Federal Aid Package Helps Individuals Affected By Coronavirus
Mar 19, 2020
Provided by BDO Alliance, USA
The Families First Coronavirus Response Act (H.R. 6201), became law on March 18, 2020. The Act guarantees free testing for the novel coronavirus (COVID-19), establishes emergency paid sick leave, expands family and medical leave, enhances unemployment insurance, expands food security initiatives, and increases federal Medicaid funding.
The Act includes up to 80 hours of emergency paid sick leave for workers who are unable to work while they are sick or complying with COVID-19 restrictions or caring for school-age children due to the closure of schools or child care facilities, as well as paid family and medical leave that employees will be able to use to care for family members (not for personal illness) for up to 12 weeks. The first 10 days of an emergency family and medical leave may be unpaid unless employees opt to use accrued paid time off for those days.
The mandatory paid leave provisions apply to employers with fewer than 500 employees and government employers, with exceptions for health care workers and first responders. Self-employed individuals would be eligible for the new benefits provided under the Act. It is not clear if individuals who have self-employment income from their partnership or limited liability company would be eligible for the new self-employed benefits, as the Act does not specifically address those situations. Employers with 500 or more employees would not be subject to those rules. Employers who are required to provide paid time off would need to initially bear the costs of paying their employees, but the federal government would provide payroll tax credits to help cover those costs.
Background. Currently, the federal Family Medical Leave Act of 1993 (FMLA) provides eligible employees up to 12 workweeks of unpaid leave a year and requires group health benefits to be maintained during the leave as if employees continued to work instead of taking leave. Employees are also entitled to return to their same or an equivalent job at the end of their FMLA leave. Special rules apply to military personnel.
To be eligible for FMLA, an employee is required to have been employed by their employer for a year, worked for 1,250 hours, and worked in a location where there are 50 other employees within a 75-mile radius. The FMLA applies to all private-sector employers who employ 50 or more employees for at least 20 workweeks in the current or preceding calendar year (including joint employers and successors of covered employers). Many states have enacted laws that are similar to federal FMLA, which apply to smaller employers who may be exempt from federal FMLA. The FMLA also applies to federal, state and local employers. These current provisions remain available for qualifying employees.
Emergency Paid Sick Leave. Through December 31, 2020, the Act requires employers with fewer than 500 employees and government employers to provide all employees (including union employees and regardless of how long the individual worked for the employer but excluding health care workers and first responders) with 80 hours (e.g, 10 business days) of emergency paid sick leave for full-time workers (pro-rated for part-time employees or employees with varying work schedules) for employees who are unable to work or telework because the employee:
- Is subject to a federal, state, or local COVID-19 quarantine or isolation order;
- Has been advised by a health care provider to self-quarantine because of COVID-19;
- Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
- Is caring for an individual subject to or advised to quarantine or isolation;
- Is caring for a son or daughter whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 precautions; or
- Is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
Generally, employers would pay employees at their regular rate of pay for emergency sick leave, capped at $511 per day ($5,110 in the aggregate) if the leave is taken for an employee’s own illness or quarantine (i.e., for the first three bullets above). Employers would pay employees two-thirds of their regular rate of pay for emergency sick leave, capped at $200 per day ($2,000 in the aggregate) if the leave is taken to care for others or due to school closures (i.e., for the last three bullets above).
An employer cannot require an employee to use other paid leave before using this paid leave. Employers would not be able to require employees to find replacement workers to cover their shifts if employees use emergency paid sick leave. The federal government is supposed to provide a model notice within seven days after enactment, which employers would be required to post at their workplace, informing employees of their right to emergency paid sick leave. The U.S. Department of Labor is directed, within 15 days after enactment, to issue guidelines on how to calculate the amount of emergency paid sick leave. The Department of Labor also has the authority to issue regulations to exempt small businesses with fewer than 50 employees from having to provide emergency paid sick leave to employees who need to care for a son or daughter whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 precautions if the imposition of such requirements would jeopardize the viability of the business as a going concern.
Employers would face penalties for failing to comply with the new emergency paid sick leave rules and are prohibited from discriminating against employees who take emergency paid sick leave. Eligible employees could use emergency paid sick leave before using new, emergency paid family and medical leave created by the Act.
