COVID-19, Employee Benefits Compliance

Families First Coronavirus Response Act—Full Summary

families first coronavirus response act
The evolution of the COVID-19 epidemic is constantly evolving. The information in this article is based on what is known at the time of publication. As things change, we will continue to update you as it affects employee benefits compliance rules.

 

The Families First Coronavirus Response Act (Act) passed by Congress March 18, 2020 and signed into law that night by the President:

  • requires group health plans, health insurers, and government programs to provide free Coronavirus testing.
  • temporarily mandates paid leave for employers with fewer than 500 employees.
  • expands Family and Medical Leave Act (“FMLA”) protections to include paid and unpaid leave under specific circumstances.

It also:

  • appropriates $1 billion to States for unemployment insurance expansion.
  • increases Medicaid funding and addresses nutritional services for low-income Americans, particularly students who ordinarily receive subsidized meals at school.

Coronavirus Testing

Effective date: Effective from the date of enactment until the Secretary of HHS determines the public health emergency has expired.

Who: Applies to insured and self/level funded group health plans and health insurance issuers of group/individual health plans (including grandfathered plans but excluding excepted benefit plans).

Requirements

  • Cover FDA-approved COVID-19 diagnostic testing products.
    • This includes items and services furnished during a provider visit (office, telehealth, urgent care, and emergency room).
  • Provide the coverage without “any cost sharing (including deductibles, copayments, and coinsurance) requirements or prior authorization or other medical management requirements.”

ADDITIONAL INFORMATION

Government programs, such as Medicare, Medicare Advantage, Medicaid, CHIP, the Indian Health Services, Tricare, the Federal Employees Health Benefit Program, and the VA, must provide coverage for testing for COVID-19 without cost sharing.

If States decide to provide coverage under Medicaid for testing without cost sharing for uninsured persons, the federal government will match 100% of the costs. For additional details on how cost sharing may be affected under private health plans, see Leavitt Group’s article.

TAX RELIEF: Tax credits are equal to 100 percent of the “qualifying” paid leave wages paid by the employer; up to a certain amount which varies based on the type of leave.

 

Paid Leave Provisions Quick Summary

Effective Date: Both sets of provisions are in effect from the date of enactment until December 31, 2020.

Who: Both sets of provisions under this topic apply to employers with fewer than 500 employees

Requirements:

  • Employers must provide up to twelve weeks of unpaid and paid leave under the Family and Medical Leave Act (“FMLA”) for certain employees unable to work in order to care for a child.
  • Employers must provide up to 80 hours of emergency paid sick leave related to certain specified coronavirus events. See below section for full details.

Tax Relief

To help employers cover the cost of the required leave, the Act also provides a series of refundable tax credits that apply against the employer portion of Social Security taxes. Tax credits are equal to 100 percent of the “qualifying” paid leave wages paid by the employer, up to a certain amount which varies based on the type of leave. The Act additionally provides for an increase in the tax credits associated with “qualified health plan expenses” related to paid leave.

Paid Leave Provisions Part 1: FMLA Amendments

Employers must provide up to twelve weeks of unpaid and paid leave under the Family and Medical Leave Act (“FMLA”) for certain employees unable to work in order to care for a child.

This provision amends the FMLA and includes government employees and is referred to as the Emergency Family and Medical Leave Expansion Act (FMLA). These provisions are effective no “later than 15 days after the date of enactment.”

PARAMETERS

  • Allows certain employees to take 12 weeks of job-protected leave for a “qualifying need related to a public health emergency.”
    • The first 10 days of leave may be unpaid leave
      • Employee may choose to substitute any accrued vacation, personal, or sick leave (or, in certain circumstances, the emergency paid sick leave discussed below).
    • The remaining 12 weeks must be paid leave.
    • Pay is based on an amount that is not less than two-thirds of an employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work.
    • Capped at $200 per day and $10,000 in the aggregate.
    • For employees whose schedule varies from week to week, special rules apply to calculate the average number of hours. More details to come.
  • Employers who are part of a multiemployer collective bargaining agreement may make contributions to a multiemployer fund, plan, or program that provides paid leave based on hours worked under the agreement.

