May, 2020 | Fraser Blog

Reopening Offices Under Michigan COVID-19 Executive Orders

Governor Whitmer’s various Executive Orders (“EOs”) have transitioned from shut-down to phased reopening. Those multiple EOs make the reopening process confusing. This article summarizes the requirements to permissible recall office workers for work outside of their own homes. However, the actual requirements are lengthy and all must be met by the employer. We have collected those requirements in a document that may be obtained HERE.

Office Workers – Phased Reopening

Executive Order 2020-77, since superseded, began the “reopening” process for businesses within the State of Michigan. Only employers in Regions 6 and 8 – the Traverse City quadrant and the Upper Peninsula – were conditionally permitted to recall office workers to return to work. However, it is likely that the conditions will be similar for the remainder of the state when office workers in other parts of the state are allowed to return on a Region-by-Region basis. There are two sets of rules for operating office businesses – one applicable to all employers using “in-person” services, and a second set applicable to office work specifically.

Requirements for Employers Allowing In-Person “Office” Work

Identification of Workers Who May Permissibly be Recalled

Only office workers specifically permitted to be recalled may work at the employer’s premises. Each employer that seeks to recall office workers is responsible to ensure that workers are recalled “only to the extent that such work is not capable of being performed remotely.” EO 96 Section 11.m.

Each employer “must determine which of their workers are critical infrastructure workers or workers who perform resumed activities and inform such workers of that designation … in writing, whether by electronic message, public website, or other appropriate means.” EO 96 Section 6.a.

Most importantly, “[b]usinesses and operations maintaining in-person activities must adopt social distancing practices and other mitigation measures to protect workers and patrons, as described in Executive Order 2020-97 and any orders that may follow from it.” EO 96 Section 6.c.

Workers may also be recalled to prepare the workplace to be in compliance with the various Executive Orders. Workers necessary to prepare a workplace to follow the workplace standards described in Executive Order 2020-97 and to otherwise ready the workplace for reopening. EO 97 Sec 11.o.

Executive Order 2020-97 – Mandatory Requirements

The rules set out in Executive Order 2020-97, as referenced, are extensive, mandatory, complex, and overly long for inclusion here. Rules governing office work are selected and available HERE.

Employers must note that the penalties for non-compliance may be significant. A “willful violation” of the Governor’s Executive orders “is a misdemeanor. See, EO 2020-96 section 22. Likely more concerning, EO 96 also states:

“Any business or operation that violates the rules in sections 1 through 10 has failed to provide a place of employment that is free from recognized hazards that are causing, or are likely to cause, death or serious physical harm to an employee, within the meaning of the Michigan Occupational Safety and Health Act, MCL 408.1011.”

Office facilities to be reopened must comply with the threshold policy adoption, social distancing and safe-work requirements of section 11 of EO 2020-97, which are applicable to all businesses requiring “in-person work.” Those rules, which have been in effect in various forms since the initial stay-at-home order, include among other things:

Develop an OSHA-compliant COVID-19 preparedness and response plan
Make that plan available to workers and others by June 1, 2020, or within two weeks of resuming in-person activities,
Designate one or more worksite supervisors or employees, who must be on-site while workers are present, to implement, monitor, and report on implementation of that Plan
Provide COVID-19 training to employees that covers, at a minimum:

(1) Workplace infection-control practices.

(2) The proper use of personal protective equipment.

(3) Steps the employee must take to notify the business of any COVID-19 symptoms or of a suspected or confirmed diagnosis of COVID-19.

(4) How to report unsafe working conditions.

Conduct a daily entry self-screening protocol for all employees entering the workplace, including, at a minimum, a questionnaire covering symptoms and suspected or confirmed exposure to people with possible COVID19.
Keep everyone on the worksite premises at least six feet from one another to the maximum extent possible,
Provide non-medical grade face coverings to employees,
Require face coverings to be worn when employees cannot consistently maintain six feet of separation,
Increase facility cleaning and disinfection to limit exposure to COVID-19 and adopt protocols to clean and disinfect the facility in the event of a positive COVID-19 case in the workplace.
Make cleaning supplies and access to hand washing or sanitizer available to employees upon entry and at the worksite(k) When an employee is identified with a confirmed case of COVID-19, within 24
Establish a response plan for dealing with a confirmed infection in the workplace, including protocols for sending employees home and for temporary closures to allow for deep cleaning.
Promote remote work to the fullest extent possible.
Adopt any additional infection-control measures that are reasonable in light of the work performed at the worksite and the rate of infection in the surrounding community.

EO 2020-97 Section 1.

Again, there are additional, mandatory work safety requirements set forth in Executive Order 97.

This alert serves as a general summary, and does not constitute legal guidance. All statements made in this article should be verified by counsel retained specifically for that purpose. Please contact us with any specific questions.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Fraser Trebilcock Shareholder Dave Houston has over 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

The CARES Act Will Lead to More Small Business Bankruptcies—Here’s How to Protect Your Business from Getting Burned

JCPenney, Neiman Marcus, and other household names have recently filed headline-grabbing Chapter 11 bankruptcy cases. From energy to hospitality to retail, the COVID-19 crisis has had a devastating economic impact on a wide range of companies across industries. And, of course, small businesses are no exception. According to a survey conducted by the National Federation of Independent Businesses, “92% of small employers are negatively impacted by the outbreak of the novel coronavirus.”

