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The Department of Labor and the Department of the Treasury have issued EBSA Disaster Relief Notice 2020-01.
Beginning March 1, 2020, and ending 60 days after the National emergency is over, all group health plans, disability plans, other employee welfare benefit plans, and employee pension plans must disregard this time period (the “Outbreak Period”) when administering plans and deadlines. Standard election time frames will begin again once the Outbreak Period ends. This includes things like COBRA election/notice deadlines and submitting claims for coverage, including the run-out period for FSA and HRA plans.
Read our Compliance Update for details.
The Department of Labor has provided additional guidance on the new law, which we strongly encourage employers to read. We also encourage you to review the additional materials available:
For certain circumstances related to COVID-19, employees will be eligible for:
Effective Date of Law
The FMLA and Paid Sick Leave sections discussed below went into effect on April 1, 2020 and expire December 31, 2020. Leave benefits and payroll credits will not be retroactive.
Employers with fewer than 500 employees are covered.
Any employee who has been employed for at least 30 calendar days, though employers may be able to exclude employees who are health care providers or emergency responders. See the ThinkHR COVID-19 FAQ for details on how the FFCRA defines health care providers and emergency responders.
Covered Leave Purpose
To care for a child under 18 of an employee if the child’s school or place of care has been closed, or the childcare provider is unavailable, due to a public health emergency, defined as an emergency with respect to the coronavirus declared by a federal, state, or local authority.
Up to 12 weeks of job-protected leave.
Reinstatement to Position after Leave
The same reinstatement provisions apply as under traditional FMLA. However, restoration to position does not apply to employers with fewer than 25 employees if certain conditions are met:
Employers with fewer than 500 employees.
All employees (no matter how long they have been employed), though employers may be able to exclude employees who are health care providers or emergency responders. See the ThinkHR COVID-19 FAQ for details on how the FFCRA defines health care providers and emergency responders.
Covered Leave Purposes
Duration of Leave
Rate of Pay
Small Business Exemption
Employers with fewer than 50 employees may be eligible for an exemption from the childcare leave provisions if at least one of the three statements below are true:
The IRS has released Guidance on the FFCRA Tax Credit. Employers should regularly check back for additional instructions.
The FFCRA requires certain employers (generally private employers with fewer than 500 employees, and all public employers) to provide Paid Sick Leave and Expanded FMLA leave for certain events related to the COVID-19 pandemic. Private employers can recoup their costs of providing this leave through an advanced payroll tax credit. The credit is designed to reimburse private employers who are subject to the law for the extra cost of compensation and benefits provided to employees entitled to take leave due to one of the reasons defined in the FFCRA.
The IRS provided detailed guidance on the process employers need to follow in order to take advantage of the tax credit. The process permits affected employers to withhold an amount equal to qualified wages and health expenses from payroll taxes that are to be deposited with the federal government. The employer’s qualified costs can be withheld from the employer’s portion of payroll taxes, payroll taxes deducted from the employees’ pay, and federal income tax withheld from employees’ pay. The amounts withheld will then be reported on the employer’s quarterly payroll tax filing. If there are insufficient payroll tax funds available to offset the employer’s qualified wage and health expenses related to providing FFCRA protected leave, the employer can file a Form 7200 to claim an advance credit.
Determining the Amount of Qualified Health Plan Expenses
Employer tax credits to cover the cost of employees taking FFCRA qualified leave include what are referred to as “qualified health plan expenses.” Qualified health plan expenses include plans defined as group health plans in Code section 5000(b)(1). This is a broad definition that includes employer-sponsored medical plans, HRAs, dental plans, vision plans, Rx plans, health FSAs, and others, but does not include employer contributions to a QSEHRA, Archer MSA or HSA.
The amount of qualified health plan expenses generally includes both the portion of the cost paid by the employer and the portion of the cost paid by the employee with pre-tax salary reduction contributions. If an employee participates in more than one eligible plan, the qualified expenses of each plan in which the employee participates are aggregated for that employee.
The IRS also provided guidance on documentation employers must obtain from employees who take FFCRA leave. This documentation does not need to be submitted to the IRS but must be maintained to justify tax credits claimed by the employer in the event of an audit. See more in the Amwins Connect Compliance Alert
Our partner ThinkHR has provided a great resource with questions they've received during recent webinars. Below are highlights taken from the ThinkHR COVID-19 FAQ.
Do we need to provide the required sick leave under the FFCRA in addition to the sick leave we already offer?
Yes. The Department of Labor makes it clear in an FAQ regarding the FFCRA that leaves under the FFCRA are intended to be in addition to any pre-existing leave entitlements that an employee may have.
Do we still have to provide EPSL or EFMLA if we lay off or furlough employees?
No. Employers who are closed — either due to lack of business or a state or local order — do not have to provide these leaves. Employees who are furloughed (temporarily not working but still on the payroll) are also not entitled to these benefits. In either of these cases, employees would be eligible for unemployment insurance instead. However, employers should ensure that they are not making furlough or layoff decisions based on an employee’s request or potential need for leave, as this would likely be considered interference or retaliation (and grounds for a lawsuit).
How are we supposed to pay for the sick leave and FMLA leave mandated by the Families First Coronavirus Response Act?
To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released soon.
For many, business slowdowns related to the spread of COVID-19 have made it hard to imagine how employers could bear any additional expenses. We encourage anyone with these concerns to read the linked announcement carefully.
