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Dinse Brief – Paycheck Protection Program

Pursuant to the CARES Act, the U.S. Treasury Department (“Treasury”) announced the rules and procedures for small businesses that are seeking assistance in dealing with the economic consequences of the COVID-19 pandemic.  The Paycheck Protection Program (“PPP”) makes up to $349 billion in forgivable loans available to small businesses.  PPP funds can be used for payroll costs (including benefits), and payments for utilities, rent, interest on mortgages (provided such services and agreements were in place prior to February 15, 2020).

A. Key Information

  • Small businesses with fewer than 500 employees are eligible (including non-profit organizations).
  • Applications may be made by small businesses and sole proprietorships starting Friday, April 3.
  • Applications may be made by independent contractors and self-employed individuals starting Friday, April 10.
  • No collateral or personal guarantees are required.
  • All loan terms will be the same for every business that applies.
  • Loan forgiveness is based on maintaining or quickly rehiring employees and maintaining salary levels.
  • The loan amount can be for up to 2 months of your average monthly payroll costs from 2019 plus an additional 25% of that amount (subject to a $10 million cap).
  • Receipt of a PPP loan will make your business ineligible to receive tax relief under certain sections of the CARES Act (the Employee Retention Payroll Tax Credit and/or the Delay of Payment of Employee Payroll Taxes).
  • Although applications will be accepted until June 30, 2020, Treasury is encouraging businesses to apply as quickly as possible because there is a funding cap.
  • Applications can be made through any existing SBA lender—which might include the Vermont financial institution with which you already have a relationship. Vermont SBA lenders include the following (for the full list, go here):
Citizens Bank Community Bank (formerly Merchants Bank)
Community National Bank Key Bank
Mascoma Savings Bank Northfield Savings Bank
Passumpsic Savings Bank Peoples United Bank
TD Bank Union Bank
Vermont Federal Credit Union Vermont State Employees Credit Union

 

B. Action Items / Documents to Gather

We recommend that you prepare for the Application by taking the following steps and gathering the following documents:

Calculating “Average Monthly Payroll.”  This is the most critical part of the Application, as it will determine the size of your loan.  To do so, we recommend assembling the following documents so you can review them with your lender and calculate the loan amount.

Employment Information from 2019

  • Contact your payroll provider to obtain:
    • An employer copy of all Form W-2s provided to employees in 2019.
    • Prepare a list of current employees that includes hire and termination dates as applicable.

Payroll Tax Forms from 2019

  • Contact your payroll provider to obtain:
    • Each IRS Form 941 that was filed in each quarter for 2019. (So you should receive FOUR Forms.)
    • The Company’s IRS Form 940 (which reports the Company’s annual Federal Unemployment Tax (FUTA) payment) that was prepared for 2019.

NOTE that the amount of Average Monthly Payroll must exclude any payments made to employees on an annualized basis that are over $100,000.  In other words, if an employee has an annual salary of $120,000, $20,000 of that cost will be excluded from the calculation of Average Monthly Payroll.

Other Tax Documents.  We also suggest assembling the following information.

  • IRS Form 1120 or 1099 (your general tax return) from past 3 years (if available).
  • Affiliated Entities. Do you or your major shareholders manage or own another business entity? If so, gather tax returns from the past 3 years for the Affiliated Entity as well.

20% Owners.  If your business has an owner that holds more than 20% of the equity of the business, each such owner will likely need to provide additional personal information in the Application.

  • Normally, SBA Form 1919 is the form used in such circumstances. It will likely be modified for purposes of the PPP.  But if you fill this out, you should have the information you need to complete any modification.

Preparing a Narrative.  Be prepared to answer the following questions from your lender:

  • How has the Coronavirus affected your business?
  • How are you going to use the loan proceeds? [NOTE that they are intended for payroll, utilities, and rent, and interest payments on mortgages.]
  • What is your plan to maintain your current workforce?
  1. Useful Web Links

Please see these web links for additional information and the Application:

For more information related to the PPP, please contact Brian Murphy (bmurphy@dinse.com), Dave Gurtman (dgurtman@dinse.com), Afi Ahmadi (aahmadi@dinse.com), Jeff McMahan (jmcmahan@dinse.com) or Ted Lawrence (tlawrence@dinse.com).

