As the COVID-19 state of emergency continues, businesses are implementing and considering a variety of employee-related measures to manage the impact of the crisis. While some businesses may avail themselves of payroll protection programs and loans to maintain the status quo, others may be faced with having to implement reductions-in-force (RIFs), furloughs and layoffs. Added
Benefits Guidance in the Time of COVID-19: Employer Payroll Tax Relief in the Families First Coronavirus Response Act
The Families First Coronavirus Response Act (the “Act”), which we detailed in a previous Advisory, requires private employers with fewer than 500 employees (“covered employers”) to provide paid sick leave (“Emergency Paid Sick Leave”) and family leave (“Public Health Emergency Leave”) for certain COVID-19 related absences and includes a tax credit for employers for…
Temporary Benefit Strategies to Immediately Help Workers: Benefits Guidance in the Time of COVID-19
The closure orders issued by federal and state government authorities across the United States have resulted in the reduction and loss of income for a significant percentage of the U.S. workforce. On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (the “Coronavirus Act”), effective April 1, 2020, providing relief…
May Employees Take Hardship Distributions Under Their 401(k) Plan? Benefits Guidance in the Time of COVID-19
[Updated on April 17, 2020]
As temporary layoffs and furloughs become more prevalent during the COVID-19 outbreak, employers have been asking whether they may allow employees to take hardship distributions under their Section 401(k) plans for expenses and losses resulting from COVID-19.
Under the IRS hardship distribution final regulations, employers were permitted to add…
Employer-Sponsored Leave Sharing or Leave Donation Programs: Benefits Guidance in the Time of COVID-19
Many employers are looking for ways to assist employees directly impacted by COVID-19 and employees on temporary lay-off or furlough who are exhausting their available paid-time-off (PTO). One option employers often ask about is the feasibility of adopting a leave sharing or leave donation program that would permit employees to donate vacation, sick leave or PTO to employees who need the additional time because they have been impacted by COVID-19. Properly structured, leave donated to a co-worker is a viable option, which will not be taxable to the donor but rather taxable to the co-worker when the leave is actually taken.
Employers generally may offer three different types of leave donation programs: (1) a major disaster leave sharing program (2) leave donations for employees on medical leave; and (3) leave donation to an employer-designated public charity or private foundation. Employees on leave for their own COVID-19 medical treatment could be beneficiaries of a medical leave sharing program; if an employee is not on medical leave, however, donating PTO to the employees would require a major disaster leave sharing program.
Major Disaster Leave Sharing. The current IRS guidance on “major disaster leave sharing programs” can be found under IRS Notice 2006-59. Such a program requires that the President declare a major disaster under Section 401(a) of the Stafford Act (or, as to federal employees only, a major disaster or emergency affecting a sufficient number of federal employees).On March 13, 2020, President Trump declared the COVID-19 outbreak to be an “emergency” under Section 501(b) of the Stafford Act. He did not, however, formally declare it a Section 401(a) “disaster,” but merely stated that he would not preclude the possibility that the COVID-19 outbreak would also rise to a Section 401(a) “disaster.” To fully utilize a major disaster leave sharing program, IRS guidance in the form of an announcement, notice or otherwise, would be welcome.…
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