Employer Guide to Understanding the Families First Coronavirus Response Act
The Act goes into effect on April 1st, 2020.
● It applies to people employed on that same date or later (whether continuously or rehired after being furloughed or layed off).
● It is not retroactive to wages earned prior to this date.
● It applies to leave taken through 12/31/20
It contains one expanded and one new benefit program for employees:
● Expanded -- Emergency Family Medical and Leave Act (FLMA)
● New -- Emergency Paid Sick Leave
How it works:
● The employee applies for a specific type of paid leave (there are several) under one or both of the above programs;
● The employer pays the employee wages for their qualifying leave, up to certain daily and total limits;
● The IRS reimburses the employer for 100% of these wages through payroll tax credits or refunds;
● Health insurance benefits paid during these leave periods are also reimbursable.
What are the maximum wages an employer might pay under these new programs?
● FLMA expansion: $10,000 per employee
● Emergency paid sick leave: $5,110 per employee
That’s a lot of money, but here are some tips to get it back ASAP:
● Yes, if everyone has events that qualifies them for the max benefit
● But you will (supposedly) get the money back, and hopefully soon (details TBD)
● CAREFULLY TRACK ALL EXPENDITURES MADE UNDER THESE PROGRAMS to make it easier to get reimbursed
○ Use a separate earnings code for each type of leave pay, being as granular as necessary (sick pay vs. FLMA; child care vs. the employee being sick with COVID-19 him/herself; two-thirds pay vs. 100% pay; etc.)
○ Allocate employer-paid health insurance premiums to the days/weeks of sick leave paid as my understanding is those are reimbursable, too
● Ask your payroll service provider and payroll software company for the most current guidance on how to claim the credits and/or refunds
● Include in your cash flow forecast an allowance for anticipated leave wage payouts (and subsequent credits or refunds)
Are companies with less than 50 employees exempt?
Maybe. The government can:
...exempt small businesses with fewer than 50 employees from the requirements … when the imposition of such requirements would jeopardize the viability of the business as a going concern.
I have not seen clear guidance regarding the criteria that will be used to evaluate applications for exemption. My recommendation: if your company is not going to administer these benefit programs, document internally why doing so would have jeopardized the viability of the business. Be specific.
Employers have to notify employees about these benefit programs
● Check out the poster (you can email it to your employees). This is also a good way to start to understand the types of leave, qualifying reasons, pay rates, and limits.
● Check out the Department of Labor’s (DOL) FAQ about the poster, including the need to check for updates.
How does it relate to State and City benefits programs?
● These are location-specific. Consult with your HR consultant, attorney, etc.
What if we can’t get our act (no pun intended) together by April 1st?
This is purely my opinion, but...do your best and don’t worry about it. For instance, you can notify eligible employees this week by emailing each one a poster, and take until April 16th to comply, which is 30 days from the date the Act was signed (March 18th). This from the IRS:
[Department of] Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.
Planning properly for this lets you execute it:
● More effectively (maximize benefits to employees; minimize expense to the contractor)
● Efficiently (fewer mistakes and less rework)
● With less risk (e.g. mishandling private EE data when they substantiate leave requests)
● While staying focused on business survival planning (cash flow forecasting, A/R collections, etc.)
Does this apply to union employees?
My read is that it does, but payment of the benefit can be done through a special union fund.
What’s the difference between “furlough” and “layoff”?
The advice I’ve been given locally in California, where job sites are shut down and no return to work date can be forecasted, is that they are one and the same right now.
What about continuity of health insurance for our employees?
Be careful here, if you want to maintain -- at least for a few months -- continuity of health care coverage for your employees so they don’t have to pay high COBRA premiums or go without health insurance coverage.
If you let some go (furlough or layoff), how long can they remain on your company’s health insurance plan, even if you want to keep paying it for them?
And when you rehire them, does your plan consider the current epidemic a qualifying event so they can be added back to the plan immediately or do they have to wait for open enrollment?
Several states have reopened ACA enrollment to help people get covered.
Links:
It’s worth reading the Act itself (H.R. 6021). Don’t get bogged down by the inscrutable legislative and tax references. Instead, focus on the specific practical points about types of leave, rates of pay, how many weeks, etc.
● Text pertaining to the expanded FMLA portion
● Text pertaining to the emergency paid sick leave portion
● Text pertaining to the payroll tax credits and refunds
From the IRS and/or Department of Labor (DOL):
● DOL Q&A
There are numerous third party summaries provided by trade groups, HR firms, attorneys, etc. Here are two general-purpose ones:
● Quick slide show from Eos Human Resources who’s also hosting a one hour webinar on the topic tomorrow, Friday 3/27
● From Zenefits
David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.