ACA & Coronavirus: What Employers Need to KnowUpdated September 15, 2020

Reduced hours, layoffs, and even termination is wreaking havoc on US workers due to the Coronavirus pandemic. Certain industries such as staffing, restaurants, and hospitality have been hit particularly hard.

With all the challenges employers are facing due to the Coronavirus, ACA tracking is also adding to the confusion. New sick leave and FMLA requirements related to COVID-19 adds to the mix. Therefore, the requirement to offer qualifying health plans to ACA eligible employees is now coming into question. Have the rules changed? Who is still eligible, or not, for coverage?

Coronavirus Sick Leave Relief for Employees

Due to COVID-19, the federal government issued the Family First Coronavirus Response Act (FFCRA) to assist employees in companies with fewer than 500 employees with time off to care for themselves or family members related to Coronavirus issues. This leave is in effect from April 1 – December 31, 2020.

The paid sick leave covers up to 80 hours for full-time employees that are unable to work or telework due to their own quarantine or Coronavirus illness (symptoms or medical diagnosis). They will be paid at their regular rate of pay. If the leave is required due to an employee unable to work or telework due to the need to care for an individual in quarantine, or care for a child whose school or child care provider is closed for reasons related to COVID-19, then the full-time employee receives 2/3rds of their regular rate of pay.

For part-time employees, there will be a calculation of your average hours worked to know how many hours you will receive. Employers should keep in mind the FFCRA related leave should be counted towards hours of service for ACA eligibility tracking.

ACA Offers of Coverage during Coronavirus Furloughs and Leaves

During this uncertain time due to COVID-19, many employers are wondering if they are required by the ACA to continue offering coverage while employees are not working. The IRS has not changed any of the ACA-related requirements due to Coronavirus. They had previously released guidance on the topic of layoffs, extended leave, and more; however, it’s a bit complex.

Employers who formally terminate employees do not have an obligation to continue coverage past the date of termination. However, employers who have issued furloughs or layoffs without termination or transitioning employees to some type of unpaid status need to ensure they are in compliance with the ACA employer mandate to avoid penalties.

There can be severe ACA financial ramifications for employers who do not continue offers of health coverage to those who still qualify. Therefore, if an employee was deemed full-time under the employer’s stability period prior to the furlough, the employee’s full-time status and offer of coverage should be extended during the furlough.

So in order for employers to avoid possible exposure to the ACA’s sledgehammer penalty, they need to ensure that offers of health coverage for all ACA full-time employees are extended during furloughs or any extended leave. Employers should also be aware that there is potential exposure to the ACA’s tack hammer penalty, if they resort to offering COBRA to full-time employees during a furlough or extended leave. This is because the employee bears 100% of the cost for COBRA coverage, which would make the coverage unaffordable under the ACA. The tack hammer penalty would be triggered if that full-time employee waived COBRA then obtains a PTC on the ACA Exchange. Employers also need to ensure that they are reporting offers of COBRA correctly when filing 1095-C forms with the IRS.

What Happens when Employees Return to Work?

Employees dealing with layoffs, extended leave, termination or unpaid furloughs, resulting in no hours of credited service due to COVID-19, are subject to the ACA’s “break in service rules.” The IRS has previously issued guidance to employers on how to treat employees subject to this, both from a Standard Measurement Period perspective, and service break perspective.