The Families First Coronavirus Response Act (FFCRA or Act) may have an immediate impact on your group health coverage, payroll and leave administration. The Act is set to take effect no later than 15 days after the March 18, 2020 enactment date (April 3, 2020). The FFCRA is intended to provide relief related to the current COVID-19 crisis and is set to expire on December 31, 2020. While the FFCRA contains numerous other provisions, this Alert will cover mandated coverage of COVID-19 testing and diagnosis under employer-sponsored group health plans or individual health insurance coverage; and FICA tax credits related to the two new paid leave requirements applicable to employers with less than 500 employees. Absent guidance by the applicable agencies, there are and will be numerous questions about the practical application of the FFCRA. We would invite you to review the Alert on the specific details of the two new paid leave requirements, written by members of the Labor and Employment Practice of Saul Ewing Arnstein & Lehr for a comprehensive overview of the paid leave provisions of the FFCRA.
Health Care Plan Mandated COVID-19 Testing and Diagnosis
The Health Provisions of the FFCRA require group health plans and health insurance issuers offering group or individual health insurance to cover the testing and diagnosis of COVID-19 with no cost sharing. This means that an employer-sponsored group health plan cannot charge a deductible, co-payment, co-insurance or impose prior authorization or other managed care requirements before the following services are provided:
- FDA approved, cleared or authorized diagnostic products (i.e., test kits) for the detection of the virus that causes COVID-19, and the use of such diagnostic products;
- Items and services furnished to an individual during office visits, including in-person and telehealth, urgent care center and emergency room visits (to the extent the services lead to the evaluation of the individual for COVID-19).
Families First Coronavirus Response Act Paid Leave Provisions
The FFCRA contains The Emergency Family Medical Leave Expansion Act, which amends the Family and Medical Leave Act, and The Emergency Paid Leave Act. Only private employers who have less than 500 employees, and all public employers (with at least one employee) are subject to these requirements. An employer with less than 50 employees can be exempted by the Secretary of Labor if the imposition of these leave requirements would jeopardize the viability of the business as a going concern. More details about the FFCRA paid leave provisions can be found in the Alert written by Saul Ewing Arnstein & Lehr’s Labor and Employment Practice.
Wages paid pursuant to the mandates under The Emergency Family Leave Expansion Act and The Emergency Paid Leave Act are not subject to FICA taxes (or RRTA taxes, if applicable).
Tax Credits for Paid Leave and Provision of Health
Eligible employers who provide either emergency paid family leave or emergency paid sick leave, as discussed above, are entitled to a refundable tax credit against their FICA taxes (or RRTA taxes, if applicable). There are specific limitations on the credits, which, generally, correspond to the applicable limits on the paid leave.
For paid emergency sick leave, the amount of wages taken into account as a tax credit cannot exceed:
- $511 per day per employee if the employee is on paid sick leave as a result of a federal, state or local quarantine or isolation order related to COVID-19; the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or if the employee is experiencing symptoms of COVID-19 and needs to obtain medical diagnoses or care; or
- $200 per day per employee if the employee is on paid sick leave to care for or assist a family member who is under a federal, local or state quarantine or isolation order related to COVID-19 or who has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; to care for the son or daughter of an employee if their school or childcare facility is closed, or the childcare provider is unavailable due to coronavirus precautions; or the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
For emergency paid family leave, the amount of wages taken into account for the tax credit cannot exceed:
- $200 per day per employee who is paid qualified family leave wages, up to a maximum of $10,000 per employee for all calendar quarters. The credit only applies to paid emergency family leave required by the FFCRA.
In addition, to the wage limitations, the number of days that can be taken into account in any calendar quarter cannot be more than the excess (if any) of 10, over the total number of days taken into account for all preceding calendar quarters.
The amount of the credit can be increased if the eligible employer has any qualified health plan expenses that are allocated to qualified emergency sick leave wages or emergency family leave wages. Qualified health plan expense are amounts that are either paid or incurred by the eligible employer to provide and maintain a group health plan, to the extent that such amounts are excluded from the employee’s gross income. The allocation for health care expenses must be made on a pro-rata basis among covered employees and periods of coverage, unless other allocation rules are prescribed by the IRS.
The credit cannot exceed the total amounts of FICA (or RRTA tax, if applicable) imposed on the employer for that calendar quarter. If in any calendar quarter, the amount of the credit exceeds the employer’s FICA (or RRTA, if applicable) obligations, the excess amount will be treated as a refundable overpayment. The amount of the credit is considered gross income of the employer. To prevent a double benefit, any wages taken into account in determining the credit cannot be taken into account for purposes of determining the credit under Section 45S of the Internal Revenue Code (tax credit for employers who provide paid family and medical leave).
