Employee Benefit Questions
If I furlough or lay off employees, can I continue some or all of their benefits during the leave?
There may be ways to continue some or all benefits during a furlough or layoff. Each plan is unique, however, and the exact terms must be reviewed. Many plans include a provision that employees be “employed” and/or “actively at work” and, therefore, employees may lose eligibility under the terms of the plan if they are not performing services. In addition, service requirements for eligibility (such as offering benefits only to employees working at least 30 hours per week) may cause an employee to lose eligibility during a temporary leave (but not in all circumstances). However, many plans include specific provisions extending eligibility during leaves of absence (including unpaid leaves) or following layoffs. Thus, each plan must be reviewed to make this determination.
However, even if benefits would be discontinued, an employer might assist employees to continue their benefits by subsidizing COBRA coverage or assisting employees by converting fully-insured policies and providing a severance payment to cover the costs. Further, many life and disability policies include provisions that waive waiting periods and other limitations if an employee is rehired within a certain period of time after termination. These provisions may mitigate the impact of temporary loss of coverage and should be reviewed in creating a benefit strategy.
Can I establish a leave-sharing program to allow employees to assist one another with COVID-19 situations?
Yes, if designed properly, the donated leave will not be treated as wages subject to income and payroll taxes for donating employees and, instead, will be treated as wages to the employee receiving the donated leave. As with all tax matters, the rules can be complex, so employers should consult with legal counsel in designing and documenting the leave sharing program.
If employees hours are reduced and they will lose health coverage, at what point must COBRA notices be sent?
As noted above, employees who experience a reduction of hours may lose eligibility under health plans, resulting in a qualifying event for which the employer would need to offer COBRA. The COBRA election notice must be sent within a certain time after the “qualifying event.” The qualifying event will be the date coverage would otherwise end due to termination or reduction of hours. Thus, as with the question above, it is critical to understand when coverage will end under the terms of each plan.
For example, if an employee is temporarily laid off on March 17 (and therefore has a termination of employment on that date) and health coverage under the plan ends at the end of the month that includes termination, then the qualifying event is March 31. The COBRA notice and election process should run from that date, even if the employer decides to pay all or a portion of COBRA to assist employees in extending benefits. On the other hand, if the plan provides that coverage will end on the last day of the month that is at least 60 days after a temporary layoff, then the qualifying event date is May 30, and the COBRA notice and election process generally should begin at that time.
Failure to provide COBRA notices timely can result in significant liability. Thus, each employer should work with their vendor and benefits counsel to ensure the notice is properly provided based on the terms of its particular plan(s).
Can employees receive a loan or hardship distribution from their retirement plan on account of expenses related to COVID-19?
IRS has not specifically addressed plan loans or hardship distributions for COVID-19 or any financial hardship that may result from a participant or family member contracting the virus. Several advocacy agencies have requested specific relief to make hardship distributions easier to obtain.
Loans from 401(k) and 403(b) plans generally are not conditioned on participants incurring a hardship (although the terms of each plan should be reviewed). Therefore, any loan feature would remain available to participants who need a loan to help cover COVID-19-related expenses. However, no relief has yet been provided for participants who are already at the limit on loans (either in number or amount). Therefore, participants who have already taken the maximum available loan cannot, absent IRS relief, take additional loans on account of COVID-19.
Hardship distributions from a 401(k) or 403(b) plan generally are available only if necessary to satisfy an immediate and heavy financial need—which does include potential COVID-19-related hardships, including:
- Medical expenses of the participant, spouse, and dependents, and
- Prevent eviction from, or foreclosure on the mortgage of, the participant’s primary residence.
Keep in mind that legislation has expanded the types of contributions a plan may allow the participant to access for a hardship distribution and lightened the documentation requirement of administrators. Access to these other contributions for hardships may provide additional relief.
Note that if the Federal Emergency Management Agency (FEMA) declares the COVID‑19 pandemic a disaster (rather just an emergency as they currently have done), a hardship distribution would be permitted for expenses and losses (including loss of income) incurred by the participant on account of COVID-19, up to $100,000. If this reason for a hardship distribution becomes available, participants will also be able to spread income tax burden on the distribution over a three-year period, and may be allowed to repay the distribution back into a retirement plan for three years.
