April 2, 2020
Dear Valued Clients,
There were a number of federal legislative and regulatory changes last week that address the financial impact of COVID-19 on employers. These changes led to a $2.2 trillion economic stimulus package, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The Internal Revenue Service (IRS) and Department of Labor (DOL) also released guidance to assist employers in implementing certain benefit-related provisions under the Families First Coronavirus Response Act (FFCRA). We have compiled all the relevant information for you and will take you through how this can potentially impact your business as well as your employees. Please use this as a resource as needed.
As always, Pinnacle is here for you. If you have questions, please call our customer service team at 800.649.9121, or visit Pinnacle’s COVID-19 resources page here: https://www.pinnacletpa.com/Resources-COVID-19.
On March 13, 2020, President Trump declared a national emergency in response to the health crisis caused by COVID-19. On March 18, 2020, the President invoked the Defense Production Act to expand the nation’s ability to produce medical supplies, including ventilators and personal protective equipment. While the situation is dire, the federal and state governments are taking this matter seriously in an effort to turn the tide and flatten the curve. Below is brief summary of the government response so far. We have also included:
- A description of the new COVID-19 mandates applicable to health benefit plans;
- New employer leave law requirements, including links to federal FAQs that are being routinely updated;
- Guidance for covering furloughed employees;
- Information and resources for employers who are interested in applying for monetary relief;
- A brief description of the new laws’ business tax provisions;
- Best practices for employers to help slow the spread of COVID-19; and
- Additional federal and state resources for employers
To date, three federal laws have been passed to address the crisis and provide relief to Americans:
- The Coronavirus Preparedness and Response Supplemental Appropriations (CPRSA) Act (Phase 1)
- The Families First Coronavirus Response Act (FFCRA) (Phase 2)
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act (Phase 3)
On March 6th President Trump signed the CPRSA that included $8.3 billion in emergency supplemental funds for essential federal agencies responding to the coronavirus crisis. On March 18th, the FFCRA became law and was designed to mitigate the impact on individuals by providing low income food and nutrition assistance, unemployment insurance, emergency leave, and employer tax credits to partially offset the costs of required leave. The CARES Act, signed into law by the President on March 27th, is a $2.2 trillion-dollar relief package that includes:
- $500 billion in financial assistance for large distressed businesses;
- $350 billion in low-interest loans to small businesses;
- $100 billion in financial assistance to hospitals;
- $1,200 in financial assistance for the lowest income taxpayers;
- An additional 13 weeks of unemployment compensation benefits; and
- An employee extension credit
Right now, Congressional democrats are preparing a fourth bill (Phase 4) to address the pandemic. This Phase 4 package could include more direct payments to Americans, spending on infrastructure and may be even larger than the $2.2 trillion dollar CARES Act. House Speaker Nancy Pelosi stated that she would like to see the next bill feature more money for state and local governments, increased worker protections, more assistance to hospitals, and more opportunity for family and medical leave.
We’ll go through how the new legislation will impact employees.
1. EMPLOYEE BENEFITS IMPACT
A. No Cost Screening and Testing for COVID-19
The FFCRA and CARES Act impose cost sharing restrictions on insured and self-insured group health benefit plans (including grandfathered plans) for the testing and screening of COVID-19 and the associated office visit. Insurance carriers and self-insured group health plans (even grandfathered plans) must cover the testing, screening, and associated office visit in and out-of-network.
The FFCRA requires the coverage of FDA-approved COVID-19 diagnostic testing products, including items and services furnished during a provider visit (office, telehealth, urgent care, and emergency room) to the extent those items and services relate to the furnishing or administration of the testing product or the evaluation of the individual’s need for the testing product. The mandated coverage must be provided without any cost sharing (including deductibles, copayments, and coinsurance) requirements or prior authorization or other medical management requirements.
The CARES Act expands the coverage mandated under the FFCRA and requires group health plans and health insurance issuers to cover, without cost-sharing, any qualifying coronavirus preventive service. For this purpose, a “qualifying coronavirus preventive service” means an item, service or immunization that is intended to prevent or mitigate COVID-19 and that is:
An evidence-based item or service that has in effect a rating of ‘‘A’’ or ‘‘B’’ in the current recommendations of the U.S. Preventive Services Task Force; or
An immunization that has in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved.
Under the CARES Act, a group health plan or issuer shall reimburse the provider of the diagnostic testing as follows:
At the negotiated rate, if the health plan has a negotiated rate for such service with the provider in effect before the public health emergency was declared pursuant to Section 319 of the Public Health Service Act (prior to March 13, 2020).
If there is not a negotiated rate, the cash price for such services as listed by the provider on a public website, or such plan or issuer may negotiate a rate with such provider for less than such cash price. Each provider of diagnostic testing for COVID-19 shall make available on a public website the cash price for such testing. Failure to comply with such internet posting may result in monetary penalties of up to $300 per day.
