be addressed in a prevention plan. From physical distancing, use of face coverings, cleaning and disinfecting protocols, ventilation, walkway usage, to employee training, investigations, and non-retaliation. The list is extremely comprehensive, and employers should be prepared to address all potential aspects of mitigation and prevention when creating a prevention plan.

Standalone or Integrated: The COVID-19 Prevention Plan may be developed as a standalone document or be incorporated into an employer’s existing Injury and Illness Program. Due to the specific language that must be included in a prevention plan under these emergency standards, employers are strongly encouraged to carefully examine language if incorporating these Cal/OSHA requirements into existing plans.

#3. Outbreak Requirements

Workplace Outbreak Defined: A Workplace Outbreak is defined as three or more COVID-19 cases within a 14-day period at a single location or when a local health department identifies a place of employment as the location of a COVID-19 outbreak.

Workplace Outbreak Requirements: If an employer experiences a Workplace Outbreak, the standards impose numerous requirements:

• Immediately provide testing (as outlined below)
• Exclude from the workplace all employees who test positive for or were exposed to COVID-19
• Investigate the outbreak and implement any necessary corrective action
• Document the investigation pursuant to the standards and any corrective action implemented as a result and
• Notify the local health department within 48 hours of notice of the outbreak.

Major Outbreak Defined: A Major Outbreak is defined as 20 or more COVID-19 cases in an exposed workplace within a 30-day period. If an employer experiences a Major Outbreak, additional requirements are imposed.

Major Outbreak Requirements: In addition to the requirements outlined above for a Workplace Outbreak, employers must also:

• Increase COVID-19 testing to at least twice a week for all exposed employees within the 30-day period and who remain at the workplace and
• Investigate the outbreak and implement any necessary corrective action, including potential stoppage of operations until corrections are made.
• The proposed regulation also includes requirements for notification of potential COVID-19 exposure within one business day to exposed employees, their authorized representatives, independent contractors, or employers at a worksite.
  
  

#4. Testing

Employers must offer COVID-19 testing at no cost, during working hours (with compensation), to all employees who were exposed to COVID-19 in the workplace. All such employees must be provided a follow-up test one week later and as well as continued testing at least once a week during the quarantine period of 14 days from the date of the COVID-19 outbreak. Testing requirements are triggered by any workplace exposure, not just a Workplace Outbreak or a Major Outbreak.

#5. Exclusion from and Return to Work Parameters

In General: If an order to isolate or quarantine is issued to an employee by a local or state health official, the employee cannot return to work until the specified period is completed or the order is lifted. If no period is specified in the order, the period is assumed to be 10 days from the time the order to isolate was effective or 14 days from the time the order to quarantine was effective.

Any employees diagnosed with COVID-19 and any exposed to COVID-19 within the past 14 days must also be excluded from the workplace until they have satisfied specific return-to-work criteria. One exception exists for circumstances when the employee is reassigned to work in an area where they do not have contact with other individuals until the return-to-work criteria has been met.

Asymptomatic Employees: Employees who test positive for COVID-19 but do not develop any symptoms may not return to work for a minimum of 10 days from the date of the first positive COVID-19 test.

Symptomatic Employees: Employees who test positive for COVID-19 and develop symptoms may not return to work until:

• At least 24 hours have passed since a fever of 100.4 or higher has resolved without the use of fever-reducing medications
• COVID-19 symptoms have improved and
• At least 10 days have passed since COVID-19 symptoms first appeared

Benefits and Pay Continuation: During the exclusionary period, however, employers are obligated to continue providing and maintaining the employee’s earnings, seniority, and benefits.

Cannot Require a Negative Test: The new standards prohibit employers from requiring a negative COVID-19 test for an employee to return to work. Return to work criteria are based solely on time, rather than tests.

Notice Requirements

Employee Notice Requirements: Employers must provide employees with information regarding COVID-19-related benefits, including those available as workers’ compensation, under the federal Families First Coronavirus Response Act (FFCRA), the California Labor Code, and any leave guaranteed by contract.

Health Department Notice Requirements: Employers must notify their local public health department agency and provide complete case information within 48 hours after three or more COVID-19 cases are known (for guidance on preventing further spread).