While Chapter 11 bankruptcy has historically not been an option for most struggling small businesses due to the expense and complexity of the process, that may be changing as a result of recent legislation. What does that mean for all of the solvent businesses out there? They may be forced to deal with more of their business debtors inside of bankruptcy court, rather than through traditional debt collection means. In this article, we address recent changes ushered in by the Coronavirus Aid Relief and Economic Security Act (CARES Act), and provide businesses with advice on what to be prepared for and how they can protect themselves in this time of economic uncertainty, including:

Signs of customer distress
Protect yourself and help ensure payment going forward
What to do upon receipt of a notice of bankruptcy filing

Implications of the Small Business Reorganization Act

A case filed under Chapter 11 of the U.S. Bankruptcy Code is often referred to as a “reorganization bankruptcy.” On August 23, 2019, the Small Business Reorganization Act (SBRA), which added Subchapter V to Chapter 11 of the Bankruptcy Code, was signed into law and became effective on February 19, 2020.

SBRA streamlined the Chapter 11 bankruptcy procedure—allowing it to proceed more quickly and less expensively—for small business debtors with debts totaling up to $2,725,625. The CARES Act, which went into effect on March 27, 2020, temporarily (for one year) raised the debt threshold for SBRA filing eligibility to $7,500,000.

The SBRA makes the process for reorganizing under Chapter 11 more streamlined by shortening deadlines for various case filings, appointing a standing trustee in every case to facilitate the debtor’s dealings with creditors and keep the proceeding on track, not appointing a creditors’ committee in most cases, and not requiring debtors to pay quarterly U.S Trustee’s fees. In addition:

The debtor is the only party permitted to file a plan of reorganization.
The debtor is not required to file a disclosure statement unless ordered to.
A plan of reorganization can be approved even if all impaired classes of creditors object.
Individual debtors who have used home mortgages to finance their businesses have a right to modify those mortgage loans through a plan of reorganization.
Debtors may retain ownership of their business, even if the plan of reorganization does not fully repay unsecured creditors. In other words, the “absolute priority” rule does not apply under Subchapter V.

By raising the debt limit, and making other debtor-friendly changes through the SBRA, Congress made the streamlined Chapter 11 bankruptcy process available to significantly more small business debtors. Debtors have a new tool available to them to restructure their debts, which means their creditors, many of whom are facing their own financial challenges, need to be even more vigilant.

Spotting Signs of Customer Distress

As a supplier of goods or services, there are certain telltale signs you should be on the lookout for to determine whether your customers are experiencing financial distress. Missed payments, requests to modify contract terms, lack of communication, and an increase in collection activity (such as the filing of lawsuits) against a business are all indicators that a business may be struggling to pay its bills.

To help guard against risks, develop and implement internal procedures that will alert you when payments are being made outside of normal trade terms—or not being made at all. While many businesses are making accommodations to their customers right now, going deeper in the hole with a customer often doesn’t make sense if it’s putting your own cash flow at risk. Before taking any steps to accommodate a customer, consult with legal counsel to make sure that you are, first and foremost, protecting yourself.

Protect Yourself and Help Ensure Payment Going Forward

Once you’ve identified signs of potential distress, take steps to minimize the risks moving forward. It’s important to move quickly, and in consultation with legal counsel, because once a customer files for bankruptcy protection, there is little you can do to improve your likelihood of being paid relative to other creditors.

Require Cash in Advance

One of the simplest and most straightforward ways to ensure payment from a customer is to require cash in advance before supplying goods or services. In some cases, this may require the renegotiation of an existing contract. To the extent your customer is not currently paying in accordance with the terms of an existing contract, you may have the right to suspend your own performance, which can give way to discussions regarding new payment terms. An added benefit of requiring cash in advance of performance is that it can mitigate risks associated with preference lawsuits should your customer ultimately file for bankruptcy.

Requests for Adequate Assurance

If you suspect that a customer may be, or may become, unable to perform under a contract for the sale of goods, but is not yet in breach, you may want to consider demanding adequate assurance. Under Section 2-609 of the Uniform Commercial Code, a party to a contract has the right to demand adequate assurance of performance from a distressed contract counterparty. If the counterparty fails to provide adequate assurance, you may be able to repudiate the contract.

Request Other Forms of Financial Assurance

Explore with your legal counsel whether it’s advisable to seek various forms of financial assurance from a customer, such as obtaining a security deposit, letter of credit, or collateral to secure a debt. Depending on the product or service you supply to a customer, you may also be able to exercise a statutory lien, such as a construction lien, or a special tooling lien, in certain circumstances.

What to Do Upon Receipt of a Notice of Bankruptcy Filing

Regardless of how diligent you may be, today’s severe economic downturn makes it likely that you will be forced to deal with certain debtors in bankruptcy court. The new Small Business Reorganization Act only increases that likelihood.

