Coronavirus Business FAQ

Stay Up-To-Date with the Latest COVID-19 Frequently Asked Questions

The coronavirus pandemic is forcing employers to make difficult decisions on how to manage and protect their most valuable asset – their employees. As companies move to prevent the virus from spreading by embracing remote work or inquiring about medical absences, they risk violating numerous medical privacy, disability discrimination, and workplace safety practices. Reference this Q&A page for ongoing updates to frequently asked workplace questions as well as best practices for navigating through this uncertain time. Check back frequently for updates related to the COVID-19 pandemic.

Submit your questions to the COVID-19 Support Response Team →


COVID-19 Vaccine

  • Can I require my employees to get the vaccine?

    In most states, employers can require employees to get the vaccine, as long as the requirement is job-related and consistent with business necessities and safety. If an employer is requiring the vaccine, a written policy is vital and should allow for accommodation requests for disabilities and religious beliefs.

  • While you can require employees to get the vaccine, the question is, should you?
    Many emotions are surrounding the vaccine and companies should weigh the safety of their employees and employee morale when making this decision. Before encouraging or requiring the vaccine, consider the business case, cultural implications and interactions with the public. For more information and guidance around requiring the vaccine, click here.
  • How do I handle someone’s refusal to get the vaccine?

    Even with a required vaccine policy, employers may face a situation where an employee does not want to get a vaccine. As previously stated, employees can request an accommodation for religious reasons and disabilities, but what if this isn’t the case? The employer has a few options and again, employers must evaluate the safety risk that the refusal poses. Options could include leave of absence, transfer of position, telework or flexible work arrangement. Employers need to be mindful of making exceptions and ensure they are consistent to avoid charges of discrimination, unfairness, etc.

    Beyond these options, employers could consider potential termination; however, we recommend that employers proceed cautiously and seek legal counsel before moving forward with termination and be sure to vet out if any other employee rights apply under federal, state or local regulations and laws.

  • How are accommodations assessed?

    Employers might need to make exceptions to a vaccine requirement for medical and religious reasons. Employees may say it is unsafe for them to obtain the vaccine due to an underlying health condition or may object based on a sincerely held religious belief. In these circumstances, the law requires employers to enter into an interactive dialogue with the requesting employee, review documentation and have discussions with such employees to explore all available and reasonable accommodations.

    The first step in this process is obtaining information regarding the request from the employee to determine if the accommodation falls under the ADA or Title VII. This starts the interactive process between the employee and employer. Employers must then determine whether the request can be reasonably accommodated or if it will cause undue hardship or a direct threat to the employee or others' health and safety.

    Each request should be assessed on a case-by-case basis. Some considerations for a reasonable accommodation may include allowing the employee to remain in the workplace but continuing to wear PPE and practice social distancing, reassignment of the employee's job duties, telework, flexible job arrangements or a leave of absence. Prior to denying a disability or religious accommodation, it is recommended to consult with legal counsel. Please visit OneDigital’s Coronavirus Hub for sample accommodation request forms.

  • When will the vaccine be available to our employees?
    Each state has determined its own phases for vaccine distribution. As such, each state is releasing guidance on where employees can obtain the vaccine and what documentation they’ll need to prove employment. Employers should continue to look to their state for more information on when the vaccine will be available for their employee population.
  • Can I offer a cash bonus or other program to my employees to encourage them to get the vaccine?

    Yes. If your company already has a wellness plan, explore whether you can incorporate a COVID-19 vaccination within that plan. Employers should ensure programs utilized to encourage vaccines are non-discriminatory. They should be sensitive around the messaging to ensure employees do not view the programs as coercing them to obtain the vaccine. Employers may also consider providing a cash bonus to those who choose to obtain the vaccine. Some employers are considering gift cards and/or prizes for those who get vaccinated. Companies could offer a specific reward to all employees if the organization achieves a target vaccination rate, for example, 90%. Employers should be cautioned that bonuses and gift cards are subject to appropriate federal and state tax withholding by the recipient.

  • Can we ask employees for proof of vaccination?

    Employers can ask an employee to provide proof that they have received a vaccine. If you plan to require such proof, we recommend that you instruct employees to provide only information regarding the vaccine to ensure the employee is not providing any other medical information. The proof of vaccination should be treated as an employee’s medical record and, per law, be kept confidential and stored separately from employee personnel files.

  • Can we disclose which employees have or have not been vaccinated?

    No, this information is considered confidential. Disclosing such information would violate employee privacy laws.

  • Do we have to pay for our employees to get a vaccine?

    If your company is requiring employees to be vaccinated, then yes, any cost associated with obtaining the vaccine, including time spent getting the vaccine, would be covered under the Fair Labor Standards Act as well as many states’ wage and hour laws. If your company has a voluntary vaccination policy, you would likely not be required by law to pay; however, you could consider doing so to help encourage employees to obtain the vaccine.

  • Can we ask candidates if they have received the vaccine?

    Keeping in mind that religious and/or medical accommodations may be at play, to ensure nondiscrimination, we do not recommend that you ask this question. Instead, we recommend that you communicate any vaccine requirement on the job posting, ensuring that you have language pursuant to accommodation requests on the posting. This language could include, "Our Company requires new hires to obtain the vaccine within 14 days of their date of hire. Candidates may seek a medical and/or disability-related accommodation with the Company as necessary. The Company determines reasonable accommodations on a case-by-case basis."

  • What should be included within a vaccine policy?

    If you are requiring the vaccine, a policy should be created that addresses the “who, what, where, when and why” regarding vaccinations at work. You will want to outline which employees will be required to get vaccinated and define the timeline requirement for those employees to receive the vaccine, ensuring that the timeline is realistic with your state's rollout and distribution plans.

    Furthermore, you will want to outline where employees can obtain the vaccine and how employees will receive pay for obtaining the vaccine (if applicable). You will also want to provide details of any employer programs encouraging the vaccine such as a cash bonus or gift, and discuss why this requirement is important for your business, the individual and the team as a whole.

    The policy should also provide details about required employee vaccine certification paperwork and who employees should discuss accommodation-related requests with, noting that the employer will engage in an interactive process with the requesting individual. You can find a sample vaccine policy on OneDigital’s Coronavirus Hub.

  • What can I do if employees aren’t comfortable coming back to work?

    The decision to return employees to the workplace should always consider employee safety, state and federal laws and guidance with respect to COVID-19, and CDC and OSHA recommendations and guidance. Under OSHA, an employee may refuse work that poses "a risk of death or serious physical harm." Educating employees about your decision-making process should help alleviate some of their fears of returning, but there may still be employees that are uncomfortable.

    In this case, the company should review the situation to determine what makes the most sense. If being onsite is a condition of employment, the company may be forced to terminate employment. But, before doing that, look to see if there are other options or accommodations.

