Employee Benefits Blog

With daycare centers closed and summer camps turning kids away, employees who socked away money in their Dependent Care Flexible Savings Accounts (DCFSAs) are worried their use-it-or-lose-it account balances are going down the drain.

This concern is also shared by those who tucked away pre-tax savings in Health Care Flexible Savings Accounts (HCFSAs) to cover eligible health care expenditures. With hospitals postponing elective procedures and patients skittish about entering health care facilities, savers simply aren't racking up enough receipts to deplete their FSA balances.

Both groups can now breathe a sigh of relief, since new guidance from the IRS will allow most employees to make midyear pre-tax contribution adjustments to their Health Care and Dependent Care FSAs, which typically aren't permitted once enrollment elections are set.

Historically, the only exception to this rule was if an employee experienced a Qualifying Life Event (QLE), defined by the IRS as a marriage, divorce, job change, birth or adoption of a child, or when a dependent child reaches age 26.

In addition to allowing midyear savings account adjustments, the IRS is also permitting midyear health plan enrollment changes.

As states begin to ease stay-at-home orders, businesses that shut down to minimize the spread of COVID-19 are starting to reopen. But as some employers are finding out, not every employee is ready to get back to work.

Companies that took out loans under the Paycheck Protection Program (PPP) are worried that their staffs' reluctancy to return to work will put their PPP loans in jeopardy of having to be paid back. (Loans under the PPP are only forgivable if employers rehire the same number of full-time employees they used to calculate their PPP loan amount in the first place.)

At the same time, employees who are turning down call-backs from their employers are worried they will no longer be able to collect unemployment benefits, made significantly richer under the CARES Act coronavirus stimulus bill. The New York Times estimates workers in more than half of states are receiving more in unemployment benefits than they did from their normal salaries.

Recognizing this quandary for employers and employees, here's what the Small Business Administration (SBA) and the Department of Labor (DOL) are doing to address this.

Employers are understandably confused when it comes to trying to predict how the coronavirus epidemic will impact their group health plans. Utilization is way down for preventive, elective, and non-emergent services, while expenses directly relating to the testing and treatment of COVID-19 are way up.

Employers aren't the only ones who are perplexed; many employee benefits experts are also in disagreement as to how all this will play out. Willis Towers Watson estimates that employer health care costs might increase by 4 to 7 percent for calendar year 2020, while Gallagher is predicting just the opposite, suggesting that a 15% decrease in medical expenses is possible. Others, as you'll read about later, are suggesting the potential for a staggering 40 percent increase in premiums next year. 

Employers, most notably those with self-funded group health plans, must be mindful of these wide swings in predictions. Regardless of which way things play out, they need to take careful steps to ensure the financial viability of their health plans during this crisis.

So how can employers forecast and prepare for these shifts in cost? It's especially difficult because the impacts of this pandemic are highly dependent on the geographic, demographic, and economic risks which impact every employer quite differently.

Here are some steps self-funded employers should take, along with some predictions on what might happen to various cost-drivers of medical plans.

Americans are suffering from "cabin fever." That's how both New York Governor Andrew Cuomo and President Trump described the American psyche this past weekend, with much of the country growing weary of spending so much time at home. President Trump went even further when he sent out Tweets encouraging citizens of three states to push for more immediate reopenings than planned.

Governors of those states, Minnesota, Michigan, and Virginia, were left confused, having been told just days earlier by the President that the decision to reopen would be left up to them, though just days prior they were told the opposite by the President, who claimed the decision to reopen the country rested solely with him.

Governors are understandably feeling a bit whipsawed by this flip-flopping. Still, it's fair to say that there isn't a governor across the country who isn't eager to ease restrictions that have crippled state economies. The vast majority of Governors, however, are balancing their decisions to reopen with local public health concerns and the White House's very own Guidelines for Opening Up America.

Reopening Means Renewed Opportunities for The Virus to Spread

American workers are also anxious to get back to work, and business owners are desperate to see the wheels of commerce turn again. But the fact of the matter is this - businesses are going to reopen before there is widespread testing for COVID-19, much less general availability of antibody testing, which will indicate if an employee was previously infected and has now mounted an immune response to the disease.

This is to say nothing of the 12-to-18 month roadmap to developing an actual vaccine for the virus, nor the manpower required to do meaningful contact tracking. This means that the coronavirus will have renewed opportunities to spread as workers return to the job.

