Many struggling but optimistic employers have continued to offer medical, dental, and other benefits to employees on furlough during the COVID-19 pandemic. But with no immediate end in sight, they’re wondering what to do next.
Employment Relationship Hasn’t Been Severed Yet
Most businesses in the United States (and the world, for that matter) remain hobbled because of the coronavirus crisis. (Amazon is an exception. Another notable exception is Peloton, the exercise bike maker, which is glowing in its 172% surge in total revenue, with gains in subscribers and demand for its fitness products.) But employees in several industries, including travel, hospitality, and entertainment, remain uncertain about their futures.
Before the pandemic, “furlough” was a concept more familiar in European countries where it’s mandated by law. We’ve now settled on the concept that the employer hasn’t severed the employment relationship of a furloughed employee, who is still active in the HR system. Instead, the individual isn’t actively working or being paid except for the value of the benefits the employer continues to provide.
Check your benefit plans and insurance policies. Determine how long you may extend eligibility even though furloughed employees aren’t actively working. Many employers have clauses limiting the coverage to 6 months. Other plans or policies don’t specifically address the duration, but carriers have allowed the coverage to remain in place so long as the employer pays the necessary premium. (Please get this in writing from your insurance carrier.)
As your benefits department begins delving into 2021 open enrollment, don’t forget about the last quarter of 2020 and its special circumstances for any furloughed group.
Revisit your benefits plan’s COBRA provisions. Normally, the reduction in the number of hours worked would constitute a COBRA-qualifying event but not if the event doesn’t also result in the loss of eligibility for coverage.
For furloughed employees who still have health coverage, their COBRA event presumably won’t occur until actual termination of employment, at which point presumably they will remain eligible for COBRA coverage for at least 18 more months, depending on plan terms, albeit without the employer subsidy.
Source: HR Daily Advisor