Return to Work

  • Can employers require employees to test for COVID-19 before returning to work? 
    Yes. The EEOC recently updated its “What You Should Know” website with information related to testing for COVID-19: Employers can require that  employees get tested for COVID-19 before they are permitted to return to work. Employees who get tested should provide documentation supporting their fitness for duty (e.g., healthcare provider form, stamp, or email). Because of the current inaccessibility of tests and the testing response time, employers should provide employees with sufficient advance notice of this requirement so that they can plan accordingly.
  • Can employers  test  employees  themselves for COVID-19 before returning to work?
    Employers can test employees themselves  before permitting them to return to work. This must be done in a manner to ensure accurate and  reliable results, and the test should be conducted in a sanitary and confidential environment. There are many things to consider if selecting this option, such as quality of the test (testing has not been standardized and the quality varies widely), invasiveness of the test (a saliva test would be among the least invasive to employees and easiest to administer), and training of the person administering the test if this is something that will be done in-house. Employers should review guidance from the U.S. Food and Drug Administration about what may or may not be considered safe and accurate testing, as well as guidance from CDC or other public health authorities. Employers can also connect with their benefits plan provider to see if the cost of testing will be covered in this scenario.  Because everything is newly emerging in this area, it is not clear yet on where to easily get tests or who should be administering them. Some states may have restrictions on who can conduct testing.
  • Can employers  take  employees’  temperatures?   
    Employers can  take employee temperatures  upon entry to the workplace. The person administering the temperature reading should be trained in how to conduct the reading accurately. This should also be done in a confidential and sanitary environment. If the person has a temperature over 100.4 degrees, the employer should not allow the employee further onto the premises and should send them home immediately. The employee may be able to use paid sick leave or vacation time to cover their absence.

    NOTE: a  normal temperature reading is not indicative that the person does not have the virus.    

  • Can employers  ask if employees are experiencing symptoms?
    Employers can  ask if employees are experiencing symptoms  related to COVID-19. Although employers cannot ask about a medical diagnosis, they can inquire about what symptoms the employee may be experiencing. Employers should rely on the CDC, other public health authorities, and reputable medical sources for guidance on emerging symptoms associated with the disease. The CDC recently added new symptoms associated with COVID-19 to its official list. This should also be done in a confidential setting.
  • What are some considerations for employer testing?

    If using COVID-19 testing as a barrier to reentry for the workforce, note that accurate testing only reveals if the virus is currently present; a negative test does not mean the employee will not acquire the virus later.  Also  there is currently no clear scientific answer to whether people who have recovered from the virus will be immune to it later. So anti-body testing may not be as effective for employers as testing for current viral infection. For any employee administering temperature exams or COVID-19 testing, employers should provide them with PPE, including training on how to properly use the PPE.

    Whatever measures employers take, they must be applied consistently in a nondiscriminatory manner. Employers must also ensure confidentiality of any medical information obtained or stored in connection with COVID-19 inquiries or testing.

  • What if employees  are reluctant  to come back?

    If someone is not otherwise protected by the ADA, FMLA, or  some  other  legal  protection, an employer can let someone go who  refuses  to come to work.

    However,  we are seeing employers want to be understanding during this  challenging time.   Some employers  are allowing the use of  accrued, unused paid sick leave or paid time off, or granting unpaid leaves of absence during this time to accommodate  concerns.   Many are allowing remote work, if feasible, where may not have been willing to do so prior to COVID-19.

    It is recommended to set a policy and apply it consistently to avoid claims of discrimination.   Employees may  claim  they have to care for their  children,  or they have a medical condition that puts them at risk.   In these instances, you need  to  allow employees to  apply for the appropriate protected leave, like FMLA, or engage in the interactive process for employees who may be protected under the ADA.

  • Do I need to require my employees to wear a mask when returning to the office?
    Personal Protective Equipment (PPE) includes masks, gloves, goggles, face shields and may not have been necessary in the workplace prior to the COVID-19 outbreak, but as employees return to work, they may be now or employees may choose to wear PPE, such as masks. Recommendations for PPE will vary based on the occupation, job tasks, geographic location, and risk assessment.  Employers should carefully review the safety and potential controls they can implement to protect their employees and customers.  The Occupational Safety and Health Administration (OSHA) has published  Guidance on Preparing Workplaces for COVID-19  to assist employers in making these determinations.
  • What are the Occupational Safety and Health Administration (OSHA) Guidelines on Personal Protective Equipment (PPE)?

    The OSHA PPE standard, which applies to all PPEs including masks, requires that the employers complete a hazard assessment, review alternatives, determine what PPEs will be required, train employees on the use and care of PPEs, clean and maintain the PPE, and have guidelines in place, which are periodically reviewed.  If PPEs are required, employers must pay the cost for the PPE.

    Although not required, an employee may decide to voluntarily wear a face mask or other PPE while at work.  There are two levels of voluntary mask usage according to OSHA.  The first involves wearing a N95 respirator and the other is a non-respirator mask (cloth or other material without a filter).  The employer  should review the situation to ensure that the PPE does not, in itself, create a hazardous situation (for example, a PPE getting caught in machinery) or that it does not initiate requirements under OSHA’s Respiratory Protection Standards.

    If an employer is distributing masks that they have purchased, be sure to tell employees, in writing, that the masks are not required and are voluntary. Employers are not required to pay for masks to be used on a purely voluntary basis.

    Given the CDC’s recommendation to wear masks in public, employers may want to communicate expectations around voluntary use in the workplace.

  • If one of our employees has had a positive diagnosis but has recovered and has been cleared to return by a medical professional to return to work, what information must we obtain from this returning employee? 
    If this employee has recovered completely and cleared by a medical professional to return,  he or she should not have a problem acquiring a doctor’s certification clearing them for work.  If they are unable to do that,  they can request clearance from a tele-doctor. It is best practice with a confirmed case to ask for a doctor’s certification to ensure there is no risk of COVID-19 exposure  to others.
  • Will a company’s PPP loan forgiveness amount be reduced if an employee they laid off and then offered to rehire, declined the offer to return to work?
    Many businesses have some employees who don’t want to return to work because they are making more money on unemployment, especially with the added $600 of federal money. A new ruling from the Small Business Administration (SBA) and the US Treasury Department states that if a company makes a good faith effort to rehire an employee, with a written offer letter, and they have a documented declination of the offer, that employee can be excluded from the calculation. Employees should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.