Once you become aware of a customer’s bankruptcy, call your lawyer for advice. The “automatic stay” imposed once a debtor files for bankruptcy means that normal collection activity against a debtor must stop, and you can put yourself at risk of penalty by engaging in such activity. That doesn’t mean, however, that you must sit idly by during a customer’s bankruptcy. There are additional protections that may be available once the bankruptcy has commenced.

The creditors’ rights attorneys at Fraser Trebilcock are up to date on the latest developments in the bankruptcy laws, and we are seasoned Bankruptcy Court litigators. Experience has shown us that favorable results for creditors are possible within the constraints of the bankruptcy laws. For instance, a small business debtor’s reorganization in bankruptcy may allow repayment to creditors in situations where the debtor would otherwise have just shuttered its business and paid nothing. For assistance in dealing with a financially distressed customer, inside or outside of bankruptcy, please contact a Fraser Trebilcock attorney.

Jonathan T. Walton, Jr.’s legal practice focuses on cases arising from commercial transactions, the Uniform Commercial Code, the federal and state securities laws, banking laws and bankruptcy litigation. In the areas of banking, commercial, construction and real estate litigation, he represents lenders, contractors and owners on construction-related claims, and lenders and borrowers in commercial and residential foreclosure matters, large loan defaults and collections, lien priority disputes, and title insurance company liability. He can be reached at (313) 965-9038 or jwalton@fraserlawfirm.com.

Fraser Trebilcock attorney Amanda S. Wolanin specializes her practice in business and tax law, bankruptcy, family law, estate planning, litigation, and real estate law. You can reach her at (517) 377-0897, or at awolanin@fraserlawfirm.com.

Client Alert: IRS Relaxes Section 125 Mid-Year Change Rules & Increases Health FSA Carryovers

In two recently released Notices, the Internal Revenue Service (IRS) relaxes the irrevocability rule under Internal Revenue Code section 125 relating to cafeteria plans, increases carryover allowances for health flexible spending accounts (health FSAs), extends the period of time to “spend down” unused health FSA and dependent care FSA amounts, and expands previous guidance to provide that certain covered services will not affect high deductible health plan (HDHP) status… retroactive to January 1, 2020.

See:

IRS Notice 2020-33

IRS Notice 2020-29

Section 125 Plan participants have found themselves in difficult situations as they had elected certain health and dependent care FSA amounts to use during 2020 only to find that certain medical procedures were delayed or canceled and that day care facilities were closed due to COVID-19. Moreover, group health plans are changing based on certain new coverage requirements, incomes are dropping, and layoffs are occurring. Employees are finding themselves in a position where they can no longer afford such coverage; however, IRS procedures in many of these situations would not support mid-year election changes. These are just a few examples of election issues currently occurring.

The IRS, therefore, is relaxing the typical rigid Section 125 rules. However, in order to take advantage of this leniency, employers must amend their Section 125 cafeteria plans.

Section 125 Irrevocability Rules Relaxed

Once an election is made under a Section 125 cafeteria plan, that election is irrevocable for the entire plan year, unless (1) one of the mid-year qualifying change in election events occurs as set forth in Treas. Reg. 1.125-4; and (2) the employer’s cafeteria plan incorporates the mid-year change rule.

However, IRS Notice 2020-29 relaxes these rules during calendar year 2020 relating to employer-sponsored health coverage, health FSAs, and dependent care FSAs, and the relief may be applied retroactively to periods on or after January 1, 2020. These changes apply regardless of whether the basis for the election change meets the Treas. Reg. 1.125-4 requirements. A plan amendment is required.

Specifically, Notice 2020-29 provides as follows:

For mid-year elections made during calendar year 2020, a section 125 cafeteria plan may permit employees who are eligible to make salary reduction contributions under the plan to:
- with respect to employer-sponsored health coverage,
  - make a new election on a prospective basis, if the employee initially declined to elect employer-sponsored health coverage;
  - revoke an existing election and make a new election to enroll in different health coverage sponsored by the same employer on a prospective basis, including changing from self-only to family coverage; and
  - revoke an existing election on a prospective basis, provided that the employee attests in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer; sample attestation language is provided in the Notice;
- revoke an election, make a new election, or decrease or increase an existing election applicable to a health FSA on a prospective basis; and
- revoke an election, make a new election, or decrease or increase an existing election regarding a dependent care FSA on a prospective basis.

An employer does not need to adopt these more lenient rules and can continue with its current plan procedures. However, given that they could help a number of employees, it is something to consider.

Increase in Carryovers to Health FSAs

If an employer’s cafeteria plan has a health FSA with a carryover provision, another allowable change is permitted. IRS Notice 2020-33 allows, upon plan amendment, for the 2020 plan year carryover to be increased to $550. Previously, only a $500 carryover was allowed. And if the plan is amended correctly, the $550 will likely increase in future years. Please note that this is not for any plan years which started in 2019 and ended in 2020… that carryover remains $500.

Specifically, IRS Notice 2020-33 increases the maximum carryover amount for plan years starting in 2020 to an amount equal to 20% of the maximum Section 125(i) salary reduction contribution for that plan year. Therefore, the maximum amount allowed to be carried over from a plan year starting in 2020 to the immediately following plan year beginning in 2021 is $550 (20% of $2,750). A plan amendment must be made on or before the last day of the plan year that adopts the carryover increase; however, a special amendment timing rule exists for the 2020 plan year under Notice 2020-29.

