Alert / Retirement, Risk Management, Employee Benefits
Coronavirus: Legislation imposes temporary paid leave and healthcare mandates

Coronavirus bill: Legislation imposes temporary paid leave and healthcare mandates on employers

Updated March 19, 2020

Today Congress passed a bill that implements two new, fast-tracked temporary paid leave requirements and mandates health plan coverage for coronavirus testing. President Donald Trump signed it into law Wednesday evening.

The bill, known as the “Families First Coronavirus Response Act,” mandates new paid leave requirements be implemented upon additional guidance from the Department of Labor (DOL), but no later than 15 days after the president signs the act. That implementation deadline, though currently unknown, is likely to be before April 1.

Temporary paid leave requirements

The new paid leave requirements provide up to 12 weeks of paid sick and family leave to employees of private employers with fewer than 500 employees, and to employees of all government employers. The requirements apply through Dec. 31, 2020.

Lockton comment: The legislation allows employers of healthcare providers and emergency responders to opt-out of the new leave provisions for those employees. The idea is that there is a need to keep these individuals on the front line to help manage the crisis. The legislation also allows the DOL to issue regulations exempting employers with fewer than 50 employees.

The first two weeks of paid leave are imposed under a section of the bill called the Emergency Paid Sick Leave Act. Paid leave can be taken for the employee’s coronavirus-related illness or need to seek care or isolation, to care for another individual's coronavirus-related illness or need to seek care or isolation, or to care for the employee’s child whose school or child care provider is closed or unavailable because of the coronavirus. Paid leave is capped at $511 per day ($5,110 total), unless the employee is caring for a family member or child, then it is capped at $200 per day ($2,000 total).

The remainder of paid leave, capped at $200 per day ($10,000 total), is provided under a short-term expansion of the Family and Medical Leave Act (FMLA). Technically, paid leave under this provision begins after 10 days of unpaid leave; however, employees may use their paid sick leave or accrued leave under the employer’s current leave policy to bridge the 10-day gap. The expanded FMLA requirements apply to more employers than traditional FMLA and must be made available to recently-hired employees far earlier than traditional FMLA. The final measure provides paid leave only to care for the employee’s child whose school or child care provider is closed or unavailable because of the coronavirus.

Lockton comment: The initial bill passed by the House over the weekend would have allowed ten weeks of expanded FMLA leave for the employee’s own illness or isolation or that of a family member. This provision was removed to fast track the legislation, but it is being discussed as part of future legislation. 

The two components of the bill describe different eligibility rules, rates of pay, definitions and other administrative requirements, making for administrative challenges for employers.

Employers will need to act quickly to update their paid leave policies and payroll systems to meet the new requirements, which are described in detail in the linked table.

Lockton comment: It is not entirely clear why the final bill applies only to private employers with fewer than 500 employees. We suspect this is because many larger employers already have paid sick and family leave policies in place or are expected to voluntarily adopt similar policies. Members of Congress and the president have indicated that future legislation might address larger employers specifically, especially if those larger employers without robust leave policies do not voluntarily adopt leave policies commensurate with the leave requirements imposed on smaller employers by the Families First Act.

Tax credits for paid leave

Refundable tax credits are available to employers to help offset some of the cost of providing the newly required paid leave. The credits are taken on quarterly payroll tax returns; however, administration officials have already called on the IRS to allow businesses to receive the credit faster if the new leave laws create or magnify cash flow problems.

Lockton comment: The credit an employer may claim might be less than the maximum. Employers will want to consult with their tax advisors regarding the tax credits they may claim.

Required healthcare plan coverage for coronavirus testing (but not treatment)

As expected, the legislation follows the lead of state insurance departments and requires all group health plans, including grandfathered plans under the Affordable Care Act, to cover coronavirus testing and the related visit, without imposing cost sharing (e.g., deductibles, copays or coinsurance), pre-authorization or medical management requirements. Unlike the recent state-imposed mandates that apply to insurance companies, the new federal mandate applies to all group health plans, including self-insured plans and those not subject to ERISA. Importantly, the new coverage requirement does not require plans to waive cost sharing for coronavirus treatment.

The requirement to cover testing without cost sharing is also extended to government-funded programs like Medicare, Medicaid and TRICARE. The government will also reimburse laboratories for the cost of testing people who are uninsured.

What’s next?

Many questions will remain for the DOL to sort out in regulations. The legislation directs the DOL to provide additional details within 15 days of the president’s signature, which we understand they are already working on. Some open questions and points of clarifications related to paid leave include:

  • How is the fewer-than-500 employee count computed? E.g., is it computed on an EIN-by-EIN basis or a controlled-group basis?
  • May an employer require an employee to obtain written documentation from a healthcare provider to trigger entitlement to the new paid leave, or will an employee qualify upon a self-imposed quarantine without a diagnosis or specific recommendation from a healthcare provider?
  • What must employers of healthcare providers and emergency responders do to opt-out of providing paid leave (the bill allows for this)?
  • Will employees of employers with fewer than 50 employees be eligible for paid leave, or will they be exempted (the bill allows for an exemption)?

Federal lawmakers have made clear that additional legislation is expected in the coming weeks. The administration has also submitted a $1 trillion package that would include direct payments to individuals and support for the airline industry and other businesses that have been economically impacted, including interruptions to business that are not otherwise covered through insurance. This legislation is likely to come together quickly, and we will be certain to provide updates as details emerge.

The linked table addresses questions about who the measures impact and how.

Scott Behrens, J.D., VP
Director, Government Relations

Not legal advice: Nothing in this Alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Government Relations group are not privileged under the attorney-client privilege.

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