NEWS

Dinse Brief – Unemployment Compensation Expansion for COVID-19 Related Reasons

As a result of the COVID-19 pandemic, most Vermont employers have had to make difficult personnel decisions.  Employers have had to reduce employee work hours, furlough employees, or conduct layoffs, all of which have resulted in workers filing claims for unemployment compensation benefits.  In response to the massive influx of these claims, lawmakers, at both the state and federal level, have been diligently working to put in place changes to the unemployment compensation laws to help both workers and employers alike.

Vermont

On March 30th, Governor Scott signed into law legislation amending the existing Unemployment Compensation Act to provide benefits and relief for individuals who have lost their jobs or otherwise had their compensation reduced for certain COVID-19 related reasons.  Typically, unemployment benefits are paid to workers who are unemployed, either totally or partially, through no fault of their own; employees who voluntarily leave their employment, absent a few exceptions, are ineligible for unemployment compensation benefits.  The recent changes to the unemployment compensation law have expanded eligibility for benefits for this group of employees.  Specifically, employees who have left their employment voluntarily for the reasons set forth below may now qualify for unemployment compensation benefits:

  • the individual has left employment to self-isolate or quarantine at the recommendation of a health care provider or pursuant to a specific recommendation, directive, or order issued by a public health authority with jurisdiction, the Governor, or the President for one of the following reasons:
    • the individual has been diagnosed with COVID-19;
    • the individual is experiencing the symptoms of COVID-19;
    • the individual has been exposed to COVID-19; or
    • the individual belongs to a specific class or group of persons that have been identified as being at high-risk if exposed to or infected with COVID-19;
  • the individual has left employment because of an unreasonable risk that the individual could be exposed to or become infected with COVID-19 at the individual’s place of employment;

the individual has left employment to care for or assist a family member of the individual who is self-isolating or quarantining at the recommendation of a health care provider or pursuant to a

specific recommendation, directive, or order issued by a public health authority with jurisdiction, the Governor, or the President for one of the following reasons:

  • the family member has been diagnosed with COVID-19;
  • the family member is experiencing the symptoms of COVID-19;
  • the family member has been exposed to COVID-19; or
  • the family member belongs to a specific class or group of persons that have been identified as being at high-risk if exposed to or infected with COVID-19;
  • the individual has left employment to care for or assist a family member who has left employment because of an unreasonable risk that they could be exposed to or become infected with COVID-19 at their place of employment; or
  • the individual left employment to care for a child under 18 years of age because the child’s school or child care has been closed or the child care provider is unavailable due to a public health emergency related to COVID-19.

The amendments to the unemployment compensation law also provide relief to employers whose workers are collecting benefits as a result of losing their job or income level for COVID-19 related reasons.  As background, unemployment benefits are funded by a payroll tax from employers.  The amount of that tax is based upon an employer’s experience rating, which is determined by the amount of unemployment benefit payments made to previous employees of the employer. The more benefit payments that are made to former employees, the higher the tax rate is for an employer.  Given the amount of benefits being paid out in the current environment, the amended law relieves an employer’s experience rating in certain COVID-19 related situations.  First, it relieves the employer’s experience rating for benefits received by employees who voluntarily end their employment for the same reasons noted above.  Second, it relieves an employer’s experience rating for up to 8 weeks for benefits received by employees for the following reasons:

  • the employer temporarily ceased operation, either partially or completely, at the individual’s place of employment in response to a request from a public health authority with jurisdiction that the employer cease operations because of COVID-19, in response to an emergency order or directive issued by the Governor or the President related to COVID-19, or because the employer voluntarily ceased operations due to the actual exposure of workers at that place of employment to COVID-19;
  • the individual becomes unemployed as a direct result of a state of emergency declared by the Governor or the President in relation to COVID19 or an order or directive issued by the Governor or President in relation to COVID-19; or
  • the individual has been recommended or requested by a medical professional or a public health authority with jurisdiction to be isolated or quarantined as a result of COVID-19, regardless of whether the individual has been diagnosed with COVID-19.

This relief, however, is conditioned on the employer rehiring or offering to rehire the former workers within a reasonable period of time after the employer resumes operations, or upon the completion of the individual’s period of isolation or quarantine.

The 8 week experience rating relief period may be extended at the discretion of the Commissioner of Labor.

Federal – CARES Act

The CARES Act, a $2 trillion federal Coronavirus aid package designed to provide support and assistance to business and workers negatively impacted by the COVID-19 pandemic, was enacted late last week.  There are many components to this massive legislation, including a significant temporary expansion of unemployment benefits, increasing not only the number of people eligible for unemployment, but also the amount of money eligible workers receive.

