We have added a Q&A to the end of the list about handling the employee portion of benefits that are continued as active through a furlough. The information in this article is likely to change on a regular basis as the COVID-19 crisis continues to evolve, laws and regulations change, and we receive additional information from carriers and third-party administrators (TPAs). Please check back regularly for updates to our answers or guidance.
There is no single legal definition of furloughs and layoffs. That being said, for the purpose of this document:
That is a complicated question which may require consideration of several different factors.
1. Legal protections
The first question is whether the affected employees’ absence is legally protected by some law that requires you maintain some or all benefits, e.g. the FMLA. Most furlough and layoff situations will not be covered by such a law but changes in the law in response to the COVID-19 outbreak or the particular circumstances of a given employee may change that.
2. Plan document
Do the plan documents expressly address continued eligibility for an employee whose work hours have been temporarily reduced, including a reduction in hours to zero due to a leave of absence or layoff? Any such language might say employees immediately lose coverage or remain eligible for some period of time. If there is express language addressing the issue in the plan documents, then that language will control unless amended or waived by relevant carrier (see below).
3. Employer policy
More likely, you will find only general language about being actively at work, regularly scheduled to work 30 hours per week, being a full-time employee, or words to that effect. In that case, the employer will have to interpret the language to determine how it applies in this situation.
Here are some options for employers to consider in the event their plan document doesn’t provide clear answers as to how to handle benefit continuity:
Employees on furlough
Employees on layoff
4. Carrier and TPA responses
An increasing number of insurance companies and stop loss carriers are adopting a variety of approaches to dealing with continued eligibility during a COVID-19-related shut down, furlough, reduction in hours or work stoppage, allowing employees to remain eligible for some specified period of time despite not working the required hours. Every carrier is different as to the circumstances under which they will allow such continued eligibility so it’s important to understand exactly what each carrier is allowing. In some cases, the carrier is allowing this continued eligibility without amending the plan or other formal action by the employer; in other cases, the employer must notify the carrier or complete a form to take advantage of this extended period of eligibility.
Employers choosing to provide for extended eligibility during the COVID-19 pandemic may experience difficulties collecting premiums from employees due to their employees’ lack of paychecks. Such employers will need to decide whether they will waive those employee premiums or develop a system for communicating premium deadlines and collecting those premiums from employees. Alternatively, the employer could choose not to extend eligibility but to COBRA the employees and subsidize COBRA and follow the employer’s typical approach for handling COBRA premiums.
5. Consider all plans
While health insurance is often the primary focus of the benefit continuation discussion, each individual benefit plan must be considered separately. For example, the dental and the vision plan may have different approaches than the health plan.
6. Sample plan language to extend coverage during a furlough or temporary layoff
Coverage will be continued for eligible participants should any of the following occur:
If an employer lays off all eligible employees or reduces hours such that there are no longer any active employees enrolled in the group health plan, it may not be possible to continue the plan with only COBRA/continuation participants. At this time, employers will fully-insured plans contemplating this situation should reach out to their carriers for further details. In that case, employees losing medical coverage should have a HIPAA special enrollment opportunity which would allow them to enroll in Marketplace coverage or enroll in a spouse’s or parent’s plan if available.
With non-insurance benefits such as paid time off (PTO) and vacation, you should still follow your policy, but you will have more freedom to make exceptions than under insurance and retirement plans.
As you decide how you will handle PTO payout, it is important to keep in mind the potential effect on unemployment benefits. This will vary by state.
In Minnesota, whether vacation/sick/PTO payments affect unemployment benefits depends on the type of separation. If the layoff is temporary, 100% of the PTO payment is deducted from the weekly benefit payment. The PTO payment may delay or reduce weekly benefits, however the maximum amount of benefit available is not reduced. If the layoff is permanent, PTO is not deducted from the weekly benefit payment.
In Wisconsin, whether PTO payments affect unemployment benefits depends on the amount. A claimant is generally ineligible to receive any benefits for a week if they receive or will receive wages totaling more than $500. Vacation, sick or PTO payments would all be considered wages.
(Added 4/2/20) If you require or allow the use of paid time off benefits (PTO) during the furlough, then during any part of the furlough for which the employee may also be using PTO, you would continue to make payroll deductions as normal to collect the employee portion of the premium. If you decide not to allow PTO to be used during the furlough, or at some point the furlough becomes unpaid, there are several options you can consider:
Most states’ unemployment insurance divisions have created an intranet page dedicated to questions and answers on COVD-19 and unemployment benefits that will provide additional information for employers or individuals with questions.
It is important to remain informed with the rapid changes related to COVID-19. Employers should closely monitor the CDC and World Health Organization (WHO) websites for the latest and most accurate information on COVID-19. Employers with questions about their current benefits as they relate to COVID-19 can contact us.
Employers with additional questions and concerns can access new and updated articles and resources from our COVID-19 Resources page or register for an upcoming Ask Associated: Critical Topics Related to COVID-19 webinar.
Sarah provides employer-focused guidance on human resource matters. With an emphasis on employee benefits and the Affordable Care Act, she distils the complexity of employment laws into understandable action items that meet a client’s business goals.
Sarah provides employer-focused guidance on human resource matters. With an emphasis on employee benefits and the Affordable Care Act, she distils the complexity of employment laws into understandable action items that meet a client’s business goals. During previous private practice experience, Sarah handled numerous complex benefit matters, including the transition of benefit plans in large corporate acquisitions, de-risking solutions in pension plans, contested health plan claims, DOL and IRS audits and the implementation of ACA-compliant health plan solutions. Sarah graduated from University of Wisconsin Law School, with a Bachelor of Arts degree from Grinnell College.
A recent survey by the Society for Human Resources Management (SHRM) reported 94% of leaders feel employee engagement is an important or very important workforce challenge. An engaged workforce increases operational income by over 19%, while a disengaged workforce can drain over 34% of an organizations’ operational income. Additional risks of low engagement can be seen in increased turnover, low customer satisfaction ratings and even increased employment litigation.
During the White House’s Summit on Working Families on June 24, 2014, President Obama indicated he was signing a presidential memorandum requiring every federal agency to address flexible work schedules and give employees the right to request such schedules. Absent what could be a dramatic increase in workplace flexibility for federal employees, it is undeniable that the demand for flexibility and work-life balance is on the rise.
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