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. The Rule of Parity, in particular, sets forth guidelines as to how long an employee can be absent from work, return, and still be considered eligible based on previous service, as opposed to being treated as a new hire.
According to the IRS: “For purposes of determining the period after which an employee may be treated as having terminated employment and having been rehired, an Applicable Large Employer may choose a period, measured in weeks, of at least four consecutive weeks during which the employee was not credited with any hours of service that exceeds the number of weeks of that employee’s period of employment with the Applicable Large Employer immediately preceding the period that is shorter than 13 weeks (for an employee of an educational organization employer, a period that is shorter than 26 weeks).”
Two ACA rules available to employers are addressed in the above IRS language:
The 13-week Rule – If an employee returns to work after a period of 13 weeks with no credited hours of service, they can be treated as a new hire. So although furloughed employees should be offered coverage during the furlough, they can be treated as a new employee, and the waiting period can restart if they return to work after at least 13 weeks of unpaid leave.
Rule of Parity – An employee can be treated as a new hire upon their return to work, if they were on a service break of 4 weeks or more with no credited service hours, and the duration of the service break was longer than their period of employment prior to the break.
Here are some relevant examples of the two ACA rules mentioned above:
Employee is furloughed, terminated, laid off etc. with no service hours for a period greater than 13 weeks (26 weeks of educational organizations). The 13-week rule applies and the employer can treat this employee as a new hire upon their return to work.
An employee is gone for less than 13 weeks and then returns to work, the employer must honor the employee’s status in their previous Stability Period.
Employee is furloughed, terminated, or laid off with no service hours for at least 4 weeks. If their break was longer than their period of employment prior to the break, the Rule of Parity applies and the employer can treat the employee as a new hire when they return to work.
If they were previously employed longer than the time they were off work then their previous Stability Period must be honored. (This of course assumes they were eligible for coverage prior to separation).
Integrity Data has your ACA Tracking Covered
Integrity Data’s ACA Full Service reporting already accounts for the rule of parity and we build this calculation into the analysis of your employee’s employment history and ACA status history information. It also differentiates between educational institutions and non-educational with respect to the rules outline above (13 versus 26 weeks).
Our team has been immersed in the Affordable Care Act since its inception, making us uniquely qualified to meet you ACA tracking and reporting needs. Our ACA Full Service offering lets you focus on your people, while we do all the work of keeping you in compliance. Contact us today to learn more.
For more on how Coronavirus is affecting employers, check out our COVID-19 blogs.
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