First, the CARES Act expands unemployment benefits to workers not traditionally eligible. This includes self-employed workers, independent contractors, gig-economy workers, and those workers not otherwise covered by state law.  Second, unemployment insurance availability is extended by 13 weeks beyond Vermont’s typical 26 week maximum duration.  Third, the CARES Act increases an eligible worker’s weekly benefit amount by $600 per week for up to four months, through 7/31/20.  Eligible workers will receive this additional benefit amount if they self-certify that they are unemployed, partially unemployed, or unable or unavailable to work because of the following:

  • they have been diagnosed with COVID-19 or have symptoms of it and are seeking diagnosis.
  • A member of their household has been diagnosed with COVID-19.
  • They are providing care for a family or household member diagnosed with COVID-19.
  • A child or other person in the household for whom they have primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of COVID-19, and such school or facility care is required for the individual to work.
  • They cannot reach the place of employment because of a quarantine imposed as a direct result of a COVID-19 outbreak or have been advised by a health care provider to self-quarantine.
  • They were scheduled to start employment and do not have a job or cannot reach their place of employment as a result of the COVID-19 public health emergency.
  • They have become the breadwinner for a household because the head of household has died as a direct result of COVID-19.
  • They had to quit their job as a direct result of COVID-19.
  • Their place of employment is closed as a direct result of COVID-19.

Workers are not eligible for the additional unemployment compensation benefit if they either can telework with pay or are receiving paid sick days or other paid leave form their employer.

For more information, or for assistance with other employment-related questions pertaining to the COVID-19 pandemic, please contact Amy McLaughlin (amclaughlin@dinse.com), Karen McAndrew (kmcandrew@dinse.com), Maggie Platzer (mplatzer@dinse.com), or Kendall Hoechst (khoechst@dinse.com).

NEWS

Dinse Brief – DOL Releases Additional FAQs Clarifying Employer Paid Leave Obligations Under the FFCRA

The U.S. Department of Labor has released additional FAQs to assist employers with complying with their responsibilities under the paid leave provisions of the Families First Coronavirus Response Act (“FFCRA”), namely the Emergency Family and Medical Leave Expansion Act (“FMLA Expansion”) and the Emergency Paid Sick Leave Act (“EPSLA”).  Key issues addressed by the DOL in its guidance are summarized below.

 Employees unable to work (or telework) due to a stay-at-home order likely do NOT qualify for paid leave under the FMLA Expansion or the EPSLA.

With this guidance, the DOL seems to indicate that employees who are unable to work (or telework) following a workplace shutdown pursuant to a governmental directive are not entitled to paid sick leave under the EPSLA or the FMLA Expansion.  While the guidance does not specifically discuss stay-at-home or shelter-in-place orders, the DOL does indicate that if an employee is sent home and is no longer paid by his employer because the employer does not have work for the employee, the employee will not get paid sick leave or expanded family and medical leave, regardless of whether the “employer closes [the] worksite for lack of business or because it was required to close pursuant to a Federal, State, or local directive.”  The guidance remains the same regardless of whether (1) the worksite closes before or after April 1, 2020 (the effective date of the new law); (2) the employee is on leave when the workplace closes; (3) an employee is furloughed; or (4) the worksite closure is temporary and the employee will return to work when it is opened. The DOL directs the negatively impacted employees to seek wage replacement assistance through their state unemployment compensation system.

 Employees who are unable to work because their employer does not have work for them are NOT eligible for paid leave benefits under FFCRA.

As explained in prior Dinse Briefs, employees are eligible for the federal paid leave benefits if they are unable to work for one of the specific COVID-19 related reasons set forth in the FMLA Expansion or EPSLA.  In the updated FAQs, the DOL defined what it means to be “unable” to work, including telework.  An employee is unable to work if the employer has work for the employee, but one of the COVID—19 qualifying reasons set forth in the FMLA Expansion or the EPSLA prevents the employee from being able to perform that work, either under normal circumstances at the typical worksite or by means of telework.  Flexible scheduling does not mean an employee is “unable” to work.  As stated by the DOL, if an employee and employer agree that an employee will work their normal number of hours, but outside of their normal schedule, they are still able to work and leave is not necessary.

Paid leave may be taken on an intermittent basis, but only if the employer agrees to it.