Interaction with County Protocols

In addition to these new statewide requirements, many California counties have begun announcing their own revised COVID-19 protocols. As examples:

• Los Angeles County: Under a stay-at-home order to remain in effect through December 20, 2020. The order requires that certain businesses abide by restricted occupancy limits – specifically, essential retail stores may only operate at 35% maximum occupancy, while non-essential retail is restricted to 20% maximum occupancy.
• Santa Clara County: Issued a more restrictive protocol which, among other things, prohibits contact sports at all levels, including pro football franchises.

Employers should keep apprised of updates to local county orders and consider allowing employees to work remotely whenever possible.

California Leading the Way?

Employers can expect increased OSHA enforcement under the Biden administration and possibly emergency temporary standards to combat COVID-19. California is one of a few states leading the way with emergency COVID-19 workplace regulations. Employers can expect that federal standards may be forthcoming and may be modeled after the California regulations.

Key Takeaways

The newly issued standards require that California employers evaluate their current COVID-19 protocol to ensure compliance. Suggested next steps include the following actions:

• Implement COVID PTO benefit requirements
• Draft and implement COVID-19 Prevention Programs
• Consider implementing the testing protocols
• Start preparing for the new recordkeeping requirements
• Outline a COVID-19 exposure notification process (in contemplation of a final requirement for notification to be passed in the regulation).

While many employers likely already have some protocols in place, the specific requirements provided by these new Cal/OSHA standards may require that employers update their existing procedures and/or documentation to remain compliant with the rapidly changing landscape.

Employer Resources

Cal/OSHA has provided the following resources for employers:

• One-page fact sheet 
• FAQs
• Model COVID-19 Prevention Plan
• Training webinars
• Full regulations

There are an increasing number of over-age-65 individuals who are contributing to their HSA accounts.

Is this a problem?

Sometimes, yes. Sometimes, no. It is possible to remain eligible and make contributions to an HSA after age 65, however, the details of accomplishing this can be tricky. The key is to understand when making contributions after age 65 works and when it does not.

The Rule

The HSA contribution rules say that if an individual has any other disqualifying coverage (meaning any coverage other than or in addition to a qualifying HDHP plan), they cannot make contributions to an HSA.

Medicare is Disqualifying Coverage

Importantly, Medicare is considered such disqualifying coverage. Medicare has multiple parts which include Part A, Part B, and Part D for traditional Medicare and Part C (Medicare Advantage or Medicare HMO plans, Medicare Supplement/Medigap plans). Being covered by any part of Medicare is considered disqualifying coverage and thus makes individuals ineligible to contribute to an HSA.

Eligible vs. Entitled vs. Enrolled

Medicare terminology can be confusing but understanding the definition and application of these three terms is critically important.

• Eligible means eligible to sign up for Medicare benefits but it does NOT presume any actual enrollment.
• Entitled means actually enrolled in Medicare coverage such that benefits would be payable (under any part). This is the term that is used by the Medicare program.
• Enrolled means the same as entitled in Medicare-speak.
  
  

Social Security Payments and Medicare Part A are Linked

Enrollment in Medicare Part A is oftentimes automatic, and thus can create an unintended consequence of disqualifying future HSA contributions. The Social Security Administration automatically enrolls individuals in Medicare Part A at age 65 if Social Security benefits payments commence. There are five potential scenarios to consider:

1. Social Security Prior to Age 65: When Social Security benefit payments began prior to age 65, enrollment in Medicare Part A is automatic at age 65. In this case, individuals lose the ability to make HSA contributions.
2. Social Security at Age 65: When Social Security benefits begin concurrently with turning age 65, enrollment in Medicare Part A is automatic concurrently at age 65. In this case, individuals lose the ability to make HSA contributions.
3. Social Security Deferred: When Social Security benefit payments are deferred, enrollment in Medicare Part A is also deferred until the beneficiary activates Medicare Part A (and other parts of Medicare). In this case, individuals retain the ability to make HSA contributions.
4. Elective Opt Out from Social Security and Medicare: When Social Security benefits are activated but an individual does NOT want current coverage under Medicare Part A, the individual may complete a form to actively disenroll themselves from Medicare Part A. In the absence of completing the SS form, HSA contributions would be disqualified, even if an individual did not “want” to have or intend to use Medicare Part A benefits. Notably, it is not possible to retain Social Security benefits and electively opt out of Medicare Part A. If an individual wants to opt out of Medicare Part A, they must opt out of both. When an elective opt out form is completed, individuals preserve the ability to make HSA contributions.
5. Employed at Small Employer: Individuals that work for smaller employers (fewer than 20 employees) have Medicare as their primary insurance at age 65, therefore it would not work to “opt out” of Medicare in favor of retaining HSA eligibility. In this case, individuals do not have the ability to make HSA contributions.
   