Moreover, for the remainder of 2020, employees are permitted to change their elections mid-year in order to increase their health FSA (including an initial election to fund a health FSA) due to the increased carryover under Notice 2020-29. However, these changes must be applied prospectively only.

Significantly, Notice 2020-33 provides as follows:

Although only future salary may be reduced under the revised election, amounts contributed to the health FSA after the revised election may be used for any medical care expense incurred during the first plan year that begins on or after January 1, 2020.

An amendment must be made on or before December 31, 2021 and may be effective retroactively to January 1, 2020 (or the first day of the plan year in 2020 if later), provided that the employer informs all eligible individuals of the changes to the plan.

Extended Period to Spend Down FSAs

Many employees had elected amounts in dependent care and health FSAs and were (or are) unable to use them due to reasons such as closed day care facilities or canceled medical procedures. Under the strict Code section 125, unused amounts in these accounts are forfeited at the end of the Plan Year, subject to any carryover provisions (applicable to health FSAs only) or grace periods.

Here, Notice 2020-29 provides flexibility and allows employees to “spend down” their accounts through December 31, 2020. As calendar year plans already allow expenses to be incurred through December 31, 2020, this Notice does not provide relief. It instead applies to plans with grace periods that end in 2020 or whose plan year ends in 2020. Upon amendment, participants in those plans may continue to incur eligible expenses through December 31, 2020 and submit requests for reimbursement consistent with plan terms.

Specifically, the Notice provides:

For unused amounts remaining in a health FSA or a dependent care assistance program under the section 125 cafeteria plan as of the end of a grace period or plan year ending in 2020, a section 125 cafeteria plan may permit employees to apply those unused amounts to pay or reimburse medical care expenses or dependent care expenses, respectively, incurred through December 31, 2020.

Please see below for one of the examples listed in the Notice:

Example 1. Employer provides a health FSA under a § 125 cafeteria plan that allows a $500 carryover for the 2019 plan year (July 1, 2019 to June 30, 2020). Pursuant to this notice and Notice 2020-33, Employer amends the plan to adopt a $550 (indexed) carryover beginning with the 2020 plan year, and also amends the plan to adopt the temporary extended period for incurring claims with respect to the 2019 plan year, allowing for claims incurred prior to January 1, 2021, to be paid with respect to amounts from the 2019 plan year.

Employee A has a remaining balance in his health FSA for the 2019 plan year of $2,000 on June 30, 2020, because a scheduled non-emergency procedure was postponed. For the 2020 plan year beginning July 1, 2020, Employee A elects to contribute $2,000 to his health FSA. Employee A is able to reschedule the procedure before December 31, 2020 and, between July 1, 2020 and December 31, 2020, incurs $1,900 in medical care expenses. The health FSA may reimburse Employee A $1,900 from the $2,000 remaining in his health FSA at the end of the 2019 plan year, leaving $100 unused from the 2019 plan year. Under the plan terms that provide for a carryover, Employee A is allowed to use the remaining $100 in his health FSA until June 30, 2021, to reimburse claims incurred during the 2020 plan year. Employee A may be reimbursed for up to $2,100 ($2,000 contributed to the health FSA for the 2020 plan year plus $100 carryover from the 2019 plan year) for medical care expenses incurred between January 1, 2021 and June 30, 2021. In addition, Employee A may carry over to the 2021 plan year beginning July 1, 2021 up to $550 of any remaining portion of that $2,100 after claims are processed for the 2020 plan year that began July 1, 2020. A grace period is not available for the plan year ending June 30, 2021.

Again, plan amendments will be required to accomplish the above and must be adopted on or before December 31, 2021. The amendment may be effective retroactively to January 1, 2020 as long as the above Notices are followed and the employees are informed.

Status of HDHPs

Last, the IRS extends certain previous relief for HDHPs retroactively, back to January 1, 2020. Specifically, Notice 2020-29 separately expands Notice 2020-15 to provide that reimbursement of expenses for testing and treatment of COVID-19 incurred on or after January 1, 2020 will not result in an HDHP to fail to be an HDHP under Code section 223. Additionally, testing and treatment for COVID-19 includes “the panel of diagnostic testing for influenza A & B, norovirus and other coronaviruses, and respiratory syncytial virus (RSV) and any items or services required to be covered with zero cost sharing under … the CARES Act.”

Moreover, telehealth and other remote care services provided on or after January 1, 2020 (applying only for plan years beginning on or before December 31, 2021) will not affect HDHP status. The CARES Act previously applied only for services incurred on or after March 27, 2020.

Conclusion

As always, consultation is important to determine if these changes will be of benefit to employers and their employees. Many factors should be considered, such as nondiscrimination rules, adverse selection with allowing mid-year changes, whether extending health FSA reimbursement provisions will negatively affect health savings accounts, and additional required employee communications.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or bgallagher@fraserlawfirm.com.