FMLA Amendments. The Act would add provisions to the FMLA to provide employees (including union employees) who have been employed for at least 30 days by employers with fewer than 500 employees or government employers, with the right take up to 12 weeks of job-protected leave through December 31, 2020, if the employee is unable to work or telework due to having to care for a child under age 18 if the child’s school or place of child care has been closed (or the child care provider is unavailable), due to the COVID-19 public health emergency. Employers may elect to exclude health care workers and first responders from taking this public health emergency FMLA.
The first 10 days of FMLA under these new provisions may be unpaid. Employees can use other paid time off such as vacation, sick days, sabbatical, or emergency paid sick leave to cover that gap, but employers cannot require employees to use their accrued paid time off before using these 12 weeks of extended FMLA leave. Employers would pay employees two-thirds of their regular rate of pay for this emergency FMLA leave, capped at $200 per day ($10,000 in the aggregate per employee). Adjustments would be made to the amount of paid time off for employees with varying schedules.
The Act gives the U.S. Department of Labor authority to issue regulations that would exclude certain health care providers and emergency responders from being able to take emergency family and medical leave. The Department of Labor also has the authority to issue regulations to exempt small businesses with fewer than 50 employees from the emergency family and medical leave requirements if the imposition of such requirements would jeopardize the viability of the business as a going concern. The Act would also exempt employers with fewer than 50 employees in a 75-mile radius from civil damages in an FMLA lawsuit.
Under the Act, covered employers (those with less than 500 employees) are required to hold an employee’s job open for them until the end of the leave period. However, an exception applies to employers with fewer than 25 employees if the employee’s position no longer exists due to economic conditions or other changes in the employer’s operations that affect employment and are caused by the COVID-19 crisis, and the employer made reasonable efforts to restore the employee’s job. And, if those efforts failed, the employer agrees to reinstate the employee if an equivalent position becomes available within a year.
The Act creates new, refundable payroll tax credits for employers to help cover the costs of this new paid sick and family leave.
Payroll Tax Credits
To assist employers who are required to provide emergency paid sick leave or FMLA leave under the programs described above, the Act provides for a refundable tax credit applied against the employer’s portion of Social Security or Railroad Retirement Tax Act (RRTA) tax for amounts paid under those programs. The credit is equal to 100% of the compensation paid in each calendar quarter to employees who are not working for the reasons enumerated above, subject to the following limitations:
For payments to an employee who needs time off for self-isolation, diagnosis, or care of a COVID-19 diagnosis, or compliance with a health care provider’s recommendation or order, the credit is capped at $511 of eligible wages per employee per day. For payments to an employee who needs time off to care for a family member who has been exposed to or diagnosed with the COVID-19, or a child under age 18 whose school or place of care has been closed, the credit is capped at $200 of eligible wages per employee per day. The credit for emergency paid sick leave wages is only available for a maximum of 10 days per employee over the duration of the program. For expanded FMLA, the credit is capped at $200 of eligible wages per employee per day and $10,000 for all calendar quarters.
Both of the credits are increased by any amounts paid or incurred by the employer to maintain a group health plan, to the extent those expenses are (1) excluded from the employee’s gross income under the tax code and (2) “properly allocable” to the respective qualified sick or FMLA wages required to be paid under the Act. The exact method of allocation will be provided by regulation at a later date, but the Act provides that the allocation will be treated as properly made if done “on the basis of being pro-rata among covered employees and pro-rata on the basis of periods of coverage.”
If the credit exceeds the employer’s total liability for Social Security or RRTA tax for all employees for any calendar quarter, the excess is refundable to the employer. The employer may choose not to apply for the credit. Further, to prevent a double benefit, the employer cannot obtain a deduction for the amount of the credit. In addition, employers may not receive the credit in connection with wages for which a credit is allowed under Section 45S (credit for paid family and medical leave).
Similar rules apply to a self-employed individual that allows a refundable tax credit against the individual’s self-employment tax. The credit is capped at the lesser of the amounts that apply to eligible wages per employee or the individual’s lost self-employment income. The House-passed version of the Act provides guidance on how to determine the individual’s lost income due to the coronavirus.
