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Employee Benefits in the Age of COVID-19 

by Shannon Goff Kukulka

Published: March, 2020

Submission: March, 2020


Employers are grappling with increasingly difficult decisions as COVID-19 changes our labor force and the ways we work in profound ways. Below are various benefits-related issues and solutions to consider, amidst a rapidly shifting legislative environment:

  • 401(k) loans and hardship distributions:Most 401(k) plans allow in-service withdrawals in the event of financial hardship. Many participants are already experiencing financial consequences from the COVID-19 pandemic, perhaps from work furloughs or reduced schedules, or a spouse’s job loss. If employees are terminated or attain age 59½, they are eligible for distributions; but active employees may access their 401(k) accounts through loans or hardship distributions, if the plan terms allow (or are amended to that effect).
  • Health plans:TheFamilies First Coronavirus Response Act(FFCRA, signed into law on March 18th) requires group health plans and health insurance issuers to provide COVID-19 testing and related diagnostic services with no cost sharing or prior authorization requirements. Plans are not required, however, to cover treatment beyond diagnostic testing. If a plan is fully insured, state law may impose coverage requirements in addition to those under the FFCRA; if a plan is self-funded, the plan sponsor should consult with their stop loss insurance carrier before providing coverage beyond that required by the FFCRA.
  • ACA responsibilities: Employers should monitor the impact of furloughs, leaves and other employment and coverage changes on compliance under the Affordable Care Act with respect to the requirement to offer coverage to 95% of full-time employees and the affordability of coverage.
  • FSA elections: An employer may allow changes to health and welfare coverage elections for reasons such as a reduction in hours affecting eligibility or loss of other coverage. Shutdowns in schools and other childcare facilities may trigger a mid-year change in status for employees to change their contributions to dependent care flexible spending accounts (regardless of a furlough).
  • HSA eligibility: The IRS clarified inNotice 2020-15that employees will not be disqualified from HSA eligibility solely because a plan provides COVID-19 testing and treatment benefits before meeting the deductible. (Note that the cafeteria plan status change rules do not impose the same restrictions on HSA elections.)


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