We are all looking forward to the day that we can reopen our businesses to our employees and customers following the COVID-19 virus. As we begin to think about bringing employees back to work, we need to consider how to re-onboard employees. While the decisions we make will include health and safety issues and labor considerations, we are going to focus on re-onboarding employees on their benefit plans. A few things to contemplate:
How do I reinstate benefits for employees who were on furlough or lay off?
First, you may have chosen to continue benefits for your employees who were on furlough or temporary layoff. Many carriers have allowed employers to continue coverage for a period while employees are on furlough or layoff if premiums continued to be paid. Because the timeframe that coverage is allowed to continue may vary by carrier, you should look at each carriers’ guidelines. Remember to review both your medical and ancillary carrier rules regarding continuation of coverage.
If you did not continue coverage for your employees, you will want to determine if your carrier has waived the waiting period for benefits for employees returning from layoff or furlough. Many carriers have a defined period of time in which employees can be “rehired” and are not required to fulfill a new waiting period for benefits. Check with your carrier to identify the rules. This will dictate the benefit reinstatement date for your employees.
If you are self-insured, refer to your Summary Plan Description (SPD) to determine if it contains provisions related to layoff and rehire. These provisions will dictate eligibility for coverage during these events as well as reinstatement provisions. If your SPD does not contain this language, you may choose to adopt a Summary of Material Modification (SMM) that addresses plan eligibility, rehire provisions, and payment of employee contributions during a furlough or layoff. The provisions outlined in the SMM can be for a defined period to address the temporary situation with Covid-19 or it may be permanent. Remember to submit the SMM to your stop loss carrier and ancillary carriers for approval and adoption.
If employees were offered and elected COBRA continuation coverage during a furlough or layoff, be sure to terminate their COBRA coverage and reinstate their active coverage when the employee is eligible for benefits as an active employee. Again, refer to your carrier’s rehire provisions or your plan document to determine the reinstatement date.
Can you recoup employee contributions for premiums missed during a layoff or furlough?
It is likely that this sort of arrangement is permissible, but the employer should set up, clearly communicate, and consider whether it is required to obtain the employee’s consent to a new payment schedule. It may be that the company’s benefit plan already has a provision related to catch-up payments for benefits continued during an unpaid leave of absence under the Family and Medical Leave Act (FMLA). An employer, considering benefit plan catch-up payments, should consult with appropriate counsel to ensure that both Internal Revenue Code and state wage laws are considered before a new payment schedule is implemented.
Does the rehire of an employee trigger a Qualifying Event?
Any change in employment status that affects eligibility will qualify as a change in status event under Section 125 of the IRS Code. When more than 30 days have elapsed between an employee’s termination and rehire, the Section 125 plan should outline if employees are allowed to make a new election, required that the old election be reinstated, or the participant is kept out of the plan until the next open enrollment period. An individual rehired within 30 days can only make a new election if there has been an intervening event that would permit an election change. Otherwise, the 30-day safe harbor rule requires that prior election are reinstated.
For those employees not returning from layoff or furlough during the extension of benefit timeline allowed by the carrier, must you now offer COBRA?
COBRA applies when there is a triggering event such as termination of employment or reduction in hours that results in a loss of group health plan coverage. If a loss of coverage results from the furlough or layoff, employers must offer COBRA. Smaller Employers with less than 20 employees, to whom federal COBRA does not apply, should consult their states’ mini-COBRA or state-continuation rules, where applicable.
We understand that the current situation is fluid. We recommend that you consult with your legal and financial advisors as you make plans to bring employees back to work. Your AssuredPartners team is here to help you navigate this tumultuous time.
COVID-19 Disclaimer: Any statements contained herein relating to the impact of COVID-19 and/or the coronavirus on insurance coverage or any insurance policy is not a legal opinion, warranty, or guarantee and should not be relied upon as such. The situation surrounding COVID-19/coronavirus is changing constantly; as a result, any discussions that might take place may not necessarily reflect the latest information regarding recently enacted, or pending or proposed legislation or guidance that could override, alter or otherwise affect existing insurance coverage. Answers to policy-specific questions will always depend on the terms and conditions of an individual policy and the specific facts relating to a potential claim. As insurance agents/brokers, we do not have the authority to make coverage decisions or render legal advice.