SPECIAL ADVISORY on The Families First Coronavirus Response Act

The Families First Coronavirus Response Act (the “Act”), enacted March 18, 2020, is unprecedented legislation that mandates no out-of-pocket costs for COVID-19 testing, establishes new federal paid leave programs, supports unemployment benefits, and provides benefits to children and families. This Alert summarizes the key health and mandated leave provisions of the Act that will impact plan sponsors, employers, and employees.

CHEIRON OBSERVATION: The Act is the second in a series of legislation responding to the economic and human crises that have resulted from the coronavirus pandemic. The first (the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020), was targeted primarily at vaccines, treatment, and prevention as well as expansion of telehealth for Medicare providers. On March 19 the Senate introduced the Coronavirus Aid, Relief, and Economic Security Act or CARES Act, a $1 trillion emergency economic aid proposal that includes cash payments, loans and other relief measures, the provisions of which are subject to change as it works through the House of Representatives.

Impact of the Act on Plan Sponsors

Plan Sponsors will need to comply with the following:

Full Cost for COVID-19 Testing: All group and individual health plans are not allowed to require any cost sharing (including deductibles, copayments, and coinsurance) for COVID-19 testing. This includes the test itself as well as the provider office visits (whether in-person or telehealth), urgent care visits, and emergency room visits that result in an order for testing, but only to the extent of the services for testing (that is, other parts of an office visit would be subject to cost-sharing). Prior authorization or other medical management requirements for testing are not allowed.

CHEIRON OBSERVATION: Major insurers have already implemented measures to comply with these requirements, so employers with fully insured plans will be in compliance. However, plan sponsors with self-insured plans will need to be sure their plans comply with these requirements.

Mandated Leave Requirements for Employers with 500 or Fewer Employees: The Act requires employers with 500¹ or fewer employees to provide Emergency Medical and Family Paid Leave (EMFPL) and Emergency Paid Sick Leave (EPSL). However, the Department of Labor (DOL) can issue regulations to exempt a small business with fewer than 50 employees if the mandated leave jeopardizes the viability of the business as a going concern. These leaves will be effective April 2, 2020, and end December 31, 2020. The chart at the end of this Alert summarizes the eligibility requirements and benefits for EMFPL and EPSL.

Employers must front the costs of these leaves, but ultimately will receive payroll tax credits to reimburse for the cost of the benefits. The tax credit for sick leave will be increased by the amount of the employer’s qualified health plan expenses that are properly allocable to the qualified sick leave wages for which the credit is allowed.

An employer subject to a collective bargaining agreement (CBA) may, consistent with its bargaining obligations, comply with the EFMPL and the Emergency Paid Sick Leave through a multiemployer fund, plan, or program based on the paid leave each of its employees is entitled to while working under the CBA, provided the fund provides the required paid sick leave.

An employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from the EFMPL and Emergency Sick Paid Sick Leave benefits.

CHEIRON OBSERVATIONS: The EFMPL & EPSL provides several challenges for employers and plan sponsors:

Paying for the additional leaves up front with the payroll tax credit coming later with the employer tax filings
Separately tracking leave taken on account of COVID-19 from other leave taken
Coordinating the new federal leaves with the employer’s existing leave policies and short-term disability benefits
Managing potential overlapping eligibility under the EFMPL& EPSL leaves
Compliance with the EFMPL and EPSL’s requirements may require changes to collective bargaining agreements
Multiemployer plans may have challenges supporting the EFMPL & EPSL because some employers could be exempt. In addition, many multiemployer plans do not routinely have pay/wage information for each participant
Employers of 500 or more employees are not required to provide the additional sick leave or paid leave due to COVID-19, leaving larger employers with flexibility on what to offer and paying for any such additional leave on their own with no tax credit

Impact on Participants and Other Individuals

Individuals will see the following benefits from the Act:

