Entitlement to variable hour employee benefits under COVID-19 | Perkins Coie

Will employees get a generous gift or an unintentional lump of coal in their stockings this Christmas season?

COVID-19 has forced many employers to make unforeseen changes in their workforce, with many retailers adopting a combination of vacation, layoffs and business interruptions to meet changing market demands and orders for accommodation. Other retailers, particularly those in grocery and online markets, saw unplanned spikes in demand, went on a hiring frenzy, and increased the hours of their existing staff to ensure they remained adequately staffed. These planning changes may have unintended consequences for the eligibility of employees for the group health insurance plan for both the remainder of the current year and the next planning year, unless employers review and make necessary revisions to their group health insurance plans.

Active employees are given leave of absence on vacation, but the employment relationship is not terminated. In most cases, leave is unpaid, but it can be partially paid for by the employer or supplemented with other paid vacation days such as Paid Time Off (PTO). A holiday is to be distinguished from a dismissal in which the employer temporarily or permanently terminates the employment relationship.

According to the Patient Protection and Affordable Care Act (PPACA), an applicable Large Employer (ALE) with 50 or more full-time or full-time equivalents must offer health coverage that provides minimum coverage to essentially all full-time employees. “Full-time” is defined as an employee who has an average of 30 or more hours per week or 130 hours per month. An employer must count every hour for which the employee pays or is entitled to payment for the performance of official duties for the employer, as well as every hour for which an employee pays or is entitled to payment, if due to vacation, vacation, illness, Incapacity for work, dismissal, jury duty, military leave, or leave of absence (including leave under the Families First Coronavirus Response Act). The hours of service do not include the hours that accrue after the termination of the employment relationship or if the payment is made solely to comply with the employee compensation, unemployment or disability insurance laws.

ALEs have two options for determining whether an employee with variable working hours meets this full-time definition: (1) monthly measurement method or (2) retrospective measurement method. According to the monthly measurement method, a person is full-time if their service time for a calendar month is 130 hours or more. However, the determination using the look-back method is a little more complicated, since an employer has to monitor and track the working hours of employees over a previously selected 3 to 12 month measurement period. If an employee with variable working hours had an average of 30 hours or more per week during this measurement period, the employee must be offered benefits for a subsequent 6- to 12-month stability period or the employer must be paid a co-responsibility payment penalty. If the variable-hour worker has not reached the threshold of 30 hours or more per week, he will be excluded from coverage for the stability period and no possible penalties will be imposed on the employer. For ease of administration, most employers use both a 12 month look back and a stability period.

If, during the COVID-19 pandemic, an employer had an increase in the working hours of a variable-hour worker due to increased demand, they would be counted as a full-time worker once they hit the 130-hour limit on the monthly measurement method. With the look-back method, the employee with variable working hours would not be entitled for the duration of the stability period, unless he had a change to full-time status (provided that the employer does not subject full-time employees to the look-back). Measurement method).

But what about the more common COVID-19 market situation where the working hours of an employee with variable working hours have been reduced or even eliminated? The law requires that employers continue to have insurance coverage for some Employees on vacation, dismissal or other leave of absence. Employees who are subject to a monthly measurement method at the time of vacation or leave of absence lose the right to active health benefits and switch to COBRA continued insurance coverage if their working hours fall below the minimum of 130 (unless they are in a paid or sheltered vacation, in this case the employee’s vacation may not be taken into account in the calculation). Workers who are subject to a look-back measurement process and are in a stability phase are still entitled to health insurance during a vacation and employers should keep their usual contribution subsidy, if any. In the event of non-compliance, the employer can be penalized according to the PPACA. In a dismissal situation, however, the employee concerned loses the right to active protection after termination of the employment relationship and can switch to COBRA.

Now that many retail employers are preparing for a busy Christmas season, how to address returning employees and their group health benefits this year and next year? How this problem is addressed depends on three factors: (1) how long the break-in service lasted; (2) how the planning document is currently being prepared; and (3) whether the employer wants to be more generous than the law requires.

If an employee returns to work within 13 consecutive weeks of the start of a vacation, dismissal or leave of absence, their eligibility for group health insurance benefits depends on whether the employer uses the monthly method or the retrospective method. With the monthly method, entitlement is determined on a rolling monthly basis and the employee is entitled to active health benefits as soon as he resumes the minimum working hours. With the look-back method, however, if the employee is currently in the stability phase, the employer must continue to offer the employee health insurance, as with other active employees. If the employee returns in a measurement or administration period, they re-enter that phase of the process with zero hours credit for the duration of the vacation. If the employee was on paid or job-protected vacation, such as the Family and Medical Leave Act (FMLA) or the Uniformed Services Employment and Reemployment Act (USERRA), the vacation cannot be counted towards the employee in the retrospective process.

In general, the employee can be treated as a new hirer if the job is interrupted for more than 13 weeks, if the service interruption exceeds 13 consecutive weeks without an hour of work, or if the service interruption lasts at least four weeks and is longer than the employee’s period of employment immediately prior to the interruption. However, this could result in variable-hour workers who were previously eligible to return to work and are now subject to a significant gap in coverage.

Timeframe

holidays

Dismiss

holidays

Return to work before 13 weeks or other equality rules *

Monthly measurement method:

The employee is entitled to insurance coverage if he resumes the minimum working time of 130 hours.

Review method: If the employee is in the stability phase, continue with the insurance cover or pay fines. If the employee is in a measurement or management period, continue with zero hours during the break.

Monthly measurement method:

The employee is entitled to insurance coverage if he resumes the minimum working time of 130 hours.

Review method: If the employee is in the stability phase, continue with the insurance cover or pay fines. If the employee is in a measurement or management period, continue with zero hours during the break.

Monthly measurement method:

The employee is entitled to insurance coverage if he resumes the minimum working time of 130 hours.

Review method: If the employee is in the stability phase, continue with the insurance cover or pay fines. If the employee is in a measurement or management period, continue with zero hours during the break. Protected vacation cannot be credited to the employee.

Return to work 13 weeks or more

Treat as a new employee or if the employer wants to be more generous – change the plan document.

Treat as a new employee or if the employer wants to be more generous – change the plan document.

Treat as a new employee or if the employer wants to be more generous – change the plan document.

* Special regulations may apply under PPACA and longer deadlines apply to educational institutions.

An employer could certainly be more generous than the law requires, not counting reduced or missed hours towards an employee’s eligibility criteria or decide to waive a normally applicable waiting period or allow coverage to continue before the minimum hour requirement is met. Before making such changes, the employer should: (1) Review questions related to the administration of PPACA, COBRA, FMLA and tax regulations applicable to the employer’s group health insurance plan with a legal counsel; and (2) discuss options with an applicable insurance carrier or stop-loss provider to ensure that they allow for a change in eligibility. As a final step, the employer should prospectively change the plan documents if necessary. Failure to properly amend the planning documents could violate ERISA’s fiduciary duties – even if the employer is more generous to its employees – so it is important to carefully review and amend the planning documents prior to introducing changes.

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