With one caveat, as noted below, the DOL states that if an employee is unable to work/telework their normal schedule of hours for a qualifying reason under the FMLA Expansion or the EPSLA, the employee may take intermittent leave if the employer agrees to it. The DOL is encouraging employers to collaborate with employees to achieve maximum flexibility.

The caveat referenced above relates to an employee who is taking paid leave while working at the usual worksite, as opposed to teleworking.  Specifically, in its guidance, the DOL states that when an employee is working at the employer’s worksite, paid leave cannot be taken intermittently if the leave is being taken because:

  • The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  • The employee is caring for an individual who either is subject to a quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
  • The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

The DOL reasoned that unless an employee is teleworking, once they begin taking paid sick leave for one or more of the above qualifying reasons, they must continue to take paid sick leave each day until they either (1) use the full amount of paid sick leave or (2) no longer have a qualifying reason for taking paid sick leave. This limit is imposed because if an employee is sick or possibly sick with COVID-19, or caring for an individual who is sick or possibly sick with COVID-19, the intent of FFCRA is to provide such paid sick leave as necessary to keep the employee from spreading the virus to others.

If an employer intends to seek refundable tax credits to reimburse it for the cost of providing paid leave, it must maintain documentation to support an employee’s use of it.

 The DOL instructs employers to maintain appropriate documentation to support an employee’s use of emergency paid sick leave or expanded family and medical leave wages. The DOL directs employers to consult “Internal Revenue Service (IRS) applicable forms, instructions and information for the procedures that must be followed to claim a tax credit, including any needed substantiation to be retained to support the credit.”   The DOL does offer some examples of documentation that would be sufficient to substantiate the use of the paid leave to care for an employee’s child whose school or place of care is closed, or child care provider unavailable, due to COVID-19, such as a notice that has been posted on a government, school or day care website, or published in a newspaper, or an email from an employee or official of the school, place of care or child care provider.  Employers are not required to provide the employee leave if the materials provided by the employee are insufficient to support the tax credit.

If both the employer and employee agree to it, an employee may supplement the amount received from paid sick leave or expanded FMLA with employer provided paid leave. 

 If an employee is eligible to take paid sick leave or expanded family and medical leave under the FFCRA, as well as paid leave that is already provided by their employer, an employee generally may not simultaneously take both.   An employee and employer, however, may agree that the employee may supplement the amount received

from paid sick leave or expanded family and medical leave under the FFCRA with preexisting employer provided paid leave, up to the employee’s normal earnings. For example, if an employee is receiving 2/3 of their normal earnings from paid sick leave or expanded family and medical leave under the FFCRA and their employer permits it, the employee may use any preexisting employer-provided paid leave to get the additional 1/3 of their normal earnings so that the employee is receiving their full normal earnings.  Employers cannot require an employee to supplement the time; the employee must request it, and then the employer must agree to it.  For employers, it is important to remember that the supplemental employer provided paid leave is not eligible for the reimbursable tax credit.

 The DOL defines which employees qualify as a “health care provider” and an “emergency responder” for purposes of excluding them from the paid leave benefits of the EPSLA and FMLA Expansion.

Under both the FMLA Expansion and the EPSLA, employers of health care providers or emergency responders may exclude these employees from receiving the paid leave entitlements.

The DOL indicates that the following workers are considered a “health care provider”:

anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions. This definition includes any individual employed by an entity that contracts with any of the above institutions, employers, or entities institutions to provide services or to maintain the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is a health care provider necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

The DOL indicates that the following workers are considered an “emergency responder”:

an employee who is necessary for the provision of transport, care, health care, comfort, and nutrition of such patients, or whose services are otherwise needed to limit the spread of COVID-19. This includes but is not limited to military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is an emergency responder necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

To minimize the spread of the virus associated with COVID-19, the DOL is asking employers to liberally apply this definition to exempt health care providers and emergency responders from the provisions of the FFCRA.

The DOL provides additional guidance on the exemption available to small employers.

 In previous guidance, the DOL made clear that employers with fewer than 50 employees are exempt from providing paid leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons if complying with the obligation would jeopardize the viability of their business as a going concern.  While this earlier guidance stated that these employers would need to document why their business meets the exemption criteria, no further details were provided.  In the updated FAQs, the DOL elaborated on this exemption. It states that a small business may claim the exemption if an authorized officer of the business has determined that:

  1. business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
  2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
  3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.