Without Formal Guidance, Businesses Are Essentially Winging It

Without common and well-defined safety procedures for reopening, businesses are implementing ad hoc procedures with vastly mixed results and constant changes. OSHA is stressing that its guidance isn't regulation, but rather advisory.

Many frustrated business leaders are looking to "essential businesses" that never shut down for guidance, while others are looking for inspiration from companies in overseas markets where the curve of the pandemic subsided weeks ago.

So what should employers do to prepare for reopening? What actions can they take to make workplaces safe? What steps can they take to test workers and keep them healthy?

Here are some suggestions;

With funds reportedly running dry overnight in the $350 billion Paycheck Protection Program, it was with great trepidation that I read an article in the Wall Street Journal this morning suggesting that a second round of coronavirus-related layoffs is already underway, and that very few industries will be spared this time around.

This prediction was further bolstered when the Labor Department announced, just a few hours ago, that 5.24 million more weekly jobless claims were filed last week, exceeding the 5 million expected from most economists. This brings total unemployment claims to just over 22 million, virtually wiping out ten years of spectacular U.S job growth in less than a month. 

It would be an understatement to say that that the damage to the U.S labor market has been profound. And economists say there's more to come. But there's also been considerable discussion recently about markets "opening back up", perhaps as early as the end of this month.

So which industries are next to be hit, can this be avoided, and how long might it take for things to bounce back once we return to what is sure to be a "new normal"?

Many employers hit hard by COVID-19 are wondering if they should cut payroll expenses through furloughs and layoffs. These temporary actions quickly reduce payroll expenses, while providing affected employees with access to the greatly enhanced unemployment benefits now available, thanks to the CARES Act.

Most furloughed and temporarily laid-off employees can also maintain their health benefits while collecting these unemployment benefits. However, the extent can vary based on medical carrier contracts with employers, and variations in state laws.

Just this morning, a piece in the Wall Street Journal discussed how more and more employers are going this route, though many are doing so on a voluntary basis since these richer unemployment benefits help some workers more than others. (In some cases, which we'll address a bit later, certain employees can actually make more on unemployment, at least for the moment.)

Complicating an employer's decision to pare back payroll expense in this way is another provision in the CARES Act called the Paycheck Protection Program (PPP). This program, which I covered extensively in my last blog post, is designed to encourage employers to maintain staff by providing forgivable loans to employers who resist cutting their workforce.

The PPP has already proven to be so popular that Congress is already moving to approve additional funding for the program. Congress has thus far approved $350 billion in potentially forgivable small-business loans, but early demand suggests the program may run dry. Treasury Secretary Steven Mnuchin confirmed in a tweet yesterday afternoon that his department will ask for an additional $250 billion for the small business program.

Which of these options is better for your employees, and which option is better for you as an employer? A lot depends on additional operating expenses incurred by an employer, employee income, duration of benefits, accessibility of each relief program, and the long-term impact of both decisions. And of course this dilemma is predicated on an employer not planning on ceasing operations altogether.  

Let's take a look at each option in greater detail.

To say that the Coronavirus (COVID-19) pandemic has put a significant strain on every aspect of daily life around the world would be an understatement. As the spread of the disease shows no sign of slowing down, there remains steadily increasing concern in this country, not only about the health of our citizens, but also our economy, which is now in tatters, through no fault of its own.

In response, on Friday, the United States Congress passed a $2 trillion package to provide a jolt to our economy, reeling from the deadly virus. This is the third aid package from Congress and is it designed to keep businesses and individuals afloat during an unprecedented freeze on the majority of American life.

This will most likely not be the last stimulus package Congress will have to enact. This is especially true given that President Trump, just yesterday, extended his administration's social-distancing guidelines through the end of April, as the peak death-rate from the virus is expected to hit in two weeks. (The death toll from COVID-19 past 2,000 over the weekend.)

Most economists are in agreement that last Friday's $2 trillion package isn't a stimulus plan at all, but rather a relief package. Senate Majority Leader Mitch McConnell (R-KY) described the legislation this way; "No economic policy can fully end the hardship, so long as the public health requires that we put so much of our commerce on ice. This isn't a stimulus package. It is emergency relief. Emergency relief. That's what this is."

All Americans would do well to understand the provisions of this latest stimulus/relief package, as it will offer direct relief to businesses and individuals alike. Here are the details.