Benefits & Unemployment

  • Are employees entitled to unemployment benefits if we decide to temporarily shut down or lay off employees?
    Unemployment insurance provides benefits to eligible workers who are unemployed through no fault of their own and meet other eligibility requirements. Temporary shutdowns and/or layoffs generally meet those requirements. States have different regulations around unemployment and many are making updates to their laws, so be sure to check state guidelines.
  • What solution can I offer my employees who need medical attention, but do not want to visit a medical facility?
    Many insurance carriers offer telehealth or telemedicine solutions. With virtual visits, employees can seek medical attention from the safety and comfort of their own home. For more information on the benefits of telemedicine, see How Telemedicine is Reducing the Cost of Healthcare.
  • Are insurance carriers covering the cost of COVID-19 testing and treatment?
    This depends. Several health insurance carriers of fully-insured plans, including Anthem, Cigna, Humana, and Aetna, are waiving member cost sharing (e.g., copays, coinsurance, etc.) for COVID-19 testing and will cover the cost of treatment for the novel coronavirus. Employers will want to reach out to their insurance carriers. Self-funded plans may direct their TPA or carrier to similarly waive member cost sharing. Medicare and Medicaid will also cover costs without copays. Many carriers have also released statements that there will not be surprise billing for costs associated with COVID-19. Several insurers have webpages with additional information including FAQs that employers can share with employees. For detailed and up-to-date information, visit your specific carrier website.
  • Are employees entitled to employer disability plan benefits if they contract COVID-19?
    Yes, if such payments are provided in an employer's benefit plan and if the employee meets the eligibility requirements. Employers should review the limits of coverage in the benefit plan to ensure they have competent medical resources to administer the program. For more information on Short Term Disability benefits that are being offered by carriers, click here.
  • What is COBRA?
    COBRA is a law that permits employees who have lost medical or dental coverage to continue participation in their group benefit plan(s) on a self-pay basis through their former employer. In short term situations where an employer expects to recall employees from a layoff, some companies may opt to only charge the employee share of the premium as if they were active. Please check with your COBRA administrator for the feasibility of a partial COBRA charge.
  • When does benefit coverage get reinstated, or become active, under COBRA?
    If you elect and pay for COBRA, the reinstatement process will begin the day after the receipt of your election form and first full payment. Coverage will be retroactively reinstated. Coverage reinstatement typically takes 5-10 business days.
  • Can Employers Make Changes to Employee Contributions Midyear?

    Yes; however, there may be restrictions to those changes. Employers should consider the following steps before adjusting employee contributions:

    • Review how the adjustment in employee contributions may impact your potential liability under the Affordable Care Act’s employer shared responsibility rules, if applicable to you.
    • Analyze whether the adjustment in employee contributions may impact your ability to satisfy the carrier’s minimum participation requirements, if applicable to you.
    • Determine whether your cafeteria plan will allow employees to change their benefit elections due to midyear contribution increase.
  • What Type of Midyear Changes Should Be Considered?

    The following plan design changes can be considered when an employer is looking to control costs:

    • Increase employee cost-sharing (e.g., deductibles, copays and out-of-pocket maximums).
    • Create a new plan design that places more financial responsibility on employees (e.g., high deductible health plans).
    • Implement a spousal carve-out or surcharge for spouses who are eligible for other health coverage, such as coverage through the spouse’s employer.
  • What are qualifying events that allow employees to change their health coverage?

    Qualifying events are events that cause an individual a status change to his or her group health coverage. The type of qualifying event determines who the qualified beneficiaries are for that event and the period of time that a plan must offer continuation coverage. COBRA establishes only the minimum requirements for continuation coverage. The following are qualifying events for covered employees:

    • Termination of the employee's employment for any reason other than gross misconduct or
    • Reduction in the number of hours of employment
  • Can employees take a hardship distribution from their 401(k) plan for expenses or other financial hardships?

    If an employee needs a significant sum of money and doesn't expect to have the means to repay it, they could consider a hardship withdrawal from their 401(k). A hardship withdrawal allows funds to be withdrawn from an account to meet an “immediate and heavy financial need,” such as covering medical expenses or avoiding foreclosure on a home.

    Employers don't have to offer hardship withdrawal options, so it is recommended to check your retirement plan before exploring such option.

  • Can an employer furlough a portion of its workforce and keep those employees on the benefits plan?
    If employees are furloughed, they may potentially be eligible to continue coverage. Employers are urged to check with their insurance or stop-loss carriers on this point. However, if the furlough is unpaid, the cafeteria plan rules will allow employees to change their election to drop health and other coverage, if they so choose. Employers should note that COBRA continuation coverage (or state continuation coverage, if any) must be offered for all group health plans when there is a loss of coverage because of a furlough or reduction in hours.
  • Can benefits plans be amended to allow employees who are temporarily furloughed to remain eligible for benefits?

    If furloughs are not currently addressed in plan language, it may be possible to modify existing plan terms to allow for the continuation of benefits while an employee is on furlough. Employers will need to work with their insurance carrier or TPA and stop-loss carriers on any modification of plan terms.

    It is important to note that furloughed employees may not have the funds to pay for continued coverage. In that scenario, unless the employer is willing to assume the costs, continuing coverage may not be a practical cost control measure. If the employer expects the employee to repay premiums upon their return to work, the employer should have employees sign an agreement that allows for the repayment of past premiums upon the employee’s reinstatement to a full-time position. If employees lose access to employer sponsored coverage, they can enroll in Exchange coverage, if they request enrollment within 60-days of the loss. It’s important to note that failure to pay premiums does not invoke a special election period. Those who lose coverage due a failure to pay their premiums will have to wait until the next open enrollment to obtain individual coverage, I.e. November 1.

  • Is it possible for an employer to continue only a portion of an employee’s benefits while on furlough, such as continue medical benefits and suspend other voluntary benefits?

    There are a few things to cover here. First, there is a difference between employer paid and contributory benefits. If the employer pays the full premium, i.e. non-contributory benefits, the employer may change the offer of coverage prospectively if they provide proper notification of this benefit reduction. Since voluntary benefits are 100% employee paid, the employee is the only one who can make the change and only under certain circumstances.

    If the employee’s contributions to their benefit plans are taken out on a pretax basis, they have a cafeteria plan. At the beginning of each calendar year, employees make an irrevocable election to contribute premiums on a pretax basis. The IRS provides only certain options, known as “change in status” options that may allow a mid-year change to those elections. These change in status reasons are optional. Each employer may adopt some or all these reasons. To do so, they must include them in their cafeteria plan document. So, to the extent that the change the employee seeks to make is an allowable change in status, and the employer’s plan document includes that as a valid reason for change, the employee may make a change to their contributions.

  • What can employers do if their furlough period is over and they are still not ready to reinstate their staff?
    It’s hard to say. That would be based upon facts and circumstances of their case, the industry they’re in, the reason for their furlough, any applicable state laws or ordinances, etc. In some instances a new furlough period may be set; in others, an employer may need to lay off employees. Employers should review their specific circumstances with their legal counsel to determine the best course of action.
  • Can businesses eliminate voluntary benefits as a way to minimize overhead costs? What are the associated risks with this approach?

