Employers are facing immense obstacles because of the coronavirus (COVID-19) pandemic, but employee benefits can be a vital resource during this stressful and unprecedented time. Our first blog post on benefits issues employers are facing during the pandemic addressed:
- Benefits communications;
- Health care benefits;
- Mental health; and
- Wellness programs.
This post will dive into benefits issues such as retirement benefits, financial wellness benefits, COBRA and continuation issues, benefits during furloughs, temporary disability insurance and unemployment insurance.
Most employees depend on employers for their retirement benefits. Since the days of guaranteed employer-provided pensions are long gone, a majority of employees are relying on defined contribution plans (e.g., 401(k) plans) for retirement income. While such plans have many advantages, they are subject to market volatility and fluctuations, and during recessions and other economic downturns, their balances can decrease substantially.
The coronavirus pandemic has severely impacted the global economy to say the least, and employees who look at their retirement accounts may panic and not know what to do. Because of this, employers may see a large increase in requests for 401(k) loans or hardship withdrawals. Provide employees with any retirement plan resources that are accessible to them and make sure they are aware of any guidance or help that may be available.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) sets out special rules for retirement plans designed to help individuals affected by COVID-19. For example, consistent with relief provided during other disasters, the law allows employees to access their 401(k) accounts without liability for the 10% penalty on early distributions related to COVID-19.
Financial Wellness Benefits
Employers can also be a valuable resource to employees when it comes to helping employees with financial stress. Financial stress can have a huge impact on an employee’s emotional, physical and mental well-being, and offering programs designed to help employees with their finances can help enhance their well-being.
Benefits that promote employee financial wellness and may help during the pandemic include:
- Financial education, counseling and/or training;
- Retirement planning; and
- Debt counseling.
COBRA and Continuation Coverage
When the coronavirus pandemic and the resulting shutdown of businesses across the country led to massive workforce layoffs or reduced hours for employees, the Consolidated Omnibus Budget Reconciliation Act (COBRA) came into play. As a quick refresher, COBRA is a federal law that requires group health plans to offer continuation coverage to certain covered employees, former employees, spouses, former spouses and dependent children when group health coverage would otherwise be lost due to certain specific events (including most terminations from employment and reductions in hours).
COBRA has strict rules for:
- How and when continuation coverage must be offered and provided;
- How employees and their families may elect continuation coverage; and
- The circumstances that justify terminating continuation coverage.
In addition to the federal COBRA law, a majority of states have state health care continuation coverage (mini-COBRA) laws that vary among one another and from the federal law with respect to requirements such as covered employers, employee eligibility, qualifying events, length of coverage and reasons for early termination.
Employers may be concerned about what happens to employees’ benefits coverage when they are furloughed. The answer generally depends on the terms of their benefits plans and how they address inactive employees. It is something that employers will have to check their benefits plans for and discuss with their plan providers.
If employees lose health insurance while on a furlough, they would generally be eligible for benefits under COBRA. However, before terminating group health coverage for an employee who is on a furlough, you should consider potential penalties under the Affordable Care Act’s (ACA’s) employer mandate.
Additionally, many employees who are furloughed will most likely be eligible for unemployment insurance benefits even though their employment is not terminated.
Temporary Disability Insurance
Employers in certain states are required to provide temporary (short-term) disability insurance (TDI) to workers. TDI laws provide income protection to employees who cannot work due to a nonwork-related illness or injury (which may include pregnancy and organ donation). Some states have expanded their TDI rules and/or guidance to account for the COVID-19 pandemic.
Unemployment insurance is a nationwide program created to provide partial wage replacement to unemployed workers while they conduct an active search for new work. Unemployment insurance is a combined federal-state program, based on federal law, but executed through state law.
There have been many highly-publicized coronavirus developments related to unemployment insurance. For instance, Congress has passed key pieces of legislation related to unemployment insurance, including the Families First Coronavirus Response Act (FFCRA) and the CARES Act, which enhanced and expanded unemployment insurance benefits.
Also, the Department of Labor has continued to issue guidance addressing unemployment insurance and the coronavirus, and many states have relaxed rules (e.g., waiting periods before benefits kick in) to address the pandemic.