Notably, required payments for emergency paid sick leave or FMLA under the Act will not be considered wages for purposes of calculating the employer’s portion of the Social Security or RRTA tax. In addition, the tax credits available to an employer are increased by the amount of the employer’s liability for Medicare tax on wages paid under the Act, effectively exempting the emergency sick leave and FMLA payments from that tax as well. In this way, the Act provides employers with two tax benefits: (1) refundable credits against the employer’s portion of Social Security or RRTA tax; and (2) an exemption from, or credit against, the employer’s portion of Social Security or RRTA and Medicare taxes on the wages required to be paid under the Act.
However, the law does not exempt these payments from the definition of wages for the purpose of other taxes (including the employee’s portion of Social Security, RRTA and Medicare taxes).
The Act ensures there is no negative impact to the Social Security program caused by the tax credit or the exemption of sick pay and family leave pay from Social Security tax by authorizing a transfer of funds from the General Fund to the Social Security and disability insurance trust funds to replace the lost employer contributions. The tax provisions discussed herein will apply beginning on a date to be determined by the Secretary of the Treasury after the enactment of the Act and ending on December 31, 2020.
Categories: Other Resources, Tax Compliance, Tax Planning
Determining Your Infectious Disease Risk During the COVID-19 Outbreak
Mar 18, 2020
Provided By BDO Alliance, USA
A Checklist for Organizational Leaders
On March 11, the World Health Organization (WHO) declared the novel coronavirus (COVID-19) outbreak a pandemic, with numerous countries—including China, the Czech Republic, Hong Kong, Italy, Slovakia and the U.S.—announcing travel restrictions and social distancing measures.
Beyond the immense impacts the outbreak is having on public health, the pandemic directly impacts economic activity and poses unique challenges to businesses across industries because of its potentially compounding and unpredictable consequences.
With massive quarantines, travel restrictions and factory shutdowns, companies are struggling to quantify potential exposure. Attempting to mitigate potential losses from an unknown number of variables is daunting, especially when the situation is changing daily. Business owners and risk managers will face not only tactical execution and recovery challenges, but also the prospect of navigating a lengthy insurance claim process.
Understanding how to determine and capture lost revenue and income stemming from this unpredictable outbreak is critical to minimize financial implications. To do that, business leaders must determine their infectious disease risk profile:
Here are the key questions organizational leaders need to ask to evaluate their risk profile and the corresponding action items to navigate the ongoing outbreak:
1) How prepared is my organization? What does “prepared” look like to our organization?
- Conduct a business continuity risk assessment to identify potential internal operational, financial and market risks; determine direct and indirect impacts; and generate an action plan. Third-party vulnerabilities should be incorporated into action plans.
- Identify a response team to lead ongoing crisis management efforts, coordinating with appropriate federal, state and local authorities. These efforts should include regular communication to internal and external stakeholders.
- Communicate with internal and external stakeholders—as well as their surrounding communities—about what coronavirus is and key protective measures people can employ. Leveraging information from WHO’s dedicated public advice page is a good place to start.
2) What are our organization’s capabilities, strengths and weaknesses, including across the supply chain? Which third-party risks do we have, and where are they concentrated?
- Build scenario models to determine ways to mitigate any additional risks to your supply chain, working closely with your suppliers.
- Insulate your supply chain from disruption. Identify ways to diversify your supply chain if possible and assess the cost-benefit of maintaining duplicate facilities or routes on an ongoing basis.
- Create a backup plan. Identify alternate sources should your primary source of supply be unable to deliver on services.
3) Have we clearly communicated to our workforce what steps they should take and how they should respond to different scenarios identified?
- Evaluate work-from-home arrangements and options for remote meetings and videoconferencing. Employees working remotely, meanwhile, will need secure remote access to necessary files and services, likely using a VPN, as well as collaboration tools including instant-messaging apps, project management platforms and shared documents.
- Review remote working policies and guidelines. Remote workers should only use their work computers and not their personal computers, and managers should be trained on how to be virtual leaders by setting clear expectations and emphasizing regular communication.