SBA Opens Safe Harbor Certification for PPP Loans of Less than $2 Million

The SBA recently issued guidance extending an automatic safe harbor to borrowers receiving Paycheck Protection Program (PPP) loans with an original principal amount of less than $2 million. These borrowers will be assumed to have performed the required certification concerning the necessity of their loan requests in good faith, according to guidance posted by the U.S. Small Business Administration (SBA) on Wednesday, May 13, 2020.

Congress established the PPP to provide relief to small businesses during the coronavirus pandemic. PPP funds are available to small businesses that were in operation on February 15th with 500 or fewer employees. In addition, not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors were eligible to apply for PPP loans. Businesses with more than 500 employees in certain industries could also apply for loans.

Perhaps the key feature of PPP loans is that they are forgivable in certain circumstances. Loan forgiveness was designed to help employers keep their employees paid and keep their businesses from succumbing to the economic hardships created by the coronavirus pandemic.

After a few well publicized examples, on April 23, 2020 the SBA cautioned that that businesses with substantial access to liquidity may not qualify for PPP loans and announced that the SBA would review all PPP loans in excess of $2 million to make sure borrowers’ self-certification for the loans was appropriate. If the SBA determines during its review that a borrower lacked an adequate basis for certifying the necessity of its loan, the SBA will seek repayment of the outstanding PPP loan balance and inform the lender that the borrower is not eligible for loan forgiveness.

According to the SBA, borrowers with loans below the $2 million threshold are less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers who obtained larger loans.

The guidance, provided as Question 46 in Treasury’s Q&As related to PPP Loans, states that borrowers with loans of more than $2 million may still have an adequate basis for making the required good-faith certification, based on their individual circumstances and the language of the certification and SBA guidance.

The SBA said the safe harbor will promote economic certainty for PPP borrowers with limited resources as they work to retain and rehire employees. The $2 million threshold also will help the SBA conserve its resources and focus its reviews on larger loans.

Fraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

Client Alert: COVID-19 Group Health Plan Service & Notification Requirements

On April 11, 2020, the Departments of Labor, Health and Human Services, and Treasury (Departments) jointly released frequently asked questions (FAQs) regarding health care coverage issues surrounding the implementation of the FFCRA and the CARES Act. See Joint FAQs.

Notably, the Departments maintain that the FAQs are a statement of policy and are effective immediately.

The Families First Coronavirus Response Act (FFCRA) was enacted on March 18, 2020 and requires health plans and insurers to provide certain items and services related to diagnostic testing for detection of SARS-CoV-2 or the diagnosis of COVID-19 without cost sharing or prior authorization from March 18, 2020 and during the applicable emergency period. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted on March 27, 2020 and broadened the range of diagnostic items and services that plans and issuers must cover. These FAQs represent the Departments’ approach to assist employers, issuers, providers and other stakeholders to come into compliance as well as to help families understand the new laws.

Applicable Plans

The FFCRA and CARES Act apply to group health plans and health insurance issuers offering group or individual health insurance coverage. The term “group health plan” includes both insured and self-insured group health plans, whether they are ERISA plans, non-federal governmental plans or church plans. The term “individual health insurance coverage” includes individual market coverage through or outside of an Exchange. It also includes student health insurance coverage.

However, short-term, limited-duration insurance is not subject… neither are excepted benefits or plans covering less than two employees (such as retiree-only plans).

Duration of Compliance

The FFCRA provisions are effective March 18, 2020 and continue during the public health emergency.

Required Items & Services

Q3-Q5 address the type of items and services that are required under the FFCRA and CARES Act, including:

in vitro diagnostic test (meeting certain requirements) for the detection of SARS-CoV-2 or the diagnosis of COVID-19, and the administration of such tests; this includes serological tests for COVID-19, which are used to detect antibodies against the SARS-CoV-2 virus; and
items and services furnished to an individual during health care provider office visits (including in-person and telehealth visits), urgent care center visits, and emergency room visits that result in an order for or administration of an in vitro diagnostic product, but only to the extent the items and services relate to the furnishing or administration of the product or to the evaluation of the individual for purposes of determining the need of the individual for such product.

The required benefits must be furnished during office visits. The Departments construe the term “visit” broadly and include non-traditional care settings, such as drive-through screenings. See Q8.

Additionally, a recent IRS Notice issued just days ago states that testing and treatment for COVID-19 includes “the panel of diagnostic testing for influenza A & B, norovirus and other coronaviruses, and respiratory syncytial virus (RSV) and any items or services required to be covered with zero cost sharing under … the CARES Act.” See IRS Notice 2020-29.

Notice 2020-29 also separately expands Notice 2020-15 to provide that reimbursement of expenses for testing and treatment of COVID-19 incurred on or after January 1, 2020 will not result in a high deductible health plan (HDHP) to fail to be an HDHP under Code section 223.

Cost-Sharing Requirements

Cost-sharing requirements (including deductibles, copayments and coinsurance), prior authorization requirements, and medical management requirements cannot be imposed for benefits that must be provided under section 6001(a) of the FFCRA, as amended by section 3201 of the CARES Act.