2. FFCRA PAID LEAVE
The FFCRA provides all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. The legislation was passed to ensure that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus while at the same time reimbursing businesses. The FFCRA mandates paid sick time and paid family medical leave to employees impacted by COVID-19. Employers with fewer than 500 employees will have to take immediate action to prepare to comply with the new law, which goes into effect on April 1, 2020.
The FFCRA has several components, including:
paid family and medical leave
paid sick time
tax credits for paid family and medical leave and paid sick time
medical plan components
several immediate public health related matters
The Wage and Hour Division of the Department of Labor has developed a series of frequently asked questions about COVID-19 and its effects on wages and hours worked under the Fair Labor Standards Act (FLSA), job-protected leave under the Family Medical Leave Act (FMLA), and paid sick leave and expanded family and medical leave under the FFCRA. You can find the Department of Labor FAQs here.
3. COVERAGE CONTINUATION DURING FURLOUGH OR MANDATED LEAVES
Most employer sponsored employee group health benefit plans contain detailed eligibility rules that condition eligibility on full-time employee status. Employers who are considering extending coverage to laid off or furloughed employees should review their benefit plans and insurance policies to determine how to treat employees or former employees who no longer qualify under the terms of the employer’s plan. Self-insured employers may have more flexibility to determine their plan’s eligibility rules; however, they should ensure that any changes to extend eligibility are agreed to by their stop loss or reinsurance carrier.
4. CARES ACT BUSINESS PROTECTION PROGRAMS
A. PAYCHECK PROTECTION PROGRAM
The CARES Act includes the Paycheck Protection Program that is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, health benefits premiums, rent, mortgage interest, or utilities. The Paycheck Protection Program will be available through June 30, 2020.
(1) Who May Apply?
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
(2) How to Apply?
Employers may apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Employers should consult with their local lender to determine whether it is participating in the program. Lenders may begin processing loan applications as soon as April 3, 2020. Employers may begin preparing applications and may download a sample form here to see the information that will be requested. To apply for a loan visit SBA.gov
(3) Loan Details and Forgiveness
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. Paycheck Protection Program loans may have a principal loan amount of up to $10 million (limitations apply). Loans may have a term of up to 10 years and bear interest at a rate of no more than 4% per annum (with payments to be deferred for at least 6 months and at most 1 year).
B. Economic Injury Disaster Loan and Loan Advance Program
Small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application.
To apply for a COVID-19 Economic Injury Disaster Loan, click here.
C. SBA Debt Relief
The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by the COVID-19 health crisis.
Under this program:
The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
The SBA will pay the principal and interest of current 7(a) loans for a period of six months.
D. SBA Express Bridge Loans
The Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or be used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for a decision and disbursement on an Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.
Up to $25,000
Will be repaid in full or in part by proceeds from the EIDL loan
Employers can find an Express Bridge Loan Lender by connecting with their local SBA District Office.
5. BUSINESS TAX PROVISIONS
The CARES Act provides significant business tax relief including:
Employee Retention Credit
Delay of Employer Payroll Taxes
Changes to Net Operating Loss Rules
Changes to Business Loss Limitations
Modification of Credit for Prior Year Minimum Tax Liability of Corporations
Changes to Business Interest Limitations
Qualified Improvement Property
For more information on these business tax sections, please see our companion article linked here.
6. SLOW THE SPREAD OF COVID-19 GUIDANCE
The Centers for Disease Control and Prevention (CDC) has developed interim guidance for businesses and employers to respond to COVID-19 linked here. The guidance is routinely updated. Most states have issued stay at home orders, including California and Arizona (where the majority of our clients and enrollees reside). The only exceptions are for essential critical infrastructure workers. This means that most employees–to the extent possible–are working from home.
The CDC recommends the following to reduce risk of contracting COVID-19 and to slow the spread of the disease:
Avoid contact with COVID-19 infected individuals.
Practice responsible social distancing by avoiding large gatherings and maintain distance (approximately six feet) from others when possible.
Wash your hands often with soap and water for at least 20 seconds. Use hand sanitizer with at least 60% alcohol if soap and water are not available.
Avoid touching your eyes, nose, and mouth with unwashed hands.
Cover your mouth and nose with a tissue when you cough or sneeze or use the inside of your elbow. Throw used tissues in the trash and immediately wash hands with soap and water for at least 20 seconds.
Clean and disinfect frequently touched objects and surfaces, such as workstations, keyboards, telephones, handrails, and doorknobs. Dirty surfaces can be cleaned with soap and water prior to disinfection. To disinfect, use products that meet the EPA’s criteria for use against SARs-CoV-2 (the novel coronavirus that causes the disease COVID-19).
7. OTHER HELPFUL RESOURCES
A. Federal Agencies and State Departments of Health
The U.S. government is undertaking unprecedented steps to combat the COVID-19 pandemic. For more information and additional resources, visit USA.gov/coronavirus and https://www.coronavirus.gov/.
For more information about what California is doing to combat COVID-19, visit https://www.cdph.ca.gov/ . To find out what your state is doing, visit https://www.usa.gov/state-health.