Employers are encouraged to review the full set of the DOL’s FFCRA Questions and Answers, which can be found here:  https://www.dol.gov/agencies/whd/pandemic/ffcra-questions

For more information, or for assistance with other employment-related questions pertaining to the COVID-19 pandemic, please contact Amy McLaughlin (amclaughlin@dinse.com), Karen McAndrew (kmcandrew@dinse.com), Maggie Platzer (mplatzer@dinse.com), or Kendall Hoechst (khoechst@dinse.com).

NEWS

Dinse Brief – DOL Releases FFCRA Notice and Related FAQs

The DOL has issued a notice summarizing an employee’s rights under the paid leave aspects of the Families First Coronavirus Response Act.  This notice must be posted in an employer’s workplace, or distributed or made available to all employees who are working remotely.  The DOL has also released a Q-&-A guidance for employers regarding this notice.

 

The poster and guidance may be found at the following links:

 

Notice: https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf

 

Guidance: https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions

 

For more information, or for assistance with other employment-related questions pertaining to the COVID-19 pandemic, please contact Amy McLaughlin (amclaughlin@dinse.com), Karen McAndrew (kmcandrew@dinse.com), Maggie Platzer (mplatzer@dinse.com), or Kendall Hoechst (khoechst@dinse.com).

NEWS

Dinse Brief: COVID-19’s Impacts on Contracts and Leases

As the COVID-19 pandemic continues to spread and the world’s response continues to evolve, businesses both in the United States and abroad are faced with uncertainty of COVID-19’s impact on their present obligations under their existing contracts and leases. This memorandum focuses on the interplay between COVID-19 and provisions that may invalidate a contract or lease, or excuse your obligations to perform under such agreements.
Many contracts contain “force majeure” provisions, or in the case of some leases, “casualty” provisions. Under certain limited circumstances, these provisions allow a party to a contract to be relieved of their obligation to perform under the contract (e.g., deliver goods, pay rent, etc.) where an event beyond their control prevents them from performing. The specific language of “force majeure” provisions vary, so the ability to avoid an obligation under a contract or lease will be case and language specific. Generally, the “test” for whether a force majeure provision apples requires an inquiry into three factors:
(1) The event must be beyond the reasonable control of the affected party
(2) The affected party’s ability to perform its obligations under the contract must have been prevented, impeded, or hindered by the event; and
(3) The affected party must have taken all reasonable steps to seek to avoid or mitigate the event or its consequences.
We recommend using this checklist to evaluate whether your “force majeure” clause might apply:
• Review definition of “force majeure” or “casualty” in your contract or lease to determine if there is express language covering COVID-19 (for example, “pandemic”) or if there is general language sufficient to include COVID-19.
• Consider the aspects of the contract or lease that you are not able to perform and confirm that you cannot perform those aspects due to the consequences (direct or indirect) of COVID-19.
• Review the mitigation steps you have taken to avoid or reduce the effects of COVID-19 upon your work force and contract or lease performance.
• Check your contract or lease for notice and documentation requirements—you may be required to send notice to the other parties to the contract or lease to trigger entitlement to relief.
• Consider what relief you seek if your claim is successful (delay, cancellation, etc.)
We are happy to work with you to help you understand the application of a “force majeure” clause in the time of COVID-19. For more information, please contact:
Brian Murphy (bmurphy@dinse.com), Dave Gurtman (dgurtman@dinse.com), Shap Smith (ssmith@dinse.com), or Carol Pfeiffer (cpfeiffer@dinse.com).

NEWS

Dinse Brief: COVID-19 AND EMPLOYMENT BENEFITS – WHAT EMPLOYERS SHOULD KNOW AS THEY ADAPT TO THE PANDEMIC

As Vermont begins to adapt to the COVID-19 pandemic employers are considering hour reductions, temporary closures, downsizing their workforces and furloughs.  All of these alternatives can impact employee benefits.  Although the right solution for employers will be determined based on their unique facts, circumstances and plan rules, below is general information about some of the primary benefit issues employers are facing

As this brief is being published, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) is in the final stages of negotiation and state and federal responses to the COVID-19 have been rapidly moving and remain extremely fluid.   Information in this brief may be subject to change.

Employer Health Insurance Considerations

Employers are making tough decisions to adjust to the COVID-19 pandemic and Governor Scott’s “Stay Home, Stay Safe” order.  As they reduce hours, terminate employees, and implement furloughs, they are considering how these changes will impact employer-sponsored health insurance.