With regard to out-of-network providers, Q7 of the Joint FAQs provides that plans and issuers are required to provide coverage for such items and services even if providers have not agreed to accept a negotiated rate as payment in full. In such case, a cash price equal to the service as listed b the provider on a public internet website must be provided (or another amount may be negotiated for less than such cash price).

Summary of Benefits and Coverage (SBC) Requirements & Mid-Year Changes

While material modifications to the SBC normally require that the plan provide 60 days advance notice, the Departments state that they will not take enforcement action regarding greater coverage of COVID-19 diagnosis and/or treatment, as long as plans and issuers provide notice of the changes as soon as reasonably practicable. This non-enforcement policy applies only while the COVID-19 public health emergency and/or COVID-19 national emergency declaration is in affect. Coverage changes beyond this emergency period must fully comply.

State Standards

States may impose additional standards or requirements on health insurance issuers regarding COVID-19 diagnosis or treatment, as long as they do not prevent application of a federal requirement.

Excepted Benefits

The FAQs describe types of excepted benefits, including employee assistance programs (EAPs), and provide that COVID-19 diagnosis and testing offered under an EAP will not jeopardize that EAP’s excepted benefit status while the COVID-19 public health or national emergency declaration is in effect. Additionally on-site medical clinics offering COVID-19 diagnosis and testing will remain excepted benefits.

Telehealth & Remote Care Services

The Departments maintain that widespread use of telehealth and other remote care services are essential to fight the ongoing COVID-19 pandemic, and they strongly encourage all plans and issuers to promote and notify individuals about these services.

The CARES Act has already offered flexibility with regard to high deductible health plans (HDHPs) and health savings accounts (HSAs)… stating that use of telehealth and other remote care services prior to the deductible being met will not jeopardize HDHP status, even if their use is not for COVID-19 related reasons. Moreover, individuals using telehealth or other such services outside of the HDHP may also still contribute to HSAs. The CARES Act amended Internal Revenue Code section 223(c) in this respect and will remain in effect from March 27, 2020 and for plan years beginning on or before December 31, 2021.

However, subsequently released IRS Notice 2020-29, mentioned above, provides that telehealth and other remote care services provided on or after January 1, 2020 (and applying for plan years beginning on or before December 31, 2021) will not affect HDHP status, expanding on the CARES Act which previously applied this rule effective as of March 27, 2020.

Similar to guidance previously stated in these FAQs, plans and issuers who add benefits (or reduce or eliminate cost sharing) for telehealth and other remote care services will temporarily be deemed not to violate notice of material modifications requirements or mid-year change restrictions. The Departments will apply the same non-enforcement policy as described above but only during the emergency declaration and only as long as notice is provided as soon as reasonably practicable.

Participant Communication and Lawsuits

Please keep in mind this is a Department non-enforcement policy and does not protect employers and plans from participant lawsuits.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

You Can’t Take It With You And You Can’t Keep It: IRS Says Send Back Stimulus Checks Received by Deceased Relatives

Approximately 2.8 million deaths occur in the United States each year from all causes. This leads to an interesting dilemma with the stimulus payments/checks issued by the IRS. A small number of people are receiving checks for their relatives who are no longer with us. This is because in the rush to get stimulus checks out to the American people, the IRS used information from our 2019 and 2018 tax returns.

So, what should you do if you receive a stimulus check for a deceased family member?

Keep it?
Deposit it into an account held by the estate?
Donate to charity?
Something else?
Or, heaven forbid, send it back?

The IRS says, send it back. The entire payment should be returned, unless it was made payable to joint filers and one spouse is still alive. In that case, only the portion of the payment made on account of the deceased person needs to be sent back. This amount will be $1,200, unless your joint adjusted gross income is more than $150,000.

In their “Frequently Asked Questions” on stimulus payments (technically called “economic impact payments” or EIP), the IRS outlined the procedures for returning a stimulus check issued to deceased persons. FAQ 41 available here.

If the payment was a paper check:

Write “Void” in the endorsement section on the back of the check.
Mail the voided Treasury check immediately to the appropriate IRS location listed below.
Don’t staple, bend, or paper clip the check.
Include a note stating the reason for returning the check.

If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:

For decedents from Michigan, submit a personal check, money order, etc., immediately to:

Kansas City Refund Inquiry Unit
333 W Pershing Rd.
Mail Stop 6800, N-2
Kansas City, MO 64108

Write on the check/money order made payable to “U.S. Treasury” and write 2020EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.
Include a brief explanation of the reason for returning the EIP, such as the recipient died on X date.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions or comments.

Best Lobbying Approach for the Remainder of the Legislative Session? Be Ready For Anything!

In my sixteen years in the Michigan House and Senate (spread out between 1990-2018), I’ve learned many lessons. This latest lesson to us all is “to be ready for anything.” No amount of experience could have prepared the Legislature for the challenges the coronavirus pandemic is currently presenting. Unprecedented public health challenges and logistical challenges will need to be addressed to simply keep the Legislative Branch operational.