DEFINITIONS

Public health emergency

“An emergency with respect to COVID-19 declared by a Federal, State, or local authority.”

Qualifying need

“The employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if:

  • the school or place of care has been closed, or
  • the childcare provider of such son or daughter is unavailable due to a “public health emergency.”

EMPLOYEE QUALIFICATIONS

Employees who have been employed for at least 30 calendar days.

  • Not the usual 12-month period per existing FMLA.

EMPLOYER EXCEPTIONS

  • Health care provider or emergency responders are not entitled this expanded FMLA leave.
  • The Secretary of Labor has the regulatory authority to exempt employers with fewer than 50 employees (employers who, under normal circumstances, are not subject to the FMLA) if the provision of paid FMLA leave “would jeopardize the viability of the business as a going concern.”
  • Employers with fewer than 25 employees experiencing significant economic hardship are not required to reinstate employees after their FMLA leave period ends.

TAX RELIEF

An employer may claim a refundable tax credit equal to 100 percent of the “qualified family leave wages” that the employer pays for a quarter. See below section on Calculating Sick Leave.

  • The amount of qualified family leave wages is up to $200 per day (or partial day) per individual, up to a maximum aggregate amount for all calendar quarters of $10,000 per individual.

Paid Leave Provisions Part 2: Emergency Sick Leave

Employers must provide full-time employees up to 80 hours of emergency paid sick leave related to specific coronavirus events. Employers must provide part-time employees “a number of hours equal to the number of hours that such employee works, on average, over a two-week period.”

  • The required paid leave ends with the employee’s next scheduled work shift following the end of the qualifying need.

This provision is referred to as the Emergency Paid Sick Leave Act and is effective “not later than 15 days after the date of enactment (April 2, 2020).”

EMPLOYEE QUALIFICATIONS

This provision applies to any employee regardless of length of employment where the employee:

  • is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  • has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  • is caring for an individual who
    • (1) is subject to a Federal, State, or local quarantine or isolation order relate to COVID-19, or,
    • (2) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • is caring for a son or daughter if the child’s school or place of care is closed, or the childcare provider is unavailable, due COVID-19 precautions;
    • alternatively, or is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

CALCULATING SICK LEAVE

Sick leave is calculated based on the employee’s regular rate of pay or, if higher, the applicable minimum wage rate.

  • If the leave is to care for a family member or child, or for an employee experiencing “any other substantially similar condition,” the required sick pay is based on two-thirds of the regular rate of pay.
    • In this case, the maximum amount of required sick pay per employee is $200 per day and $2,000 in the aggregate.
  • The maximum amount of required sick pay per employee is $511 per day and $5,110 in the aggregate.
  • For part-time employees whose schedules vary from week to week, special rules apply to calculate the average number of hours.

Employers who are part of a multiemployer collective bargaining agreement may make contributions to a multiemployer fund, plan, or program that provides paid leave based on hours worked under the agreement.

EMPLOYER RULES

  1. An employer may not require an employee to use other paid leave provided by the employer before using the new emergency paid sick leave.
    • Notes: Provisions included in the initial House-passed version of the Act that would have stated that the required paid sick leave must be in addition to any existing paid leave as of the date of enactment, and would have prohibited an employer from making any “change[s]” to its existing leave policy, were not included in the final version of the Act.
  2. An employer may not “discharge, discipline, or in any other manner discriminate against” any employee who:
    • takes a leave or
    • has instituted a complaint regarding the employer’s failure to provide the requisite leave.
  3. An employer may not require employees to find replacement employees to cover the hours they miss while using the paid sick time, see Fair Labor Standards Act (FLSA).
  4. An employer must provide a model notice prepared by the DOL.

EMPLOYER EXCEPTIONS

  • Employers of health care providers and/or emergency responders are not required to provide paid sick leave to them.

TAX RELIEF

An employer may claim a refundable tax credit equal to 100 percent of the “qualified sick leave wages” that the employer is required to pay for a quarter.

