As employers begin to bring furloughed and other employees back to work, many have questions about how to handle employee benefits. Here are some considerations for you.
Service or Longevity Credit
Consider what you have done for rehires in the past. Upon return, you can bridge the time the employee spent out, giving them credit towards service or longevity for that time, or restart their service or longevity credit as if they were a new hire.
Sick, Vacation or PTO Accruals:
- If you did not pay out vacation or paid time off (PTO) when you furloughed employees, their previously earned sick, vacation or PTO should be made available to them. If you grant time based on accruals, resume accruing at their return. If you do a yearly grant, will you prorate the grant for the time missed? Again, look at what you typically have done with unpaid leaves or rehires, and treat all employees consistently.
- If you paid out vacation or PTO upon furlough or layoff, let the employee know when their new accruals will be available for use, following your policy. Consider your service credit decision, and how you’ve handled rehires in the past, in deciding whether to restart their accrual level as if they were a new hire, or let them retain their previous earnings level.
Health Plan Benefits:
- If the employee’s health benefits continued during furlough: The same group health plan coverage should be provided upon return. Notify the employee when premium payroll withholding will resume (check with your carrier or plan documents). If the employee’s premiums went into arrears while they were gone, make arrangements with the employee to withhold catch-up premiums from future paychecks pre-tax, or have them write a check to repay the premiums.
- If the employee elected COBRA/Colorado Continuation during furlough/layoff: Their coverage as an active employee can resume. Check your plan documents for timing, and let the employee know the date, as well as when employee premium paycheck deductions will resume. Returning employees should not be required to fulfill another waiting period before benefits begin unless they have been out longer than 13 weeks (26 weeks for educational institutions).
- If the employee chose not to retain their group health coverage while on furlough/layoff, there are several possibilities upon return. Employers should check their plan documents or insurance contracts regarding what to do. If the employer is an ALE under the Affordable Care Act, be sure to apply the rehire rules on waiting periods to determine when benefits begin.
Health Plan Benefits –Optional expansion of mid-year change events:
Due to COVID-19, the IRS is temporarily allowing several mid-year changes for medical, dental, and vision plans. Employers can choose to offer these or not and can pick which ones to offer. These changes are prospective only, except for changes due to the birth of a child, which are retroactive to the date of birth. Note that a plan amendment is required to allow employees to take advantage of these mid-year changes:
- Make a new election if coverage was previously declined
- Revoke their current election and change plans (ex. Preferred Provider to High Deductible Health Plan), or change dependent coverage (ex. self-only to family coverage)
- Revoke their coverage election with a statement of new coverage (medical plan only)
Health Flexible Spending Account (FSA) Elections
- For a laid-off employee returning within 30 days, a new contribution election can be made only if a qualifying event occurred during the time away. If the laid-off employee returns outside of 30 days, there are multiple options. Check your plan documents or ask your claims processor for assistance.
- Furloughed employees who remained covered by the plan during their time away may need to make catch up contributions. If their contributions went into arrears, make arrangements with the employee to withhold catch-up contributions from future paychecks pre-tax, or have them write a check to catch up.
Optional Health and Dependent Care FSA Plan mid-year change events:
Under IRS COVID-19 relief, employers may adopt plan changes to allow employees to make mid-year changes to their Health or Dependent Care FSA plans. Employees can revoke their election, make a new election, or decrease or increase contributions. These changes must be prospective only. Allowing these changes is optional for the employer, who may choose which (if any) to do. The employer must adopt a plan amendment by 12/31/21 to allow these changes.
Health Savings Account (HSA) Elections
- Employer and employee HSA contributions can be resumed upon return. Employees can change contribution amounts throughout the year per the plan document.
Please contact your broker or Employers Council with questions.