As of this writing, based upon my conversations with both members and staff of the House of Representatives and the Senate, no one is precisely certain of the specifics of how the people’s business will be conducted. As was demonstrated by the House and Senate session of April 7^th, the utmost effort is being made to protect the health and safety of members, staff, and citizenry alike. The session calendar indicates a return to Tuesday, Wednesday, Thursday session days beginning May 5^th, save the extension of the “stay-at-home” order, and in the coming weeks there is a Joint Committee meeting on the COVID-19 response. In keeping with Governor Whitmer’s Executive Order, both partisan and non-partisan staff are working entirely from home–and they could remain so even after the “stay-at-home” order is lifted or modified. The logistical challenges of facilitating committee and floor action may result in far fewer, but much longer, session days.

The pressures of the Legislative Calendar have always been used by the Caucus leaders to compel the “Collective Legislative Mind” to focus on the challenges before it. This dynamic will be magnified ten-fold in the session days that remain before the summer recess. The demands of addressing the policy and budgetary aspects of the coronavirus crisis, the normal aspects of the Appropriations process, and individual members and caucus policy priorities will tax the Legislature to its limits.

I am confident they are up to the task.

The House and Senate will undoubtedly “Burn the Midnight Oil” for the balance of the spring session.

Director of Governmental Affairs at Fraser Trebilcock, David B. Robertson was a Michigan State Senator of the 14^th District of Michigan, representing Southeastern Genesee County and Northwest Oakland County. While a State Senator, Mr. Robertson was elected Caucus Chairman by his colleagues, and introduced non-partisan legislation positively impacting Michigan residents. He can be contacted at 517.377.0836 or drobertson@fraserlawfirm.com.

Client Alert: New Model COBRA Notices Issued by DOL

Along with other recent changes, including the delay of COBRA deadlines and premium payments (see our Client Alert: Major Extension of Employee Benefit Plan Deadlines Due to COVID-19 Outbreak), the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) released new model notices that employers may use to comply with the notice obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). A News Release as well as frequently asked questions (FAQs) were also posted.

These revised general and election model notices provide additional information regarding the interaction between COBRA and Medicare. While no legal changes are referenced, a new paragraph explains to employees that there may be advantages to enrolling in Medicare before, or instead of, electing COBRA.

Along with a few other small revisions, the model notices insert a new section addressing whether an individual can enroll in Medicare instead of COBRA, the timeframe for doing so, and the potential penalties for waiting to enroll in Medicare Part B. The new section also describes the priority of payment if both COBRA and Medicare are elected.

Employers should ensure their COBRA notices are updated to include these revisions.

Notably, these new notices do not address the extension of time to elect COBRA or to pay for COBRA during the coronavirus Outbreak Period. (See our Client Alert: Major Extension of Employee Benefit Plan Deadlines Due to COVID-19 Outbreak). Employers are not required to provide COBRA election notices during the Outbreak Period, and individuals are not required to elect or pay for COBRA during the Outbreak Period. Separately, in its recent FAQs (accompanying the Joint Notice that extends COBRA deadlines, among others), the EBSA reminds individuals that if employer coverage is lost, Marketplace coverage is another alternative, and it may be more affordable than COBRA. The FAQs review the Marketplace’s special enrollment periods (which have not been extended).

Issues regarding communication of all these changes will emerge quickly.

Important Note: While the Department of Labor considers use of these model notices by employers to be good faith compliance, it is important to remember that participant and qualified beneficiary litigation may still ensue. These model notices do not address numerous other important circumstances, such as limited application of COBRA continuation for most underspent health FSAs. Additionally, it is recommended that the general notices contain information on how an individual must provide notice of a qualifying event (such as whether oral notice or electronic notice will be accepted) and what information must accompany the notice of qualifying event.

With all the continual changes, it is important to be in contact with your employee benefits advisors and counsel. Please check with your Fraser Trebilcock attorney for the most recent updates.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

The IRS Says You Should Never Double-Dip Your Forgiven PPP Loan Proceeds

With stay-at-home orders and prohibitions on social gatherings still in effect, most of us are safe from those spring cookout guests with bad habits, like double-dipping their chips. The IRS recently gave loan borrowers under the CARES Act Paycheck Protection Program another reason against double-dipping. On April 30, 2020, the IRS announced that Paycheck Protection Program (PPP) loan recipients cannot deduct expenses that are paid with forgiven PPP loan proceeds.

Under the PPP provisions of the CARES Act, borrowers who pay certain covered expenses (payroll costs, benefits, rent, interest and utilities) using funds borrowed under the PPP program may have some or all of their loan forgiven. The CARES Act also modifies the general rule regarding the tax treatment of debt that is forgiven by providing that amount forgiven under the PPP program will not be included in the borrower’s taxable income.

Ordinarily, a business produces taxable income from making sales or furnishing services and is permitted to deduct from that income the expenses it incurred to produce it.

In its recent guidance, the IRS reasoned that the CARES Act exclusion from income for forgiven PPP loan amounts results in a class of tax-exempt income under the federal tax laws and regulations. The IRS concluded that, although the expenses paid by the PPP may be otherwise deductible as trade or business expenses or interest under the Internal Revenue Code, another section of the Code, intended to prevent a double tax benefit, disallows deductions sourced to tax-exempt income. As a result, borrowers will not be permitted to “double-dip” by claiming an additional tax break on money received through this program designed to provide economic assistance.

