COVID-19 Related Employee Benefits Issues for Governmental Employers
COVID-19 Related Employee Benefits Issues for Governmental Employers
As a growing number of the workforce is being affected by the COVID-19 pandemic, governmental employers are raising benefit-related questions. The Employee Benefits Group at Hanson Bridgett will be providing updated information on possible issues arising in the benefits area through Benefits Alerts and postings on Hanson Bridgett's Online COVID-19 Resource Center. Regulatory and legislative changes are occurring rapidly and we will make every effort to keep our clients informed of new developments occurring in this area as they occur.
Below are answers to some of the most frequent questions received thus far from governmental employers. Of course, your particular benefit plan provisions may impact the answer to some of these questions. Please feel free to reach out to your contact in the Employee Benefits Group with more specific questions about your benefits issues.
Additional resources for employee benefit plan sponsors regarding COVID-19 related issues can be found at the following websites:
IRS Coronavirus Tax Relief
U.S. Department of Labor Coronavirus Resources
U.S. Department of Labor Questions-and-Answers regarding FFCRA
CalPERS COVID-19 Webpage
Group Health Plan and Cafeteria Plan Issues Related to COVID-19
Question 1: Must employers provide paid leave to employees who are absent from work due to the COVID-19 emergency?
Answer 1: Yes, in some circumstances.
Under the Emergency Family and Medical Leave Expansion Act, enacted as part of the FFCRA on March 18, 2020, public agencies of any size that are subject to the Family and Medical Leave Act (FMLA) must provide up to 12 weeks of FMLA leave for employees who have been employed for at least 30 days and are unable to work or telework due to a need for leave to care for their minor children as a result of closures of schools or other child care facilities, or because their child care provider is unavailable. After the first two weeks of such leave, the leave must be paid. An employee may elect to use, or an employer may require that an employee substitute any accrued vacation leave, personal leave, or paid time off for any part of the two weeks of unpaid leave. The amount of pay that must be provided is equal to at least two-thirds of the employee's regular rate of pay based on the number of hours the employee would otherwise be scheduled to work, and capped at $200 per day and $10,000 in the aggregate. Covered employers may elect to exclude employees who are health care providers and emergency responders from the new leave requirement.
Under the Emergency Paid Sick Leave Act, also enacted as part of the FFCRA on March 18, 2020, public agencies with at least one employee must provide employees with up to two weeks (80 hours) of emergency paid sick leave to be used for time off in specific circumstances related to the COVID-19 emergency. As with expanded FMLA leave, employers may elect to exclude employees who are health care providers and emergency responders from the new paid sick leave requirement.
On March 24, 2020, the U.S. Department of Labor (DOL) issued fact sheets for employers and employees, and guidance about the paid leave requirements under the FFCRA in the form of a series of questions and answers, including information about supplementing FFCRA paid leave with employers’ existing paid sick leave policies, when leave can be taken on an intermittent basis, and what it means to be “unable” to work or telework in order to qualify for the leave.
On April 1, 2020, the DOL issued rules to implement the FFCRA leave provisions that expand on earlier DOL guidance, including information about documentation employees must provide in support of FFCRA leave. The rules also define “health care providers” and “emergency responders” that may be excluded from the leave requirements.
In addition, because the FFCRA also provides that any required emergency paid sick and expanded FMLA leave is not wages for FICA purposes, governmental employers who provide voluntary Social Security coverage (or to the extent Social Security coverage is mandatory for certain employees) will be relieved of withholding FICA and paying the employer portion of FICA for any required emergency leave payments.
Question 2: Must employers continue to provide coverage under their group health plans while employees are on COVID-19 related paid sick leave or paid FMLA leave?
Answer 2: Yes, employers must maintain an employee’s coverage under its group health plan during FFCRA leave on the same terms as if the employee did not take leave. These requirements are similar to the regulatory requirements for employers when employees take FMLA leave for other reasons. For information about application of the employer shared responsibility payment rules under the Patient Protection and Affordable Care Act (ACA), see our Group Health Plan alert.
Question 3: If an employer extends additional benefits to employees or retirees, is there an issue of "gift of public funds"?
Answer 3: Section 6 of article XVI of the California Constitution states in part: “The Legislature shall have no . . . power to make any gift or authorize the making of any gift, of any public money or thing of value to any individual, municipal or other corporation whatever…” Gifts of public funds are prohibited under this constitutional provision, whether at the state or local level of government. (See Community Memorial Hospital v. County of Ventura (1996) 50 Cal.App.4th 199, 207; Paramount Unified School Dist. v. Teachers Assn. of Paramount (1994) 26 Cal.App.4th 1371, 1388; Goodall v. Brite (1936) 11 Cal.App.2d 540, 544-545.) Governmental employers often must analyze this issue when something of value is being provided, particularly to retirees who have completed providing services to the public agency, without the expectation of further services being provided. In this case, the additional benefits that a public agency might consider providing (such as perhaps lowering co-pays or deductibles) presumably would not be "gifts" but actions taken to protect the health and safety of all the participants in the public agency's programs. Since the particular facts involved will be important in analyzing each situation, please feel free to reach out if you have question in this area.