    Some voluntary benefits will be impacted on whether or not an employee is actively at work. Some examples include:

    Life and Disability Plans: Some life and disability insurance carriers may require that employees be actively-at-work for coverage to be honored. Employers need to identify carrier plan language to ensure benefit continuation will not be disrupted in the event of a furlough/temporary closure or when employees’ hours are reduced below eligibility criteria. If an employer is changing life and disability carriers during this pandemic, confirm that they will not delay insuring employees who are not actively-at-work as a result of a closure or who have experienced a reduction in hours of employment.

    Commuter Benefits: Notify employees to cease contributions into a commuter benefit program, if they are expected to work for home for a month or more. Employees can also reduce the monthly elections to reflect a decrease in the number of days they anticipate to commute into the office. If employees are terminated, note that unused amounts in their commuter benefit plans will be forfeit.

  • Can employers adjust employee benefit contributions mid plan year?

    Yes; however, there may be restrictions to those changes and not all carriers allow employers to make changes midyear. Additionally, a significant cost in change may trigger a new open enrollment if the employer’s plan allows mid-year changes due to a change in costs. If your carrier permits midyear changes, consider the following:

    • What specific plans can be modified, what timing is required by carriers and what is the process for implementing changes?
    • How will the changes affect the benefits of current plan participants?
    • Will employees be permitted to change their benefit elections under your cafeteria plan due to the midyear design change?
    • Does your cafeteria plan document include the change in status reason allowable for a mid-year plan change?
  • If a business needs to temporarily lay off their workforce, should they direct them to the various state exchanges that have now opened additional enrollment sessions, in addition to utilizing COBRA options?

    If employees are terminated/laid off, even if potentially for a limited amount of time they are no longer eligible for benefits as active employees. At this point, employers will need to offer COBRA or state continuation coverage, whichever is applicable. Employees have the option of continuing coverage or applying for individual coverage in the Exchange or the private market. A loss of coverage, at any time and not just due to the COVID-19 issue, creates a special enrollment period in the individual market. Individuals may enroll within 60 days of the loss of coverage.

    If employees are furloughed, they may potentially be eligible to continue coverage. Due to a reduction in hours, furloughed employees are eligible to make mid-year election changes that are consistent with the reduction in hours. Employers should note that COBRA continuation coverage (or state continuation coverage, if any) must be offered for all group health plans when there is a loss of coverage because of a furlough or reduction in hours. Individual state continuation rules vary. It is important to check the circumstances and rules for each applicable state.

  • How can employees pay their deductions when they file for unemployment?

    Typically, there are three options.

    1. Pre-payment if there is a predetermined amount of time;
    2. The employee can submit payment via after tax dollars to employer; or
    3. The employer can offer catch-up when employee returns to work.
  • How can employees pay for a portion of benefits premiums while on furlough?

    Employers should implement a policy or follow their existing policy for collecting employees’ share of healthcare premiums. Employers can choose to implement any one of the following policies and must apply the policy uniformly to all employees:

    • Pre-payment: Employers can allow employees to pre-pay premiums prior to any furlough. Employees must voluntarily consent to the pre-payment and can elect to make the payment on a pre-tax basis through a salary reduction (if the employer’s Section 125/Cafeteria Plan allows for it) or on a post-tax basis. Any deductions should not bring the employee below minimum wage for hours worked in the pay period.
    • Pay as you go: Employers can implement a policy whereby they collect premiums from employees during the furlough period. Since employees will not be receiving a paycheck during the furlough, they cannot make pre-tax deductions for premiums and they must be made on a post-tax basis.
    • Payment upon return: Employers can cover the cost of employees’ share of premiums with the understanding that the employees will pay the employer back upon their return. Be sure to implement a written agreement for this arrangement. When employees return from work, they can pay the amount back on a pre-tax basis through a special catch-up salary reduction (if the employer’s Section 125/Cafeteria Plan allows for it) or on a post-tax basis. Deductions should not bring the employee below minimum wage for hours worked upon return.
  • If an employee contracts the COVID-19 virus from a customer or coworker, is that considered a workers’ compensation case?
    That will be determined by the coverage provisions of their workers’ compensation policy based on the facts of the specific case.
  • If an employer is paying an employee workers’ compensation during a company closure and the employee is already out due to injury, which wage order takes precedent?
    The employer will need to review the state workers’ compensation laws to determine the rules regarding workers’ compensation and company closures.
  • Is self-isolation for employees covered under short-term disability?
    To be eligible for short-term disability benefits, the individual must have a disease, illness, or injury that is covered by the policy, usually be under the care and treatment of a physician, and be “disabled” according to the definition in the policy. Self-isolating may not be enough without being under a doctor’s care.
  • Will there be a moratorium on purchasing new coverage or enrollment changes?
    Not that we know of. Enrollment changes must be consistent with a valid change in status under the cafeteria plan and allowable under procedural rules by the insurance carrier. States and carriers are determining if additional rules are needed in this area to respond to COVID-19.
  • With ERISA considerations, do temporary state laws that are currently being passed supersede existing federal regulations?
    It depends what laws this refers to. State laws that "relate" to ERISA plans are preempted by ERISA (i.e., blocked from enforcement). If certain state laws have an indirect impact on ERISA plans, they are likely saved from preemption. Most notably, these are state insurance laws. The impact is indirect as these laws regulate insurance policies, by which benefits under ERISA plans are paid. State insurance laws do not apply directly to self-insured ERISA plans.
  • How does a reduction in hours or furlough impact FSA & HSA contributions?

    As long as an employee remains covered by an HSA-compatible high deductible health plan during the leave or furlough, the employee is able to contribute to his or her HSA account.  However, for periods of unpaid leave, there would be no pay from which salary reductions may be taken. In that scenario, the employee may suspend HSA contributions and resume contributions when they return to an active state of employment. As another alternative, the employee can make after-tax contributions to their HSA account directly and deduct those contributions when the employee files his tax return for the calendar year. It is important to note that contributions are only allowed for the months that an individual is enrolled in an HSA-compatible high deductible health plan (HDHP).

    If furloughed employees lose their eligibility for flexible spending accounts (FSAs) at the beginning of the furlough, then in some cases health FSA participants will need to be offered COBRA continuation coverage. Employees with available account balances that exceed the COBRA premium for the remainder of the plan year would be able to elect COBRA coverage in order to utilize those dollars for expenses incurred after the date they lost eligibility for health FSA coverage.