   

Medicare Part B and Part D Require Action

Enrollment in Medicare Part B and Part D require participant action and there are premiums that must be paid pursuant to enrollment in these parts. These coverages still disqualify HSA contributions, but because they require specific action to enroll, they are less often the subject of inadvertent coverage entitlement.

Stopping Medicare to Reclaim HSA Eligibility

Medicare Part A coverage can be declined (if coverage was activated either previously or unintentionally) by submitting a request form to the Social Security Administration.

If Social Security benefit payments have not commenced, this action will reestablish eligibility for making HSA contributions proactively. If Social Security benefit payments have commenced, a Social Security/Medicare Part A opt out requires repayment to the government of all Social Security payments received and all monies received as reimbursement for Medicare claims. Part A benefits may be activated after group health benefits are terminated in the future.

Pro-Rata Contribution for Year Individual Turns 65

HSA contributions are pro-rated in the year an individual turns age 65. The proration is based on the months of actual eligibility, after turning age 65 and enrolling in disqualifying coverage (in this case, Medicare). Beginning with the first month of Medicare enrollment, the contribution limit is zero. This rule also applies to periods of retroactive Medicare coverage.

Example: Bonnie was covered by a self-only HDHP and eligible for an HSA in 2020. She turned 65 on July 2, 2020 and enrolled in Medicare, effective July 1, 2020. Bonnie lost eligibility for her HSA as of July 1, 2020 and thus was only eligible for six (6) months of the year. Her federal HSA limit was $4,550 ($3,550 individual HSA limit plus a $1,000 catch-up). Accordingly, Bonnie’s maximum contribution is 6/12 X $4,550 = $2,275. Bonnie has until April 15, 2021 to make this contribution.

If a delay occurred in applying for Medicare and an enrollment is later backdated, any HSA contributions made during the period of retroactive coverage are considered excess contributions.

Anticipating Post Age 65 Enrollment in Medicare Part A

Individuals who have deferred enrolling in Medicare Part A for HSA eligibility purposes must plan ahead for the reality that, upon activation, the effective date of Part A coverage will be up to six months retroactive (no earlier than the first month of Medicare eligibility or the individual’s age 65). This means that HSA contributions must be stopped six months prior to Medicare Part A enrollment since the retroactive nature of Part A coverage will disqualify HSA contributions during that six-month period.

Excess Contributions

The IRS annual contribution limits for HSAs for 2021 is $3,600 for individual coverage and $7,200 for family coverage. Individuals age 55+ can contribute an additional $1,000 per year as a “catch-up” contribution. These limits are based on inflation, and generally increase by moderate amounts every year.

Excess contributions also include any amount in excess of the pro-rated monthly amount for an individual who was only eligible to make HSA contributions for a portion of the full tax year (such as for someone who turns 65 mid-year).

Excess contributions are not tax deductible and must be reported as "Other Income" on an individual’s tax return. Excess contributions made by an employer must be included in gross income (Box 1 of Form W-2).

6% Excise Tax

If excess contributions are left in an HSA, a 6% excise tax must be paid on the contributions. For example, if an excess contribution of $100 was made, the penalty tax would be $6.00. If an excess contribution of $1,000 was made, the penalty tax would be $60.

Importantly, the excise tax applies to each tax year the excess contribution remains in the account. This means the 6% excise tax applies annually until the excess contributions are withdrawn from the account. Alternatively, a reduction in future year contributions may be made to offset a prior year’s excess contribution.

IRS Form 5329 (Additional Taxes on Qualified Plans and Other Tax-Favored Accounts) is used to calculate and report the excise tax.

