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COVID-19 and Employee Benefit Plans - The Knows and Unknowns

March 24, 2020

What a difference a few days make! Since we last talked with you friends, we’ve both been ordered by our respective governors to stay home at all times with our husbands and pets, plus we need to home-school our children. We’ve spent an obscene amount of money at the grocery store and on Lego sets. Most importantly, our federal policymakers finalized a second major piece of legislation to provide economic relief and aid related to COVID-19 and employee benefit plans. On March 18, 2020, just hours after clearing a Senate vote, President Trump signed H.R. 6201, the Families First Coronavirus Response Act into law. Here’s a summary of what we know about the legislation, and also what remains up in the air.


What we know:  The law requires all private individual and group health insurance providers, including self-funded employer groups and grandfathered health plans, to cover COVID-19 diagnostic testing at no cost to the insured. Coverage, without any cost-sharing, is also required for any office visit, telehealth visit, urgent care, or emergency room visit that triggers the need for testing.  Said differently, this means that no plan can charge copayments, coinsurance, or deductibles for diagnostic care related to COVID-19. Prior authorization and medical management requirements are also not permitted.

What we don’t know: It’s unclear when these requirements and all of the rest of the law go into effect.  The law says,“this Act shall take effect not later than 15 days after the date of enactment of this Act.”  Fifteen days after enactment is April 2, so we know it will be in effect by then, but the law allows for the possibility of an earlier effective date. We don’t know if the Trump Administration will begin enforcement sooner rather than later.


What we know: Covered employers with fewer than 500 employees will have to provide employees unable to work or telework due to reasons related to COVID-19 with two weeks of paid sick-leave related to coronavirus.

Specifically, this leave must be made available to employees required to self-isolate based on the advice of a doctor or ordered into quarantine.  It also can be used to get COVID-19 diagnostic testing and care, to take care of a child whose school or childcare arrangement closes due to coronavirus precautions, or for related illness as defined under future regulations.

This leave does not carry over to 2021, but employers cannot force anyone to take this leave before other accrued leave, so any individual qualifying will likely wish to use their emergency paid sick leave first.

For any employee quarantined, self-isolated, or seeking care and diagnosis for COVID-19, the statute provides that up to 80 hours of service can be reimbursed at 100% of pay, subject to a $511 per day ($5,110 aggregate) maximum.  For all other circumstances, 2/3 of pay is reimbursed up to $200 per day ($2,000 aggregate).  Notably, part-time employees are also eligible for emergency paid sick leave—in this case, pro-rated based on the individual’s regularly scheduled hours.

The good news for employers is that they will not be required to bear the cost of this leave.  Instead, these amounts are reimbursable through a 100% refundable tax credit against each employer’s portion of Social Security taxes, which can be claimed on a payroll-by-payroll basis. If the value of the tax credit exceeds the employer’s aggregate Social Security tax liability for a given pay period, the excess may be refunded directly to the employer. In addition, the tax credits will include 100% of the employer’s group health plan costs attributable to the paid leave, to the extent such amounts are excluded from the employees’ gross income.

Two key exceptions worth noting here.  First, employers of health care providers or emergency responders can opt-out of these rules. Second, the Department of Labor is authorized to issue emergency regulations to exempt individual companies with fewer than 50 employees from this requirement if compliance with it would “jeopardize the viability of the business as an ongoing concern.”

What we don’t know: How employers are supposed to count to 500 employees. Part-time workers seem to count, but as whole employees or pro-rated? What about foreign workers? Should each corporate entity be counted separately, or do the IRS controlled group rules apply?  What date does the employer use for its count?

What exactly does a Federal, State, or local “quarantine order” or “isolation order” mean? And how does this new sick leave requirement mesh with existing state-level sick and paid leave requirements?

Also, employers can exempt health care providers and emergency responders from these rules, but how are those roles defined?

Speaking of exemptions, no one is sure exactly how the possible exception for businesses with fewer than 50 employees will work yet either. The Department of Labor is authorized to issue emergency regulations to create this exemption, but exactly how companies will certify that compliance “jeopardizes the viability of the business as an ongoing concern” remains unclear.

Another issue is how the tax credits will work, both from the IRS side of the equation and the benefits administration and payroll provider side too.

We hope that the emergency regulations to be issued by the Departments of Treasury and Labor in the next few days will answer some of these questions. If they do, we will keep our friends posted!


What we know: The new law also expands the Family Medical Leave Act (FMLA) for employers with fewer than 500 employees by adding a new qualifying event for any employee who has been employed for at least 30 days.

Specifically, FMLA will apply if an employee is unable to work or telework due to a need to care for a child(ren) under age 18 who cannot attend school or childcare due to coronavirus-related closures.  In addition to providing 12 weeks of protected FMLA leave for these individuals, the law also provides for a portion of that leave to be paid.

Under the rules, the first ten days of leave may be unpaid, or an employee may use other accrued leave during that period (but they can’t be required to do so). After the first ten days, employers must pay employees on this kind of FMLA leave at least 2/3 of the employee’s regular rate of pay, up to a maximum benefit of $200 per day and $10,000 in aggregate leave payments. These expenditures are reimbursed in the same manner as the emergency sick leave—through reimbursable payroll tax credits. Also, just as with the sick leave, the employer can claim reimbursement for 100% of the group health plan costs attributable to the FMLA leave, to the extent such amounts are excluded from the employees’ gross income.

Also, as with the emergency sick leave provisions, employers of health care providers and first responders have the option to opt-out of these rules, and there is the possibility of future regulations that will relax the rules for employers with fewer than 50 employees.  Additionally, while businesses with fewer than 25 employees are subject to these new FMLA requirements generally, they are not required to maintain a position for an employee on return from leave.  They must make a reasonable effort to do so (and to notify that individual if a job subsequently becomes available under certain circumstances).

What we don’t know: All of the same questions we have about the emergency sick leave requirements apply to the new FMLA leave. Another issue that some people have raised over the past few days related to the FMLA leave is what does “unable to telework” mean?  As working mothers with young-ish children, it is obvious to us that some parents may have the option to telework, but still might not be able to perform their job duties and therefore qualify for the FMLA leave. For example, it might be impossible to complete work tasks when also forced to home-school a special needs child, attend to a cranky three-year-old or both! However, some people have interpreted this part of the statute to mean you can only take the leave if you cannot work and do not have the option to telework. Again, hopefully, clarification is coming soon.


Over the past few days, we’ve been asked approximately a billion times about group health coverage options for laid-off and furloughed workers and employees with reduced hours. Right now, those options depend a lot on what employers can do financially and if the health insurance carriers who underwrite those benefit plans are willing to modify contract provisions about eligibility requirements. However, what is unclear is if the states or the federal government will mandate any solutions. A few states have already required carriers to offer a 60-day premium payment grace period, and many more state regulators are encouraging carriers to provide maximum flexibility. The real question, though, is what benefits will be in the third COVID-19 relief bill currently being debated in Congress. Based on what we hear about the legislation, it could be a game-changer for employers that want to maintain health benefits for employees for as long as possible.


These are crazy times, and we dare you to find anyone who isn’t a bit anxious and overwhelmed about COVID-19. As Jen has been saying to people for the last week, “Disney World is CLOSED! No normal rules apply!” That’s why we think it is our industry’s time both to give back to our communities and to shine.  Individuals and employers need assistance, answers, and assurance. While we don’t know what the future holds, and we might not be able to answer every question that arises immediately, we can try our best. It is the time for employee benefits professionals to be helpful, creative, patient, and positive—with each other and with our clients.  Friends, we’re all in this together, so please let us know if there is a way we can help you out!