457(b) plans (a special defined contribution plan available only to tax-exempt entities) may permit an “unforeseen emergency” distribution when faced with a severe financial hardship resulting from illness and medical care for the participant or beneficiary, but not merely due to loss of income. It does not have a similar provision for disasters.
Pension plans and cash balance plans do not permit hardship distributions or loans. However, the SECURE Act, which passed in late 2019, would allow an employer to add a permanent or temporary ability to receive in-service distributions for employees who are at least age 59.5.
Does my health plan have to cover COVID-19 diagnosis and treatment expenses at a reduced cost-sharing?
Generally, no. Plans that provide essential health benefits generally will provide coverage for the diagnosis and treatment of COVID-19, but they might not be required to provide benefits at reduced cost-sharing. However, some major health insurers have agreed to waive cost-sharing that might otherwise apply to COVID-19 diagnostic tests. In addition, several states have encouraged or required health insurers to waive co-pays and cost-sharing to cover various COVID‑19 testing and treatment while also waiving any preauthorization requirements for this testing. Employers with self-insured plans should closely monitor this as there is discussion of legislation in this area that might impact plan benefits.
Can my high deductible health plan cover COVID-19 diagnosis and treatment expenses with no or reduced cost-sharing?
Yes, on March 11th, the IRS issued Notice 2020-15 permitting an HDHP to allow for COVID-19 testing and treatment without a deductible or with a deductible below the minimum annual deductible, and that such waiver or lessening of deductible would not affect the status of the plan as an HDHP. Plans may need to be amended if the company wishes to provide these enhanced benefits.
Is a participant allowed to make changes to his election under a Code Section 125 (“cafeteria”) plan due to COVID-19?
There is no special provision allowing participants to change elections to add or drop coverage due to COVID-19. However, a change in status, like a reduction in hours, may arise under COVID-19 for the participant (or his spouse or dependents), which could allow for an election change. Any election change must be consistent with the change in status. Employers should carefully review plan documents to discern what election change options are available and how employees taking FMLA leave will pay for any coverage provided during that leave.
Other plans and agreements to consider with COVID-19 related issues.
Employers should review their short-term disability policies to see if COVID-19 related illnesses may be covered. If so, employers should be prepared to provide participants with notices or paperwork as needed.
Employers with collectively bargained employees should refer to their collective bargaining agreements as some may create additional obligations of the employer to pay for lost time under certain circumstances.
Employment and Labor Questions
If I close my offices and employees are unable to work from home, who must be paid?
Under the federal Fair Labor Standards Act, non-exempt employees are entitled to be paid only when they work. Therefore if your offices are closed due to the pandemic, and non-exempt employees are not working from home, they do not need to be paid wages. Check your policies to make sure that you don’t have another policy which says that all staff will be paid when the office is closed due to natural disaster such as hurricane or snowstorm. If you have such a policy, change it prior to any office closure or furlough of employees. Also, check state law to make sure there are no applicable notice periods or other state law issues. Consistent with advice from the CDC and other governmental agencies, consider being flexible in allowing non-exempt employees to use paid leave to replace lost wages.
Under the FLSA, an exempt employee is entitled to his/her full salary during any workweek in which any work is performed. If you close your offices, consider whether exempt employees are able to work from home—answering emails or taking calls. If so, you need to consider whether you want to authorize those workers to work from home. IF you do authorize remote work for exempt employees, consider asking them to keep track of time worked and reporting weekly on time they spent working. Exempt employees do not have to be paid in any workweek in which no work is performed. It may be possible to reduce exempt employees hours of work and salaries, depending on state law, any applicable contracts and other considerations. If you need advice on this issue, contact us.
Are employees eligible for FMLA based on Coronavirus Disease 2019 (COVID-19) fears?
When an employee has an underlying medical condition that makes their physician advise them not to come in to work, that advice may be sufficient to qualify the employee for FMLA. Provide the required Notice of Eligibility and a Certificate of Health Care Provider, and if the doctor’s information on the complete certification qualifies, treat the leave as FMLA. Pay attention to Congressional Action, as there are bills pending to expand FMLA rights.
An employee comes to work with respiratory illness symptoms—can I send them home?