Leaves of Absence and PTO

  • Can an employer force a sick employee to go home or stay home?
    Under OSHA’s “general duty” clause, employers are responsible for assessing the hazards in their workplace and taking appropriate steps to protect employees from those hazards. Given the current pandemic situation, employees with obvious symptoms of acute respiratory illness, including flu-like symptoms, may be required to stay at home or leave work and go home.
  • If a business encounters a furlough or layoff due to coronavirus, are employees entitled to receive unemployment compensation?

    Unemployment eligibility is determined by specific states under individualized statutory and regulatory frameworks. On March 12, the  Department of Labor (DOL) issued new guidance  encouraging states to amend their unemployment laws to provide greater flexibility for unemployment arising from coronavirus. Federal law does not require employees to resign employment in order to receive benefits due to the impact of COVID-19.

    Federal law allows states to pay benefits where:

    1. An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work.
    2. An individual is quarantined with the expectation of returning to work after the quarantine is over.
    3. An individual leaves employment due to a risk of exposure or infection or to care for a family member.

    It is encouraged for employees to apply for unemployment benefits in the occasion of a furlough or layoff due to COVID-19.

  • Can businesses require employees to use paid-time off (PTO) for self-quarantine or in the event they are sent home due to illness?

    Typically, employees may be required to use their PTO as long as it’s consistent with:

    1. The PTO policy provisions and application
    2. Previous administration of the policy under the FMLA
    3. For unionized employees, permitted by the PTO provisions of any applicable collective bargaining agreement.

    The PTO policy should be implemented on a consistent basis, and the employer should consider the potential employee relations implications of requiring use of PTO. In contrast, note that employers may not be able to require use of paid sick leave; some paid sick leave laws allow the employee to use it at the employee’s option. Be sure to review your state’s requirements for administration of these rules.

  • Who does the Family and Medical Leave Act (FMLA) apply to?
    In order to qualify for FMLA, an employer must have 50 or more employees within a 75-mile radius, who work each working day during 20 or more calendar workweeks in the current or preceding calendar year. An employee must be employed with the company for a year and have worked 1250 hours in the previous 12 months to be eligible.
  • Are absences due to the coronavirus covered by the federal Family and Medical Leave Act (FMLA)?
    Under the FMLA, if symptoms caused by the coronavirus rise to the level of a "serious health condition," it would allow an employee to take protected leave for their own health condition or to care for a family member. General flu-like symptoms do not rise to the level of a “serious health condition.” However, complications arising from the illness that may require hospitalization or result in incapacity and treatment may qualify. The employee would be entitled to job reinstatement assuming he or she returns to work within the FMLA-authorized leave duration.
  • What leave laws apply to employees who are diagnosed with COVID-19?
    Leave laws that apply will vary by state. In states that do not have their own leave laws, the federal FMLA (Family Medical Leave Act) may apply to employees for their own medical condition or for time off to care for a family member. However, the FMLA applies only to qualified employers and employees. State paid sick leave may also apply. Employers are encouraged to check local laws to see what, if any, leave laws may be applicable.
  • Are workers that contract COVID-19 eligible for workers’ compensation?
    The question of eligibility for workers’ compensation benefits is state-specific. It will also be based on a number of discrete factual and legal issues, including how the virus was contracted, how the injury or illness was sustained (including its severity), and related issues.
  • What is the difference between FMLA, furloughs or layoffs?

    A furlough is a temporary, leave of absence, which is generally shorter in duration in full-day or week increments. During the furlough, the employees are not paid, but they are still technically employed. When the business reopens to full strength, furloughed employees will become active again.

    A layoff is a permanent separation of employment, with the possibility that former employees may be rehired should the business reopen.

    A furlough could be seen as favorable to retain talent and reduce the cost of separation (e.g., payout of vacation balance payout) or future hiring and training. However, the laws on furloughs and final pay vary from state to state, and employers should ensure compliance with their states of operation.

    FMLA is an unpaid leave of absence for qualified employees for the following reasons:

      • To care for a child following birth, or placement of a child for adoption or foster care;
      • To care for an employee’s own serious health condition;
      • To care for a family member with a serious health condition;
      • To care for a military service member recovering from combat-related injury; or
      • Military qualifying exigency leave.

    FMLA benefits to employees unable to work, or telework, due to school or daycare closings. This leave is twelve weeks; the first 10 days is unpaid, but then the remainder of the leave is paid at 2/3 of regular rate of pay up to a maximum of $200 per day and a $10,000 in aggregate.

  • Do the new paid FMLA benefits included in the Families First Coronavirus Response Act override Short Term Disability benefit payments, for those that qualify or will they run concurrently?
    The new FMLA paid expansion is only for individuals that cannot work or telework due to the fact that they need to care for their children because their school or place of care has closed. This is not a valid disability reason. Therefore, there would be no short-term disability benefit payable, only the wage replacement benefit under FMLA.
  • If a business doesn’t have paid sick leave and utilizes only vacation time, at what point does the business become required to offer sick leave?

    The emergency paid sick leave becomes effective April 1, 2020 if the employee needs to exercise leave for one of the qualified reasons under the FFCRA. They are:

    • Federal, state, or local quarantine or isolation order related to COVID-19;
    • Advice by a health care provider to self-quarantine due to COVID-19-related concerns;
    • Employee experiencing symptoms of COVID-19 and seeking a medical diagnosis;
    • Employee’s need to care for an individual who is subject to an order or who has been advised to quarantine by a health care provider;
    • Employee’s need to care for a son or daughter if the school or place of care closes or is unavailable due to COVID-19 precautions; or
    • The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services (HHS) in consultation with the Secretary of the Treasury and Secretary of Labor.
  • How can an employer handle accruing PTO and sick days for the extended time periods when employees are not working but being paid?
    The employer’s PTO, sick leave, or other time off policy should dictate how and when hours accrue. If the language is vague with regards to accrual when employees are paid but not working, the employer should work with their employment counsel to modify their policy to incorporate this scenario.
  • Can employers mandate the use of vacation time?
    Generally, employers may require when vacation/paid time off (PTO) may or may not be used. However, for the expanded FMLA provisions of the FFCRA, employers are prohibited from mandating that PTO or any other paid leave be used during the first 10-day unpaid period of the leave.
  • If an employee is required to work from home but, is unable to perform their job, will an employer still be required to continue paying them or will they be put on disability?
    This will depend on why they unable to work. If it is a purely performance-based reason, the employer should evaluate the situation based on their policies and procedures for managing poor performance. If the employee is unable to work from home due to illness, the employee may be eligible to use accrued, unused paid or unpaid leave benefits, depending on the nature of the illness. If the employee qualifies as “disabled” under the applicable state or plan disability rules, then they may be eligible for disability.
  • Who is a “health care provider” who may be excluded by their employer from paid sick leave and/or expanded family and medical leave?

