We've been reading dozens of articles and whitepapers, attending webinars and Q&As and we believe we have found the simplest way for a small business owner to navigate this pandemic. Barring all other required leaves as stated in the FFCRA (reviewed here) and assuming the small business owner is unable to continue to meet payroll obligations, we believe the best and simplest course of action may be to furlough the employees rather than terminate them.
Our goal is to provide a way for the small business owner to "save the business" while also maintaining the most important benefit of all to their employees; health insurance coverage.
Why furlough and not terminate?
Terminating a employee would also mean terminating their group health insurance but even with unemployment insurance, the cost of COBRA and Covered California coverage is likely out of reach for most. Terminating a employee also requires the employer to pay out any accrued PTO to the terminated employee. On the other hand, furloughing a employee allows the employer to keep the employee enrolled on the company health insurance coverage while releasing the employer from any payroll obligations. A furlough agreement can be drafted between both parties with the understanding that the furloughed employee be required pay back the employee portion of the health insurance premium that the employer has been paying during the furlough period.
Where will the furloughed employee get money to pay back the employer?
Furloughed employees, like terminated employees, are eligible to file a unemployment insurance claim. And under the recently passed Senate bill (being voted on in the House today and on to the President for signing over the weekend), unemployment insurance will be expanded to include an additional $600 per week for up to four months. For the average American, this newly increased weekly total may come very close to what they were already earning prior to being furloughed. Additionally, most Americans (income limits apply), will each be receiving a non-taxable stimulus check in the amount of $1,200 per individual, $2,400 per married couple, and $500 per child, perhaps within the next 4-5 weeks.
Where will the small business owner get money to "keep the lights on" and pay for group health insurance premiums?
Under the recently passed and aforementioned Senate bill, small businesses will be provided a loan which essentially becomes a grant if the funding is used to cover payroll and other operating expenses, including the cost of group health insurance premiums. The funding is intended to cover the cost of up two eight weeks retro-effective to February 15. The details on exact dollar amounts and how this funding will be distributed is unclear at this time. However, the funding is there and ready to be disbursed once the means by which the disbursements will occur has been determined, perhaps within the next 2-3 weeks.
What if the small business owner cannot wait that long to receive this government funding?
Last week the California Insurance Commissioner, Ricardo Lara, issued a public statement urging health insurance carriers to provide an extended grace period of up to 60 days to groups that are unable to pay their health insurance premiums. Although most of the carriers, at the time of writing, have yet to officially respond, we cannot imagine any of them would cancel a group health insurance account with less than a 60 day grace period in light of this global pandemic. Of course, our recommendation is that the small business owner pay the invoice in full for their covered furloughed employees, but not to worry if they are unable to at this time. The small business owner can be proactive by informing the carrier of their current situation and requesting an extended grace period to maintain active coverage without payment for the next 60 days. Again, we cannot imagine any carrier would not honor such a request at this time.
The trusted team of Licensed Agents and Client Care Representatives here at Eureka Insurance Solutions will continue to monitor all aspects of the COVID-19 pandemic as it relates to our clients and their employees. We continue to operate, business as usual, providing excellent, efficient, and compassionate service to our valued clients and partners. Feel free to contact us at clientcare@eurekains.com
Comments