Most group health plans have eligibility requirements tied to the number of hours that must be worked to remain eligible for coverage.  For regular, full-time employees, a reduction in hours or temporary closure may cause employees to fall below the requisite minimum-hour threshold to remain eligible for coverage.  If that change in status results in a loss of coverage, an employee will experience a COBRA qualifying event.  It is important to note that COBRA is triggered by these hour reductions or separation from employment.

Large employers (50 or more full-time employees) should consider compliance with the Affordable Care Act (“ACA”) and whether employee hour reductions  will impact who is considered to be a full-time employee for purposes of the employer insurance mandate.  If the employer terminates coverage hastily, these actions could expose employers to the ACA’s “pay-or-play” penalties for failing to offer or maintain coverage for full-time staff, particularly with respect to variable hour employees that are determined to be full-time in a current stability period.  The ACA look-back measurement and stability period rules require employers to treat variable hour employees as full-time employees where they have been determined to be full-time for a look-back measurement period.  In these cases, the variable hour employees must be treated as full-time employees during the stability period.

Employers will also be faced with decisions regarding how to pay for employees’ health insurance during times when employees do not experience a loss of coverage, but nevertheless, are not receiving a paycheck from which the employer can deduct the employee-paid portion of insurance premiums.  In these cases, employers should look to existing unpaid, leave of absence policies and/or the terms of the employer’s Section 125 cafeteria plan that may shed light on the options for employers to make arrangements with the employees to pay for insurance premiums during periods when the employee is not working.  Options include making arrangements with the employees for pre-payment of premiums, “pay-as-you-go” with the employee’s non-wage financial resources, or catch-up payments when the employees return to work and start earning wages again.

Before making any changes to the eligibility requirements for health insurance coverage, employers should check with health insurance carriers, stop-loss insurers, third-party administrators, and counsel to ensure that changes are feasible and can be implemented.  Changing eligibility without checking with carriers and stop-loss insurers can leave employers with substantial financial exposure.

COBRA Continuation of Coverage and Premium Payments During Leave

Where employees experience a separation from employment or a reduction in hours that results in the loss of health insurance coverage (based on health plan eligibility policies), they experience a COBRA qualifying event.  In these situations, employers should follow COBRA protocol and notify employees of their continuation of coverage rights.

Employers can voluntarily assist COBRA-eligible employees or terminated employees with COBRA premiums at any level or for any duration they choose but should consider the following.  Where an employer wants to assist terminated employees with COBRA premiums, these arrangements should be made in writing and  communicated quickly and clearly to the terminated employees and should clearly identify the level and duration of the benefit the employer is offering.

Where a person remains employed but has a COBRA qualifying event, employer can also assist with COBRA premiums at the level and duration they choose.  This should also be communicated in writing to all affected employees.  When making these decisions, employers should avoid assisting with COBRA premiums for one group of employees over others and, in particular, should avoid reimbursing COBRA premiums for only highly-compensated employees.   Where an employee is expecting to return to work, an employer can enter into an agreement with employees to be reimbursed for the some or all of the COBRA premium upon their return to work.

Retirement Benefit Issues

As employees begin to face disruptions in their work and health due to COVID-19, employers will increasingly field questions about retirement benefits.

If wages and salaries are still being paid to employees, employers must continue to take salary deferrals permitted under the plan unless the employee elects to discontinue.  Plans with matching or other employer contributions must continue to fund those contributions, unless the plan is amended to discontinue employer contributions.  Some types of “safe harbor” 401(k) plans may face regulatory hurdles discontinuing employer contributions in the middle of a plan year and plan documents should be consulted before these changes are implemented. Some employers have contemplated sending a reminder to employees of their right to discontinue making 401(k) deferrals at any time, so they can maximize current pay.  Employers facing temporary closures should ensure that key employees who process 401(k) deferrals from payroll are not laid off, since the U.S. Department of Labor imposes fines on employers who experience delays in funding employee deferrals into their 401(k) plans.

Employers may allow employees who are terminated or on an unpaid leave of absence to delay repayment of 401(k) loans for up to 12 months.  However, this 12-month period cannot extend beyond the IRS maximum limits for loan repayment.  When the employee returns, the loan must be reamortized or the missed payments and interest repaid in a lump sum.  Some plans allow terminated employees to continue paying off plan loans, typically by check or automatic debit from a bank account.  Employers should consult with their 401(k) record keeper to determine if this option is available in their plan.