    For the purposes of employees who may be exempted from paid sick leave or expanded family and medical leave by their employer under the FFCRA, a health care provider is anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions.

    This definition includes any individual employed by an entity that contracts with any of the above institutions, employers, or entities institutions to provide services or to maintain the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments.

  • Who is considered an “emergency responder” and may be excluded from paid sick leave or expanded FMLA by their employer under the FFCRA?
    For the purposes of employees who may be excluded from paid sick leave or expanded family and medical leave by their employer under the FFCRA, an emergency responder is an employee who is necessary for the provision of transport, care, health care, comfort, and nutrition of such patients, or whose services are otherwise needed to limit the spread of COVID-19. This includes but is not limited to military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is an emergency responder necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

Employee Payroll

  • Are businesses required to pay exempt employees who are sent home from work because they are sick?
    An exempt employee must be paid for partial-day absences. However, his or her salary may be reduced for full-day absences due to sickness if the employer offers a paid sick leave benefit and the employee has completely used that leave or is not yet eligible for the leave.
  • Are businesses required to pay nonexempt employees who are sent home from work because they are sick?
    Most employers provide paid time off for illnesses for their employees. Nonexempt employees who do not have paid leave available are not required to be paid for such absences, unless there is a collective bargaining agreement indicating otherwise.
  • Do employers have to pay someone who refuses to come into work out of fear of Coronavirus?
    Unless the employee is actually ill and required to be paid under paid sick leave laws, short-term disability programs, workers’ compensation, or any other applicable company policy, it is not necessary to pay employees who do not come to work out of fear of the Coronavirus (unless they are performing work while out of the office). However, no matter the circumstance, all employees should be given the same opportunity as other employees to use their PTO benefits. If the person is exempt and they perform work, even for one hour in the week, they have to be paid for the full week, absent limited circumstances. If they don’t work at all in a given week, then they do not have to be paid for that week.
  • Is an employer required to pay an employee when the business has instructed them to remain at home?

    The answer is dependent upon many components, including applicable laws such as the federal Fair Labor Standards Act (FLSA), state wage and hour laws, company policy, and employee status (exempt versus nonexempt).A nonexempt employee, for example, is only required to be paid for the time they perform work. The employee may use his/her earned sick time, unused vacation time, personal time, or paid time off, to ensure continued earnings during the time the person is off work.

  • Can an employer reduce salaried employees to less hours or reduce wages and stay compliant with FLSA? Or change an employee to hourly if they are currently exempt?
    Employers may reduce salaries and hourly rates for at-will employees, provided that nonexempt employees are paid at least the applicable minimum hourly wage, and exempt employees meet the salary basis requirement applicable in their state of employment. Keep in mind that exempt employees’ pay cannot be tied to the quantity of their work, or they may risk losing their exempt status. Exempt employees get paid their salary regardless if they work over or under 40 hours in a workweek. A safe alternative is to make exempt employees nonexempt. Under the Fair Labor Standards Act, all employees are considered nonexempt. Even if an employee qualifies as exempt, they may be treated as nonexempt.
  • How can payroll personnel ensure that employees are paid on time if they do not have direct deposit and the office is closed due to the coronavirus?
    Encourage these employees to sign up for direct deposit now to ensure timely and secure wage payments. Employees should be able to enter their direct deposit information into the employer's Employee Self-Service Portal (ESSP) from their homes. Employers can also designate a contact person to help employees who need to set up remote access to the ESSP or are having trouble accessing it remotely. For employees who still refuse to sign up for direct deposit, consider providing employees with a prepaid card to which wages are deposited, where permitted, or arrange for a delivery service to get paper checks to employees on time, in accordance with the applicable state wage payment law.
  • How can payroll employees working remotely print paper paychecks during the coronavirus crisis without access to an MICR printer?
    Since states' reactions to the coronavirus vary, with some businesses being required to close in some states but not in others, multistate employers may be able to tap into the resources, including MICR (magnetic ink character recognition) printers, of their other divisions located in other states. If that is not possible, or the employer does not have more than one office or division, and employees refuse to sign up for direct deposit, every effort should be made to pay them on time in accordance with the applicable state wage payment law. Documenting efforts to comply with the state wage payment laws is important, as it can serve as the basis for a reasonable cause defense if employees or a state labor department alleges that the employer failed to pay employees on time.

Pharmacy Benefits

  • How will pharmacy plans handle coverage if new or experimental vaccines and treatments for COVID-19 become available? 
    If a vaccine to treat and prevent COVID-19 is developed, it is likely that all  pharmacy  plans will honor  it, similar to Influenza coverage with 100% coverage with medical and/or Rx. If a viral treatment were  approved,  it would likely move into tiered coverage with a copay/cost share.  Anti-viral treatments are exceptionally difficult  to develop,  so if there would be a chance of coverage,  the  vaccine would typically be the first to market as noted. Drug manufacturers have trialed existing anti-viral medications, however,  there is  currently not enough data to support the validity of those medications. If one of the medications  did work,  it is  expected that  a quick shortage  would take place,  similar  to  what was experienced with  Tamiflu, the drug used to treat the flu (influenza),  in the past.  Employers can access additional  information on current and upcoming trial here.
  • Are providers issuing exceptions on dispensing maintenance medications, such as providing longer term supplies?  
    Most Pharmacy Benefit Managers (PBMs) have lifted their refill edits so that members are able to obtain additional medication in either  30 or 90-day  supplies.  The quarantine timelines are currently no longer  than that, eliminating the need for a six month or extreme  stockpile. It is recommended that patients do not attempt to stockpile or panic,  as that could cause strains  on the system, similar to what is currently being experienced with bare grocery store shelves.
  • What could a halt in global drug manufacturing/distribution mean for U.S. healthcare cost/employers?  
    About 80% of the raw ingredients for medications start in  China. Several areas that were impacted or initially shut down, have since re-opened. Most typical medications have 3-12 months of raw materials prepared in advance as a prevention, but there are some medications in short supply that could be impacted.  U.S. supply chains always have medication shortages due to various issues, and the current systems are built to have back up plans in order to be able to deliver  most medications. A list of current and resolved drug shortages and discontinuations reported to the FDA can be found here. Please note that this is always a lengthy list and many of these medications are injections and not your typical retail medications.

Employee Health & Disclosure

  • How can businesses communicate with their workforce if they have a confirmed case of an employee infected by coronavirus?

    An employer’s duty should be to protect the workforce, while at the same time ensuring they aren’t creating panic. Due to medical privacy considerations, an infected employee should not be identified and confidential medical information about the employee should not be shared with others. However, the employer can inform the workforce that there has been a reported case of COVID-19. Once announced, it is important the employer identify the steps that are being taken to address the issue in the workplace, along with reiterating its infection control practices, including handwashing and sanitizing workplace areas.