Question 4: Are special rules in place to help governmental employers in California ensure adequate staffing during the COVID emergency?
Answer 4: Yes, under the Executive Order N-25-20 signed by California Governor Gavin Newsom on March 12, 2020 (“Order”), certain restrictions regarding employment by California state agencies of CalPERS retired annuitants, permanent and intermittent personnel, and state management and senior supervisors have been suspended, to the extent consistent with applicable federal law. Although the language in the Order is ambiguous, we believe it was intended to also extend relief to county and local governments with respect to rehiring annuitants to assist during the COVID-19 emergency.
For state agencies, the Order suspends the application of reinstatement requirements and work hour limitations in Government Code sections 21220, 21224(a), and 7522.56(b),(d),(f), and (g). This means that CalPERS retirees can be rehired by state agencies during the emergency without reinstatement from retirement, even if the employee works more than 960 hours in a fiscal year, or is rehired within 180 days of their retirement date. The Order also suspends the employment time limits that otherwise apply to certain emergency appointments by state agencies without regard to employment lists or existing classes, under Government Code section 19888.1 and California Code of Regulations, title 2, sections 300-303. The Director of the California Department of Human Resources must be notified of any individual employed pursuant to the waivers in the Order.
On March 18, 2020, CalPERS issued Circular Letter 200-015-20 to clarify that, under the Order, the suspension of the retired annuitant work hour limitation and wait period rules under Government Code sections 7522.56, 21221(h) and 21224 applies to retired annuitants hired to ensure adequate staffing during the state of emergency by all local government employers that are CalPERS contracting agencies, effective as of March 4, 2020 until the state of emergency is lifted. During the state of emergency, retired annuitants are also exempt from the 60-day separation in service requirement under current CalPERS regulations. CalPERS clarified in Circular Letter 200-016-20 that the suspension of work hour limitations also may apply to retired annuitants who were hired before the COVID-19 emergency, if the employee is redirected for the purpose of ensuring adequate staffing during the COVID-19 emergency.. However, the prohibition on any predetermined agreement between an employer and an impending retiree who has not attained normal retirement age continues to remain in effect, consistent with federal law. Other rules related to employment of CalPERS retirees also remain in effect, including that compensation paid to the employee cannot exceed the maximum base salary for the position as listed on a publicly available pay schedule, and the employee cannot receive any benefit, incentive, compensation in lieu of benefits or other form of compensation in addition to the hourly pay rate. In addition, agencies must continue to enroll and report retired annuitants to CalPERS. In addition, contracting agencies must report retired annuitants hired pursuant to the Order to the California Department of Human Resources (CalHR) via email at CAStateofEmergency@calhr.ca.gov. CalHR has a notification process in place to share such information with CalPERS.
The provisions of Government Code section 7522.56 also apply to other governmental employers with respect to rehired annuitants. Again, while the language of the Order is not clear, we believe that there is low risk to county and local governments in interpreting the rehired annuitant rules as being suspended in the same manner as CalPERS has done for both State and other participating employers. We believe that county and other local agencies would be able to rehire annuitants needed to respond to the emergency without violating the tax rules using similar rules. We recommend that any questions regarding rehiring retirees be addressed to the particular '37 Act system or other independent retirement system covering employees and retirees affected.
Question 5: Does the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provide any tax relief for governmental employers?
Answer 5: Although tax credits provided under new COVID-19 legislation are not available to governmental employers, the CARES Act allows governmental employers who pay employer FICA tax to defer payment of the employer share of the 6.2% Social Security payroll tax otherwise due on employee wages for the period from March 27, 2020 through December 31, 2020. The employer may extend payment of the employment taxes owed for such period over the following two years, with half paid by December 31, 2021 and half paid by December 31, 2022.
Question 6: Has CalPERS issued any guidance for contracting agencies about reporting employee data and contributions to CalPERS during the COVID-19 emergency, given the impact of COVID-19 closures to schools and public agencies?
Answer 6: Yes, on March 19, 2020, CalPERS issued Circular Letter 200-016-20 to provide guidance in the form of a series of “Frequently Asked Questions” CalPERS has received about employee data and contributions reporting issues. The guidance explains how employers can request a reporting extension; whether CalPERS will waive penalties, interest or administrative fees associated with late reporting; and how to report compensation paid to employees who are on administrative leave or using accrued vacation during a worksite closure. The Circular Letter also provides additional guidance regarding the suspension of certain restrictions applicable to employment of CalPERS retirees pursuant to Executive Order N-25-20, described in Question/Answer 2, above.