The amount of qualified sick leave wages varies depending upon the reason for the leave:

  • For employees who must self-isolate, obtain a coronavirus diagnosis, or comply with a self-isolation recommendation from a public official or health care provider, the amount of qualified sick leave wages taken into account is capped at $511 per day.
  • For employees caring for a family member or for a child whose school or place of care has been closed, the amount of qualified sick leave wages considered is capped at $200 per day.

The aggregate number of days that may be considered in calculating the tax credit is capped at 10 days per employee.

TAX CREDITS

An employer may take an increase in the amount of the tax credit equal to the amount “of the employer’s qualified health plan expenses as are properly allocable to the qualified family [or sick] leave wages for which such credit is allowed” for a “qualified health plan expense.”

  • A qualified health plan expense is defined as: amounts “paid or incurred by the employer to provide and maintain a group health plan …, but only to the extent that such amounts are excluded from the gross income of the employees by reason of section 106(a)” of the Code.
  • Qualified health plan expenses shall be allocated to qualified family [or sick] leave wages in such manner as the Secretary of the Treasury … may prescribe,” and that “except as otherwise provided by the Secretary, such allocation shall be treated as properly made if made on the basis of being pro rata among covered employees and pro rata on the basis of periods of coverage (relative to the time periods of leave to which such wages relate).”
  • More information re what constitutes qualified health plan expenses and how the allocation rules apply will be set forth in Treasury guidance.

No employer deduction for the amount of the tax credits.

  • The tax credits are not allowed for wages in which a tax credit is already permitted under existing employer credit rules for paid family and medical leave under Internal Revenue Code Section 45S.
  • Employers can elect to have the new tax credits not apply.
  • Similar rules are included for self-employed individuals.
  • The tax credits apply to wages an employer pays between (1) a date that the Secretary of the Treasury must specify within 15 days after the date of enactment, and (2) December 31, 2020.

A general fund appropriation will be made to the Social Security OASDI and Federal Disability Insurance Trust Funds to offset the resulting lost revenue to the funds.

Employer Action May be Required

While not all the rules have been fully developed following the passing and signing into law of this Act, there are steps an affected employer may take now to prepare. Smaller employers (under 500 lives) will be the group largely affected as a result of the new FMLA and paid leave rules contained in this Act. Employers have until April 2, 2020, to amend their leave policies to include these changes. Steps to consider include:

  1. Update leave policies.
    • Include expanded FMLA leave to include Emergency Sick Leave of up to 80 hours for full-time employees or for part-time, the amount equal to the amount of time worked in a two-week period.
    • Employers under 50 lives may apply for a waiver from the leave requirement if there is undue burden on the business. Details on how to apply have yet to be released. More to come once announced.
    • Expand Paid and Unpaid FMLA to include eligibility for FMLA for coronavirus-related events of up to 12 weeks and an additional 10 days unpaid leave to care for a child out of school due to school closures.
      • Consider whether to allow other extended leave. The law allows employers to be more generous. Be sure to document in a policy any such rules.
    • Update any procedures related to how employees will communicate the need for leave. Be sure to use state confidentiality laws, where applicable.
      • Update leave request forms and return-to-work policies and forms.
  2. Work with your payroll and tax professional to ensure tax credits and paid leave wages are properly handled and calculated.
  3. Insured health plans will have no actionable items to ensure COVID-19 testing, prevention, and treatment are properly handled within the plan. Work with your insurance carrier to receive new Summary Plan Descriptions (SPD) and Summary of Benefits and Coverages (SBC), where applicable.
  4. Self-funded plans will need to update cost sharing language in the SPD and SBC, where applicable.
  5. Be prepared to discuss the new unemployment options available to employees affected by coronavirus.
    • The Federal government provided additional funding to States to allow expansion of unemployment insurance to cover employees laid off, furloughed, or lost through the end of 2020.
Rules affecting employers and their plans are likely to continue to see changes. It is important to remember that all compliance rules are still in play aside from these changes. As additional government guidance is released, Leavitt Group will provide details. We are your partner in compliance!

 

Disclaimer: this information is educational only and not intended to be legal or financial advice. Please consult with your own legal professional to ensure compliance with all applicable law.