No cost share for COVID-19 Testing. This includes Medicare, Medicaid, TRICARE, CHIP, Indian Health Services, as well as group health plans. Note, however, that treatment of COVID-19 will generally be subject to the plan’s normal cost-sharing provisions
New leave benefits if their employer has 500 or fewer employees (with the possible exception of certain employers under 50 and those who are employed by health care providers or emergency responders)
Additional unemployment benefits: The Act provides for $1 billion in additional funding for states in which the number of unemployment compensation claims has increased by at least 10 percent over the same quarter in the previous calendar year
Easing of eligibility requirements and access to unemployment compensation for claimants, including waiving work search requirements and the waiting week
Food and nutrition benefits during the COVID-19 emergency:
- Emergency Supplemental Nutrition Assistance Program (SNAP) assistance to continue free or reduced-price meals for eligible children whose schools are closed for at least 5 consecutive days
- Waivers and funding to continue free student lunches
- $500 million additional funding under the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) public health program to provide access to nutritious foods to low-income pregnant women or mothers with young children who lose their jobs or are laid off
- $400 million additional funding to the Emergency Food Assistance Program to assist local food banks to meet increased demand for low-income Americans

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.

¹The employer threshold is defined an employer that has fewer than 500 employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year.

Comparative Chart of Federal Emergency Family & Medical Leave and

Emergency Paid Sick Leave Relating to COVID-19

Applicable for Employers with 500 or Fewer Employees
	Emergency Family and Medical Paid Leave (EFMPL)	Emergency Paid Sick Leave (EPSL)
Eligible Employee	An individual who has been employed for at least 30 calendar days by the employer with respect to whom leave is requested.	All employees of the employer.
Qualifying Need	Employee is unable to work (or telework) due to a need for leave to care for a son or daughter under 18 years of age of such employee if the school or place of care has been closed, or child care provider of such son or daughter is unavailable, due to the coronavirus public health emergency. (Public health emergency means an emergency with respect to COVID–19 declared by a Federal, State, or local authority.) Employees with foreseeable needs are required to provide the employer with as much advance notice of leave as practicable.	Employee subject to Federal, State, or local quarantine or isolation order. Employee has been advised by a health care provider to self-quarantine. Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis. Employee is caring for an individual who is subject to a governmental quarantine or has been medically advise to self-quarantine. Employee is caring for his or her child because the school or place of care of the child has been closed, or the childcare provider of such son or daughter is unavailable due to COVID-19 precautions. Employee experiences any other condition specified HHS/ DOL.
Benefit Amount	After the initial 10-day period, eligible employees will receive 2/3 of regular rate of pay for up to $200 per day, capped at $10,000 in the aggregate.	Regular rate of pay for leave taken for items 1, 2, or 3 above, capped at $511 per day and $5,110 total; 2/3 of employee’s regular rate of pay for leave taken for items 4, 5, or 6 above, capped at $200 per day and $2,000 total.
Benefit Waiting Period	First 10 workdays	None.
Duration	After initial 10-day period, the duration of the leave ends when the employee reaches the $10,000 maximum benefit amount.	The total amount of hours of paid sick time to which an employee is entitled is: For full-time employees: 80 hours. For part-time employees: the number of hours equal to the number of hours that such employee works, on average, over a 2-week period. Carryover from 1 year to the next not permitted.
Job Protection	Generally, employer is required to make reasonable efforts to restore employee returning from EFMPL to a position equivalent to the position the employee held when the leave commenced, including equivalent benefits, pay, and terms and conditions of employment. This is not required if the position no longer exists due to changed economic/operating conditions.	Employer prohibited from discharging, disciplining or otherwise discriminating against any employee who takes paid sick leave, files a complaint or institutes a proceeding relating to paid sick leave, or testifies or is about to testify in any such proceeding.
Leave Request Period	Effective April 2, 2020, through December 31, 2020.	Effective April 2, 2020, through December 31, 2020.