Withdrawing Excess Contributions

Some or all of the excess contributions may be withdrawn to avoid paying the excise tax. The following conditions must be met:

• Same Tax Year: Withdrawals of excess contributions must be made by the due date (including extensions) of the federal tax return for the year the contributions were made.
• Interest Withdrawn: Net income attributable to the excess/withdrawn contributions (interest) must also be withdrawn and included in the earnings in "Other Income" on the tax return for the year the contributions and earnings withdrawals are made.
• Report as Income: Income taxes must be paid on the withdrawn amounts (contributions and earnings). Withdrawn excess contributions should be reported as “Other Income” on the tax return.
  
  

The Process of Withdrawing Contributions

Essentially every HSA vendor has a mechanism for withdrawing excess contributions (both employee contributions and employer contributions). Typically, an individual must inform the HSA administrator as it is not their responsibility to police contribution amounts. Most withdrawal transactions simply require completion of a special form. It is critical that excess contributions be withdrawn within the same tax year as deposited. There is no way to avoid the 6% excise tax if excess contributions are not withdrawn within the same tax year.

Excess funds withdrawn will be listed on Form 1099-SA as a distribution (Box 1) for the tax year in which the distribution was taken. Earnings on excess contributions withdrawn will also be reported (Box 2 and included in Box 1). Form 5498-SA will report the market value of your HSA at the end of the calendar year, the total contributions made within the calendar year, and the total contributions for the tax year through the tax filing deadline. Both IRS forms are typically generated by the HSA vendor and should be retained for record keeping purposes but is not required to submit to the IRS. Lastly, any excess contributions made by an employer should be included in gross income (Box 1 of Form W-2).

Practical Advice for Employers

It is solidly not the employer’s responsibility to track employee HSA contributions nor to cross check for potential excess contributions. These matters fall in the hands of employees and their tax advisors.

That said, HSA rules are confusing at baseline and even more so for individuals turning age 65 as they look to enter the period of entitlement to Medicare benefits. Many are not aware that Medicare coverage disqualifies future HSA contributions while still others are not even aware that they automatically became enrolled in Medicare Part A when their Social Security benefit payments commenced (and therefore are newly prohibited from making HSA contributions).

The team at Vita recommends that, to the extent possible, employers reach out to individuals turning age 65 and provide a copy of this article to provide plan participants with baseline information. Because we have seen an increasing trend of age 65+ individuals making HSA contributions, Vita has performed a Vita Flex HSA database sweep and is providing a list of employees who fall into this category to ease the outreach and communication process.

We’ve been hearing a lot lately about a recently released ruling known as the Transparency in Coverage rule. What exactly is it? The intent of the rule is multi-fold:

• To put health care price information in the hands of consumers and other stakeholders
• To ensure consumers are empowered with the critical information they need to make informed healthcare decisions
• To empower consumers to shop and compare costs between specific providers before receiving care
• To increase price transparency by giving patients access to hospital pricing information
• To reduce the secrecy behind healthcare pricing with the goal of bringing greater competition to the private healthcare industry

The rule was issued jointly by the Department of Health and Human Services (HHS), the Department of Labor, and the Department of the Treasury in response to President Trump’s executive order on Improving Price and Quality Transparency in American Healthcare to Put Patients First. 

The Goal

It is expected that the enhanced transparency from making healthcare cost information available to the public will drive innovation, support informed, price-conscious decision-making, and promote competition in the healthcare industry.

The Problem of Not Knowing the Cost

The problem many consumers face when needing healthcare services is that they never know the cost until after the fact. Pricing information is typically not available to consumers and thus consumers lack the ability to compare providers and services based on projected cost.

How does this rule fix the problem?

This rule will require most group health plans and health insurance issuers in the group and individual markets to disclose price and cost-sharing information to participants, beneficiaries, and enrollees. While not fully completed, the Departments are finalizing a requirement to give consumers real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability, through an internet based self-service tool.

What pricing disclosures are required?

Plans and issuers will be required to disclose the following information on a public website:

• In-network negotiated rates
• Billed charges and allowed amounts paid for out-of-network providers
• Negotiated rate and historical net price for prescription drugs
  
  

Two Approaches for Comparison Shopping

This final rule includes two approaches to make healthcare price information accessible. These rules apply to most non-grandfathered group health plans and health insurance issuers in the group and individual markets.