Employers will likely also see an increase in the requests by affected employees for hardship distribution and loans from qualified retirement plans.  Generally, federal tax law restricts an employee’s ability to access 401(k) savings until the employee reaches age 59 ½. An exception exists for hardship distributions if there is an “immediate and heavy” financial need to pay for certain types of expenses.  While the requirements for each plan may vary, most plans use the IRS’ “safe harbor” list of approved expenses, which includes: medical care, tuition, and other educational expenses, and rent or mortgage payments necessary to prevent evictions.

For more information, or for assistance with other employment or benefit related questions pertaining to the COVID-19 pandemic, please contact Amy McLaughlin (amclaughlin@dinse.com), Karen McAndrew (kmcandrew@dinse.com), Maggie Platzer (mplatzer@dinse.com) or Kendall Hoechst (khoechst@dinse.com).

NEWS

Dinse Brief: New Employer Paid Leave Laws Discussion

The U.S. Department of Labor, the U.S. Department of Treasury and the Internal Revenue Service issued a joint press release to address the employer paid leave obligations contained within the recently enacted Families First Coronavirus Response Act, namely the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act.

Key Points

  • Employers will receive a tax credit to reimburse them 100% for any paid leave they provide to their employees under the requirements of these new laws. Eligible employers are entitled to an additional tax credit that will be determined on the basis of the employer’s costs to maintain health insurance coverage for any eligible employees during the leave period.

 

  • The agencies announced prompt payment for the costs of providing paid leave. Specifically, eligible employers who pay qualifying paid leave under the FMLA Expansion Act or the Emergency Paid Sick Leave Act will be able to retain an amount of payroll taxes equal to the amount of qualifying paid leave, rather than deposit them with the IRS.  The payroll taxes available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes for all  If there are not sufficient payroll taxes to cover the cost of the paid leave, employers will be able to file a request for an accelerated payment, which the IRS expects to process within two weeks, or less.   Further guidance will be released this week.

 

  • Small businesses with fewer than 50 employees will be eligible for an exemption from the paid leave requirements when the need for leave is caused by school closings or child care unavailability and where those requirements would jeopardize the ability of the business to continue. The DOL will be providing clear guidance on this exemption standard.

 

  • The DOL will issue a temporary non-enforcement policy to provide employers a period of time to come into compliance with the obligations of the paid leave laws. During this time period, the DOL will not bring an enforcement action against any employer for violations of these laws, so long as the employer has acted reasonably and in good faith to comply with its obligations.

The press release can be found here: https://www.dol.gov/newsroom/releases/osec/osec20200320.

For more information, or for assistance with other employment-related questions pertaining to the COVID-19 pandemic, please contact: Amy McLaughlin (amclaughlin@dinse.com), Karen McAndrew (kmcandrew@dinse.com) or Kendall Hoechst (khoechst@dinse.com).

NEWS

COVID-19 Response Legislation Signed Into Law

Yesterday, the U.S. Senate approved the COVID-19 response legislation previously passed by the U.S. House of Representatives, and President Trump signed it into law. It provides for a number of measures to assist Americans who are facing overwhelming and daunting challenges created by the coronavirus pandemic.

You can read more HERE.

If you have any questions, please contact any member of our Employment & Employee Benefits practice group listed below.

 

Amy McLaughlin

amclaughlin@dinse.com

Karen McAndrew

kmcandrew@dinse.com

Maggie Platzer

mplatzer@dinse.com

Kendall Hoechst

khoechst@dinse.com

NEWS

Dinse Announces New Director and Shareholder of the Firm

Burlington, VT (January 2020) – Dinse is pleased to announce that James P. Langan has been elected as a Director and Shareholder of the firm.

Jim joined the firm in 2014 after beginning his legal career in the real estate department of a large Boston law firm and the Division of Finance of the University of Vermont.   His practice focuses primarily on real estate and business transactions.  Jim assists clients in all areas of commercial real estate and land use practice, including purchases, sales, state and local permitting, leasing, and common interest community governance.  He also provides guidance to clients with their business operations, including financing, commercial contracting, acquisitions, employee housing, and permitting and zoning.  Jim grew up in Vermont and is a graduate of Harvard University and William & Mary Law School.