Yes, the EEOC guidance on pandemic response specifically permits this. That guidance can be found here.
Do I need a written document on how my company will address COVID-19?
OSHA recently issued guidance recommending that employers develop an Infectious Disease Preparedness and Response Plan, addressing potential exposure for employees based on the particular workplace, procedures for prompt identification and isolation of sick employees, and development of workplace protections. The guidance can be found here.
Will laid off employees or employees whose hours are cut be able to apply for unemployment?
Yes. On March 17, 2020, Governor Cooper announced he will lift some restrictions on unemployment. These include:
1. The removal of the one-week waiting period before someone who lost a job can apply for benefits.
2. Those unemployed and seeking benefits will not be required to seek additional work during the outbreak.
3. Employees who lose their job, or in certain cases have their hours reduced, because of the COVID-19 coronavirus are eligible to apply for benefits.
4. Benefit applications will not need to interview in-person and instead can be interviewed online or by phone.
5. Businesses with workers seeking unemployment will not have losses counted against them.
Immigration Questions
If an H-1B or E-3 employee’s worksite changes, including working from home, what does the employer need to do, if anything?
The employer must normally post the required notice at the new worksite, file a new Labor Condition Application with the US Department of Labor, and file an amended petition with US Citizenship and Immigration Services unless the employee will be working within a “normal” commuting distance of 50 miles. Longer commutes have been approved as “normal if it can be proven to be a common commuting distance for that geographic area.” Another exemption to the aforementioned onerous refiling requirement is a short-term placement exemption to a changed worksite if less than 30 consecutive days or 60 days in a single calendar year.
What happens to an employee’s visa status if they are laid off or terminated?
Termination requires notification to the relevant government agency. For example, a student with an F-1 visa working under Optional Practice Training (OPT) authorization, must notify the Designated School Officer (DSO) at the student’s educational institution to make changes to the student’s Form I-20 and notify SEVIS – the Student and Exchange Visitor Information System. For an H-1B employee, termination would also require an employer to pay for the reasonable costs of return transportation to the employee’s home country, something to which the employer agreed on the Form I-129 which forms part of an H-1B visa petition.
Can a foreign employee be placed on unpaid furlough?
No, an H-1B or E-3 visa employee cannot be placed on unpaid furlough because of the prevailing wage requirement for both of those visa categories. Other categories like an L-1 intracompany transferee do not have such a wage requirement. (However, the employer did attest that it will maintain an office as part of the L-1 visa petition. Although unlikely, USCIS can verify by an on-site compliance review which the employer must be prepared to address with counsel should this occur.)
H-1B or E-3 employees should either be exempted from furlough or continue to be paid their normal wage. While an employer cannot require such a furloughed employee to take vacation, this is permissible if the employee decides to do so.
How will CDC travel advisories affect an employer’s ability to get employees into the US on H-1B visas?
Not all H-1B workers need to travel and come back in order to be able to be in H-1B status. If they were/are already in the US on an H-1B visa or are in any status that allows them to change to H-1B, such as an F visa holder on OPT, then they are not forced to travel and return to get an H-1B visa stamp in order to able to work in H-1B status.
Can a Chinese nonimmigrant visa holder who is an employee currently return to the US if out of the country?
No, unless they are citizens of Hong Kong, Macau and Taiwan. Chinese citizens may be able to stop in a third country, wait 14 days and try to enter the US from that location, but this is risky. Moreover, other countries may have travel bans prohibiting their entering. However, permanent US residents like US citizens, also known as green card holders, may enter the US from China through designated airports: LAX, SFO, JFK, EWR, SEA, HNL, ORD, ATL, IAD, DFW, and DTW.
Form I-9 compliance
The designated representative of the company, which also can be a duly authorized agent, must physically review the documents supplied by the employee for completion of the form I-9. Any errors or omissions by the designated representative or authorized agent will be attributed to the employer, so be sure this person is adequately trained. Have a copy of the Handbook for Employers M-274 Guidance for completing Form I-9 (Employment Eligibility Verification Form) on hand to guide in completing the form and refer to examples of acceptable documents, as needed. https://www.uscis.gov/i-9-central/handbook-employers-m-274
Information on North Carolina’s response to COVID-19 is available here.