    Healthcare providers are required to notify federal, state and local health authorities of the diagnosis, and those authorities may provide additional guidance and requirements, including further notification, on-site medical questioning, or examinations.

  • Can organizations require temperature screenings of employees?

    Under the Americans with Disabilities Act (ADA), a temperature screening is likely to be considered a “medical examination,” which generally is prohibited. However, it may be permitted under limited exceptions. It must be job-related and consistent with business necessity, or the employer has a reasonable belief that the employee poses a direct threat to the health or safety of themselves or others. These exceptions may be more or less applicable depending on the employer’s industry and the employee’s job position. The Equal Employment Opportunity Commission (EEOC) has issued guidance permitting employers to take employee temperatures during this pandemic to determine if they have a fever. However, it is important to note that not everyone with the coronavirus may have a fever.

    Requiring a doctor’s note certifying fitness to return to work is permissible if consistent with the employer’s standard practices, but employers should be aware that such documentation may be delayed due to the high volume of patients being assessed by healthcare providers during this period. Taking temperature or requiring a doctor’s note should be done consistently across the employee population or groups.

    3/17 update: What used to be considered a medical examination and was not allowed under ADA has now been given the green light by the EEOC. On March 17, 2020, the U.S. Equal Employment Opportunity Commission (EEOC) issued an update to its guidance that now expressly acknowledges that employers may implement temperature screening measures in response to the current COVID-19 pandemic. The EEOC noted that “because the CDC [Centers for Disease Control and Prevention] and state/local health authorities have acknowledged community spread of COVID-19 and issued attendant precautions, employers may measure employees’ body temperature.” The CDC has also issued a precaution to remind employers that not everyone with COVID-19 has a fever and not everyone with a fever has COVID-19. Employees sent home due to COVID-19 concerns may be eligible for expanded unemployment insurance if paid leave or other relief is unavailable.

    If your business decides to conduct this practice in the workplace, follow these precautions, consistent with social distancing policies:

    • Do not reveal the thermometer reading to other employees.
    • Think about where you are taking the test and consider a private setting.
    • Ensure the person taking the test has the knowledge to do so correctly.
    • The thermometer must be disinfected between uses.
    • Businesses need a clear definition of what will be considered an elevated temperature and what steps will be taken.If this is something you want to implement in your workplace, be sure to be consistent.
  • Is it acceptable to ask an employee why they have been absent for work if a medical reason is suspected?
    Asking why an employee has not been at work is not a disability-related inquiry, and therefore, an employer may ask the reason(s) for the employee’s absence. This question was addressed by the EEOC in 2009 in their Pandemic Preparedness Guide.
  • Can an employer ask an employee if he/she has the coronavirus?

    Employers can ask an employee how he or she is feeling in general, but should avoid inquiring about specific illnesses, as that could rise to the level of a disability-related inquiry under the ADA.

    If an employee is showing symptoms, it is recommended that employers require a set period away from the workplace and receive medical clearance before permitting the employee to return to the workplace. These determinations should be made on a case-by-case basis following guidance established by public health officials.

  • What should employers do if an employee discloses that they have been in close contact with a person who tested positive for COVID-19?
    According to  CDC guidance, individuals who have had close contact with a person diagnosed with COVID-19 should self-quarantine for 14 days. Employers can require an employee who has been exposed to the virus to stay at home.
  • What if an employee is showing signs of an illness?
    Employees who have symptoms of acute respiratory illness (e.g., fever, cough, shortness of breath or difficulty breathing) should be encouraged to stay home and not come to work until they are free of fever. Employees who are diagnosed with coronavirus should follow guidance from public health officials and their doctor before being released from isolation and thus returning to work.
  • Can an employer require that an employee disclose confidentially whether he or she has been exposed to others who have tested positive for coronavirus?
    Yes. The Americans with Disability Act (ADA) permits employers to require that an employee disclose health information with respect to whether the employee poses a direct threat to the health or safety of himself/herself or others.
  • Can an employer require that employees with symptoms of coronavirus be tested?
    Yes. Under the Americans with Disability Act’s (ADA) direct threat analysis, an employer that reasonably believes, based on an individualized assessment, that an employee has symptoms of a condition that poses a direct threat to the employee or team member, which would include COVID-19, can require that the employee undergo medical testing to determine if the employee is infected. Additionally, if the test is job-related and consistent with business necessity, employers may require medical testing.
  • If an employer has a positive case of COVID-19 with one of their employees, is the employer required to report it to OSHA and the appropriate State Department of Health?
    No. Healthcare providers that diagnose the employee are required to notify federal, state and local health authorities of the diagnosis, and those authorities may provide additional guidance and requirements, including further notification, on-site medical questioning, or examinations. However, if the employee is infected on the job or while traveling for work, it is considered a recordable illness. OSHA recently published guidance on this issue.


  • Can an employee refuse to report to work due to fear of contracting the coronavirus?
    Under the Occupation Safety and Health Act (OSH Act), employees are only entitled to refuse to work if they believe they are in imminent danger. See Workers' Right to Refuse Dangerous Work.
  • Do employers have to allow employees to work from home?
    While not mandatory, telecommuting may be a practical measure to lessen the risk of exposure to the virus. Employees with disabilities that put them at higher risk for complications may request remote work as a reasonable accommodation under ADA to reduce their chances of infection during a pandemic.If there is an outbreak in your area, consider allowing or encouraging employees to work remotely, to the greatest extent possible, even if not sick. In this situation, it would not be considered a "leave of absence."
  • Has OSHA developed new standards in light of the coronavirus (COVID-19)?

    OSHA considers contraction of COVID-19 as a reportable event when work related. Employers are responsible for recording cases of COVID-19 if all of the following are met:

      1. The case is a confirmed case of COVID-19 (see CDC information on persons under investigation and presumptive positive and laboratory-confirmed cases of COVID-19);
      2. The case is work-related, as defined by 29 CFR 1904.5; and
      3. The case involves one or more of the general recording criteria set forth in 29 CFR Section 1904.7 (e.g., medical treatment beyond first-aid, days away from work).


    Additionally, there is no specific OSHA standard covering COVID-19; however, some OSHA requirements may apply to preventing occupational exposure to COVID19. Among the most relevant are:

    • OSHA's Personal Protective Equipment (PPE) standards, which require using gloves, eye and face protction, and respiratory protection.
    • When respirators are necessary to protect workers, employers must implement a comprehensive respiratory protection program in accordance to the Respiratory Protection standard.
    • The General Duty Clause of the Occupational Safety and Health (OSH) Act of 1970, which requires employers to furnish to each worker “employment and a place of employment, which are free from recognized hazards that are causing or are likely to cause death or serious physical harm.”