The guidance will impact tax planning for PPP loan borrowers and the overall value of the PPP loan forgiveness program.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Governor Whitmer Reopens Manufacturing with Executive Order 2020-77

On May 7, Governor Whitmer issued Executive Order 2020-77 reopening manufacturing effective May 11. This order continues the “process of gradually resuming in-person work and activities that were temporarily suspended under … prior orders.” This latest order supersedes prior stay-at-home orders, and extends until May 28 prior restrictions and stay-at-home provisions already in effect.

Reopening Manufacturing

EO 77 permits workers “necessary to perform start-up activities at manufacturing facilities” to engage in those activities immediately. The manufacturing employer may permissibly recall all “workers necessary to perform manufacturing activities.” EO 77, section 10(k). Further, “workers at suppliers, distribution centers, or service providers whose in-person presence is necessary to enable, support, or facilitate another business’s or operation’s resumed activities, including workers at suppliers, distribution centers, or service providers along the supply chain whose in-person presence is necessary enable, support, or facilitate the necessary work of another supplier, distribution center, or service provider in enabling, supporting, or facilitating another business’s or operation’s resumed activities” are permitted to be recalled to work, subject to specific provisions identified at section 9(c) of the order.

Manufacturing facilities to be reopened must comply with the threshold social distancing and safe-work requirements of section 11 which are applicable to all businesses requiring “in-person work.” Those rules, which have been in effect in various forms since the initial stay-at-home order, include among other things:

preparation of a COVID-19 preparedness and response plan,
restriction of the number of workers to those “strictly necessary to perform the in-person work,”
six-foot distancing “to the maximum extent possible,”
the mandatory use of masks when such distancing is not be “consistently maintain[ed]”
face shields are to be “considered” where workers must work within three feet of each other,
increased cleaning and disinfection, and
screening policies “to prevent workers from entering the premises if they display respiratory symptoms or have had contact with a person” with a positive COVID diagnosis.

Again, there are additional “in-person” work requirements applicable to all businesses.

Additional Manufacturing-Specific Requirements

Further, “(m)anufacturing work may not commence … until the facility at which the work will be performed has been prepared to follow” strict workplace standards and protocols set forth at section 11(k) of the Order. In addition to the prior procedures, reopening manufacturing facilities must:

“1. Conduct a daily entry screening protocol for workers, contractors, suppliers, and any other individuals entering the facility, including a questionnaire covering symptoms and suspected or confirmed exposure to people with possible COVID-19, together with temperature screening as soon as no-touch thermometers can be obtained.

2. Create dedicated entry point(s) at every facility for daily screening as provided in subprovision (1) of this subsection, and ensure physical barriers are in place to prevent anyone from bypassing the screening.

3. Suspend all non-essential in-person visits, including tours.

4. Train workers on, at a minimum:

A. Routes by which the virus causing COVID-19 is transmitted from person to person.

B. Distance that the virus can travel in the air, as well as the time it remains viable in the air and on environmental surfaces.

C. Symptoms of COVID-19.

D. Steps the worker must take to notify the business or operation of any symptoms of COVID-19 or a suspected or confirmed diagnosis of COVID-19.

E. Measures that the facility is taking to prevent worker exposure to the virus, as described in the COVID-19 preparedness and response plan required under section 11(a) of this order.

F. Rules that the worker must follow in order to prevent exposure to and spread of the virus.

G. The use of personal protective equipment, including the proper steps for putting it on and taking it off.

5. Reduce congestion in common spaces wherever practicable by, for example, closing salad bars and buffets within cafeterias and kitchens, requiring individuals to sit at least six feet from one another, placing markings on the floor to allow social distancing while standing in line, offering boxed food via delivery or pick-up points, and reducing cash payments.

6. Implement rotational shift schedules where possible (e.g., increasing the number of shifts, alternating days or weeks) to reduce the number of workers in the facility at the same time.

7. Stagger start times and meal times.

8. Install temporary physical barriers, where practicable, between work stations and cafeteria tables.

9. Create protocols for minimizing personal contact upon delivery of materials to the facility.

10. Adopt protocols to limit the sharing of tools and equipment to the maximum extent possible.

11. Frequently and thoroughly clean and disinfect high-touch surfaces, paying special attention to parts, products, and shared equipment (e.g., tools, machinery, vehicles).

12. Ensure there are sufficient hand-washing or hand-sanitizing stations at the worksite to enable easy access by workers, and discontinue use of hand dryers.

13. Notify plant leaders and potentially exposed individuals upon identification of a positive case of COVID-19 in the facility, as well as maintain a central log for symptomatic workers or workers who received a positive test for COVID-19.

14. Send potentially exposed individuals home upon identification of a positive case of COVID-19 in the facility.

15. Encourage workers to self-report to plant leaders as soon as possible after developing symptoms of COVID-19.

16. Shut areas of the manufacturing facility for cleaning and disinfection, as necessary, if a worker goes home because he or she is displaying symptoms of COVID-19.”

As the Governor’s Executive Orders continue to issue we anticipate that further sectors of the economy will be addressed. Please contact your Fraser Law Firm lawyer for timely assistance.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.