- Review policies for paid time off, sick leave and short-term disability. Employees should be reassured that they will not be penalized for taking sick leave, and they should not come into the workplace while sick because they are worried about losing out on income. Policies for payment if the workplace is temporarily closed or employees are furloughed will also need to be reviewed and clarified.
4) What is our organization’s insurance coverage, and do we have funds to support this crisis? Does your organization have coverage for an insurance claim?
- Evaluate your insurance coverage for business interruptions. Identify the impact from civil authority and ingress/egress coverage, service interruption, supply chain interruptions, loss mitigation, and extra expenses like increased logistics and redistribution costs, higher costs related to workforce disruption as well as shifting productions to potentially higher-cost locations, and others.
- Establish milestones for claim recovery. Resources are likely going to be stretched thin for the foreseeable future. It is important to create milestones and hold all members — from the adjusting team to internal stakeholders — accountable for achieving those goals.
5) How can this threat unfold and evolve, and what scenarios do we need to consider for our organization?
- Regularly monitor announcements from the WHO and the Centers for Disease Control and Prevention to determine other potential impacts that could be coming down the pike for your organization.
- Establish various versions of your enterprise risk plan that can be adapted to help mitigate risk should other waves of the outbreak take place, taking into consideration where they might unfold.
- Consider accounting implications and total tax liability changes. For example, COVID-19 could complicate how businesses comply with Current Expected Credit Losses (CECL) accounting given the complication to forecasting credit losses. Total tax liability, meanwhile, could be impacted in several ways depending on individual circumstances and the actions taken by national and local governments.
Following this checklist can better enable you to make informed operational and strategic decisions while balancing the risks inherent to an infectious disease pandemic. Beyond that, you can use the intel gained from your self-evaluation to build your capabilities over time and support the business case for future investments in resiliency.
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Minimizing the Impact of Coronavirus (COVID-19) on Your Business
Mar 18, 2020
Amid the growing cases of coronavirus (CODVID-19), many state governments including Ohio and Michigan have instituted a mandatory shutdown of all bars and restaurants leaving many operators scrambling to figure out how to stay afloat. More recently, dental offices, spas, gyms and other businesses have been forced to close their doors to promote “social distancing.” Here are tips for staying healthy—and staying in business—during this unprecedented period:
Communication is Key
It is essential to communicate the latest information and advisories from your local state health departments to your team of employees. Make sure preventative measures such as sanitization, hand washing, and employee sick leave is conveyed and well understood. If your employees are able to work from home, remember to keep open lines of communication—check in regularly and communicate frequently; this applies to both the client and internal team members.
Many owners are communicating reassuring messages to their customers, providing confidence in their understanding of the severity of the virus. Make sure your customers know you are taking the proper steps to maintain a healthy work environment to protect not only your employees but your consumers as well.
Apply for a Small Business Loan
The SBA will work directly with state Governors to provide targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the Coronavirus (COVID-19). The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. Find more information on the SBA’s Economic Injury Disaster Loans here.
Dust off your business continuity plan
The objective of the business continuity plan (BCP) is to help a business to efficiently return to normal activities after a major incident that directly affects operations. Items to consider, if not already done so include:
- Establish an Emergency Action Plan (EAP) and team
- Have the EAP team assess the situation and agree to an appropriate action plan based on demand, available supplies, and available labor
- Implement appropriate prevention methods and procedures to reduce risk
- Have management staff review and take appropriate action regarding sick-leave absences unique to a pandemic, including policies that define when a previously ill person is no longer infectious and can return to work
- Work closely with the local health department to monitor the situation and to deploy appropriate control measures
- Identify backups for each job position and alternate manufacturing sites in pandemic response planning
Shift your marketing strategy
Don’t stop marketing your business, instead now is the time to be creative. For example, if you are a restaurant, try to experiment with different third-party delivery providers or encourage customers to find any way to receive your product such as curbside pick-up. Compromised populations, such as senior citizens can benefit from meal delivery. If you have a restaurant app, consider providing a meal deal for a family. Thinking outside the box will ultimately help you stay afloat during this highly volatile time.
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