    OSHA’s Bloodborne Pathogens standard applies to occupational exposure to human blood and other potentially infectious materials that typically do not include respiratory secretions that may transmit COVID-19. However, the provisions of the standard offer a framework that may help control some sources of the virus, including exposures to body fluids (e.g., respiratory secretions) not covered by the standard.

  • Is an employer required to reimburse internet service if employees are required to work from home?
    Currently, there is no wide-reaching federal law that requires the employer to reimburse internet expenses for their remote employees. Employers should review the laws in their states of operation related to expense reimbursement.

Employee Travel

  • Can employers ban travel to affected locations?

    Employers may ban any business-related travel to high-impact areas, as identified by the CDC. Employers with business involving travel to those areas should consider reasonable alternatives for their workforce, such as videoconferencing. As additional U.S. locations report incidences of COVID-19, employers should recognize that assessments of elevated travel risks must remain fluid.

    Although employers cannot mandate an employee’s personal travel, they should consider advising employees about the risks associated with such travel, inform them of the consequences of undertaking such travel, and may require periods of quarantine before being allowed to return to the workplace, applying any such practice on a non-discriminatory basis.

  • May an employer restrict travel to China or other afflicted countries?
    If the travel is for business, yes. If the travel is personal, no. Employers in many states are prohibited from taking any adverse actions against employees for lawful off-duty conduct, which would include personal travel. Further, if an individual is traveling to an affected country, which happens to be his or her home country, the employee could allege national origin discrimination if he or she suffers an adverse employment action due to such travel.

Temporary Shutdown

  • If a business needs to close their operation due to COVID-19, putting all employees out of work, how do unemployment insurance laws impact that situation?
    If a company decides to close temporarily and put employees out of work, the employer is required to provide workers with notice about how to file for unemployment. Assuming the employees are eligible, they may file for unemployment; however, there may be a waiting period, depending on state guidelines, before they are entitled to collect any benefits.
  • What tax reliefs are in place to offset business losses during this pandemic?
    On March 19, the Senate majority introduced “phase 3” of the legislative response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act builds on the two former pieces of legislation by providing more robust support to both individuals and businesses, including changes to tax policy. The Act includes forgivable loans to small businesses, direct payments and tax relief for individuals, tax relief for businesses, financial assistance for vulnerable industries, additional health funding and policy, and additional assistance for financial markets. With respect to the tax provisions, the bill provides direct payments, among other provisions, to individuals at a time when millions of Americans will likely face disruptions to their employment. The bill also provides business tax relief, including the delay of certain tax payments, as well as a number of adjustments and technical corrections to changes made by the Tax Cuts and Jobs Act (TCJA). The bill was signed on March 27th. See our latest article on the benefits provided in the bill.

Wealth & Retirement

  • Can employers stop 401K matching temporally?
    Employer-sponsored 401(k) plans often include employer contributions through a variety of funding mechanisms, including matching contributions on employee deferrals, non-elective contributions that aren't dependent on what employees contribute, and discretionary contributions that are optional and usually made at the end of the plan year as a form of profit-sharing.

    In tough economic times, employers might seek to cut compensation-related costs and employer contributions to 401(k) plans are an obvious target. While reducing employer contributions can hurt employee morale, it is sometimes a better option for reducing labor costs than furloughs and layoffs.

    Here are some of the ways a business can change or stop company contributions:

    • Discretionary Match –   if your company has a “discretionary” match, you can change the formula at any point, including stopping the match.   Such change does not require any participant notice though managing the message is still a critical component of your plan.
    • Stated Match – if your plan’s adoption agreement has a specific formula, it can be amended to either a discretionary or revised. This process will require both an amendment and a notice to your employees.  The process can take 30 to 60 days, depending upon the provider and required notification to your employees  .
    • Safe Harbor Match – Safe Harbor match formulas can also be removed from the plan, though these also require plan amendments and notification to employees.  This process can take 30 to 60 days depending upon your provider and required notification to your employees.
  • If  a business  changes  the  match or employer contribution to a retirement plan, what other ramifications should  be considered?
    1. If your match is calculated by your payroll provider, please be sure to update any formula or contact your payroll provider for assistance.
    2. If your plan is current Safe Harbor, this maneuver will require the plan to complete non-discrimination testing for the plan year. If the safe harbor contributions already allocated, it can be considered for non-discrimination testing purposes.
    3. While changing a match formula is allowed, it is important to consider the messaging to your team members as saving for their future should continue even without any company contribution.
  • What  additional  options do  employers  have  with regard to  reducing cost to company-sponsored retirement plans?
    • Forfeiture Utilization: Be sure to use all company forfeitures to fund plan expenses in the current year.
    • Revisit your small balance force out provisions: Many plans  have the ability to  recoup unvested match or profit-sharing dollars to terminated employees.  Unvested monies in participant accounts only move to the forfeiture account upon a distributable event.  Using the “force out” mechanism for small balances (terminated under $5000) will help move these dollars into the forfeiture account so that you can offset plan expense or future company contributions.
    • Plan Audit: Should your plan be subject to this annual requirement, considering passing the cost onto the plan to reduce company expenses.
  • What is the impact to  retirement  plans  should  a business need to  terminate or furlough employees?
    A partial plan termination is determined after the end of the year if your eligible population changes by 20% or more. As such, the impacted population would have an accelerated vesting event meaning this group would be 100% vested rather than follow any vesting schedule in place.

    Please note, the above commentary is a general guideline. Consult your individual plan document or contact your record-keeper for additional information.

  • Is a furloughed employee eligible for a distribution from  a retirement  plan?
    While this can be considered a “grey area” in the IRS regulations regarding Retirement Plans &  furloughs.  Generally speaking , a  furlough is not considered a separation of service or a distributable event especially if there is an expectation that the employee will return in the future should conditions improve.  This type of determination may require the assistance of ERISA counsel.
  • What impact does a furlough have on participant loans?

    Employers have already begun to furlough employees as opposed to terminating employment. IRS regulations discuss the impact that a furlough has on participant loan requirements. Employees with plan loans who are placed on unpaid leave of absence may forego making loan payments during the leave of absence without triggering taxation of the loan as long as the following requirements are met:

    1. The furlough cannot exceed 1 year
    2. The loan must be repaid by the end of the original term of the loan. The missed payments that occurred during the furlough can be later repaid by continuing the original payment schedule, with a larger balloon payment of the missed installments at the end of the original loan term, or by increasing the payments upon reinstatement during the remainder of the loan repayment period. Please note, special consideration should go into examining a participant case where the furlough begins in extreme proximity to the end of the original loan term.

The information contained here and the statements expressed are a general nature and are not intended to address the circumstances of any particular or individual entity. This advisory hub is made available by OneDigital for educational purposes only. Please consult with your local advisory team member for advice specific to your situation.

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