For Participants and Beneficiaries: Provide personalized out-of-pocket cost information, and the underlying negotiated rates, for all covered healthcare items and services, including prescription drugs, through an internet-based self-service tool and in paper form upon request.

• An initial list of 500 shoppable services as determined by the Departments will be required to be available via the internet based self-service tool for plan years that begin on or after January 1, 2023.
• The remainder of all items and services will be required for these self-service tools for plan years that begin on or after January 1, 2024.

For the Public: (including stakeholders such as consumers, researchers, employers, and third-party developers) Provide three separate machine-readable files that include detailed pricing information:

• File #1 must show negotiated rates for all covered items and services between the plan or issuer and in-network providers.
• File #2 must show both the historical payments to, and billed charges from, out-of-network providers.
• File #3 must detail the in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level.

Plans and issuers must display these data files in a standardized format and provide monthly updates. This data will provide opportunities for detailed research studies, data analysis, and offer third party developers and innovators the ability to create private sector solutions to help drive additional price comparison and consumerism in the health care market. These files are required to be made public for plan years that begin on or after January 1, 2022.

What’s next?

Expect health plans to work on developing data file disclosures over the next year and consumer transparency tools over the next two years. For the immediate future, participants in group health plans will not experience any changes, but in the future, enhanced pricing transparency can be anticipated.

As the deadline approaches for the ACA required reporting of group health coverage offered in 2020, the IRS has issued IRS Notice 2020-76 regarding deadline extensions and requirements. This Notice provides parallel extensions and relief as has been offered in prior years.

History of Compliance Relief

In past years, the IRS provided relief to employers who made a good faith effort to comply with 1095-C and 1094-reporting requirements. The IRS provided relief that employers would not be subject to penalties for failure to correctly or completely file. This relief did not apply to employers that failed to timely file or furnish a statement, but it was a welcome relief to employers who made an honest effort to file the forms.
 

Good Faith Error Relief Again for 2020

Under the newly issued guidance, once again in 2020, no penalties will be imposed on employers that report incorrect or incomplete information (either on statements furnished to individuals or to the IRS) if a good faith effort at compliance was made. As in prior years, the relief is applied only when a good faith was made, not to any failure to timely furnish statements or file returns.

2020 is Last Year for Relief

The IRS also makes clear that 2020 is the final year the IRS intend to provide this good faith relief from penalties for incorrect or incomplete information returns.

Deadline for Furnishing Forms to Employees

The deadline for employers to furnish Form 1095-C to plan participants is now March 2, 2021. (The regular due date January 31). Due to this automatic extension, the permissive 30-day extension that the IRS may grant to an employer for good cause will not be available.
 

No Extension for Filing Forms with IRS

The IRS has not extended the deadline for employers to file Forms 1094-C and 1095-C with the IRS. Forms for calendar year 2020 must be filed by March 31, 2021 if filed electronically (or by March 1, 2021 if filed in paper form (because February 28 falls on a weekend). Employers may file Form 8809 to receive an automatic 30-day extension of this due date for forms due to the IRS.

A Different Process for 1095-B (Insurance Carrier Forms)

Because the individual shared responsibility payment has been reduced to $0 as of January 1, 2019, the IRS will not assess a penalty for failing to furnish Form 1095-B to individuals if two conditions are met:

• The reporting entity (insurance carrier) posts a notice prominently on its website stating that individuals may receive a copy of their 2020 Form 1095-B upon request (accompanied by an email address and a physical address to which a request may be sent), and
• A telephone number that individuals can use to contact the insurance carrier with any questions about the 1095 Forms.

The insurance carrier must then furnish a 2020 Form 1095-B within 30 days of the date the request is received.

Parallel Relief for Self-Funded Plans (for PT Employees)

This relief also applies to employers that are required to furnish Form 1095-C to employees enrolled in a self-funded health plan who are not a full-time employees for any month of 2020.

Reminder on CA Reporting Timing

While the federal deadline for filing is extended to March 31, 2021, the deadline for filing coverage confirmation reports to the state of California remains January 31, 2021. This applies to employers with self-funded plans. (Insurance carriers handle the reporting for fully insured plans.)