The full announcement can be found here: Treasury, IRS, and Labor Announcement on FFCRA Implementation. Including the information in the link, this is all we currently know about the payroll tax credit under the FFCRA and how to access or administer it.
If I am a nonprofit or a public employer, do tax credits and reimbursement apply to me?
Most public employers (e.g., cities, municipalities, public school districts) will not be eligible for the tax credits or reimbursements provided in the act. Private nonprofit entities, however, are eligible
What are our EPSL and EFMLA obligations to different employee situations, such as remote employees?
All employees are entitled to emergency paid sick leave (EPSL) and emergency expansion of the FMLA (EFMLA) benefits unless a specific exemption applies to your business or the individual.
Is the FFCRA retroactive or applicable before its effective date?
No. The Families First Coronavirus Response Act (FFCRA) goes into effect on April 1, 2020 and is not applicable before that time.
How do EFMLA and EPSL relate to each other, especially in regard to caring for children?
The emergency FMLA (EFMLA) and emergency paid sick leave (EPSL) both cover caring for children whose school or place of care is closed due to COVID-19 precautions, though EFMLA has the broader restriction that the child be under 18 years old. The leaves can run concurrently with the first 10 days of EFMLA being unpaid, which will, in many cases, coincide with the 80 hours of pay (at 2/3 the regular rate) under EPSL for full-time employees.
Required FFCRA Poster
The Department of Labor (DOL) has released a mandatory employee rights poster for the FFCRA. It should be posted or distributed to employees electronically (via email or online portal) by April 1. Read more on the requirements.
Enforcement of FFCRA
The DOL will not bring enforcement actions against employers for violations of the FFCRA prior to April 17, 2020, provided that the employer has made reasonable, good faith efforts to comply with the Act. Read more about the brief non-enforcement period.
Documentation Required to Substantiate Leave Payments
(From the IRS) An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if the employer receives a written request for such leave from the employee in which the employee provides:
In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.
Guidance from the DOL on Administering FFCRA Leaves
We strongly suggest that employers read through the entire Questions and Answers document, so they have an understanding of how the leaves work. The following are some highlights from the updated guidance:
On Friday, March 27, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The new law is a $2 trillion economic stimulus package designed to repair the economic damage caused by COVID-19 and provide additional protection to individuals and businesses who may lose income due to the pandemic. While most of the act pertains to direct payments and loans, there are some sections that affect employers.
Providing Alternatives to Closure and Layoffs
The CARES Act gives employers the following options and benefits, which may allow them stay open and keep more people employed:
We are unable to advise on these topics as they are outside the scope of our expertise. We encourage you to follow the IRS Coronavirus Tax Relief page and the SBA Coronavirus Loan Resources page, as well as consult with your tax professional or financial advisor. Detailed guidance on how to access these financial resources should be coming soon from those sources.
Impact on Unemployment Insurance
The act increases the length of time someone can be on unemployment benefits to a maximum of 39 weeks. In many states, this will be an increase of 13 weeks of benefits. The act also adds $600 to the weekly amount an individual would usually receive. Independent contractors may be eligible for benefits under this expansion. While these unemployment benefits are generous, employers should still consider their options and incentives under the CARES Act mentioned above before making decisions about reduced hours, furloughs, or layoffs.
Employees who experience reduced hours, furloughs, or layoffs should be encouraged to file for unemployment insurance as soon as possible. We recommend that both employers and employees visit their state’s unemployment insurance department website and track local and state news, as departments across the country are updating their rules to facilitate displaced workers during this time.
The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone. The loan amounts will be forgiven as long as:
Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. Loan payments will be deferred for 6 months.
Visit the Paycheck Protection Program (“PPP”) page for more details.
Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors— are eligible. Businesses with more than 500 employees are eligible in certain industries.
When to Apply
Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.
How to Apply
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.
The SBA will work directly with state Governors to provide targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the Coronavirus (COVID-19). The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. Find more information on the SBA’s Economic Injury Disaster Loans at SBA.gov/Disaster.
Details shown below are from the Benefits.gov website.
The Small Business Administration's (SBA) disaster loans are the primary form of Federal assistance for the repair and rebuilding of non-farm, private sector disaster losses. The disaster loan program is the only form of SBA assistance not limited to small businesses.
The Economic Injury Disaster Loan Program (EIDL) can provide up to $2 million of financial assistance (actual loan amounts are based on amount of economic injury) to small businesses or private, non-profit organizations that suffer substantial economic injury as a result of the declared disaster, regardless of whether the applicant sustained physical damage.
An EIDL can help you meet necessary financial obligations that your business or private, non-profit organization could have met had the disaster not occurred. It provides relief from economic injury caused directly by the disaster and permits you to maintain a reasonable working capital position during the period affected by the disaster. EIDLs do not replace lost sales or revenue.
To be eligible for EIDL assistance, small businesses or private non-profit organizations must have sustained economic injury and be located in a disaster declared county or contiguous county.
The SBA can provide up to $2 million in disaster assistance to a business. The $2 million loan cap includes both physical disaster loans and EIDLs. There are no upfront fees or early payment penalties charged by SBA. The repayment term will be determined by your ability to repay the loan.
Apply online for disaster loan assistance at your own convenience through SBA's secure Disaster Loan Assistance website. For application information, please call 1-800-659-2955 or email DisasterCustomerService@sba.gov.
For more information about this program, please visit the Economic Injury Disaster Loan page.
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