In just a few months, the coronavirus has caused the global economy to enter a major downturn that could last for years. While nearly everything in our lives has been affected by the pandemic in some way, group health benefits have endured one of the greatest impacts of any industry. Congress has passed new laws, and employers must consider the effect of the layoffs, furloughs, and other workforce changes in regard to the ACA.
Employers could face penalties from the ACA if they have laid off or furloughed employees without completing a full termination agreement, if they have required employees to use unpaid time off, or if they’ve simply reduced employee hours and subsequently stopped offering benefits. Under the ACA, full-time employees are typically measured by the look-back method, which means the number of full-time employees for 2020 is based on the 2019 number.
The employers who have terminated employees according to California state laws are not responsible for offering those individuals coverage. Those who have furloughed or moved employees to unpaid leave are responsible for offering coverage.
When an employee decides to furlough or move their employees to an unpaid leave status, they must consider a few things. First, to avoid penalties, they must verify all full-time employees are being offered health coverage while they are furloughed or put on leave. If the employer doesn’t offer coverage to at least 95% of their full-time employees, furloughed, or on unpaid leave status, they open themselves up to a $2,570 penalty for all full-time employees, not including the first 30.
Second, employers should consider the implications of COBRA or 100% percent-of-cost offerings to full-time employees. If full-time employees waive the COBRA offer and subsidize their policy in the Marketplace, the large employee is subject to a penalty of $3,860 per employee that it applies to.
Lastly, employers must document their coverage offerings and ensure that their offerings are made to ensure carrier eligibility considerations are met by contacting their insurance carrier.
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