The coronavirus is a challenge unlike any most employers have faced. The pandemic has brought major changes to the workplace, including shifts to employees’ health care and retirement benefits.
A new International Foundation report, Employee Benefits in a COVID-19 World, examines what employers are doing as their organization adapts to the new world.
Health Care Benefit Changes Due to COVID-19
Prescription Drug Plans Are Changing to Reduce Barriers
As a result of the pandemic, 35% of employers have extended the time allowed under prior authorization periods for prescription drugs, 29% have increased quantity limits and 13% have waived prior authorization requirements.
Mental Health Benefits Are Increasing
Recognizing that employee mental health during this time is a serious concern, 12% of employers have added telepsychiatry, which allows employees to access mental health services virtually. Additionally, 9% of employers have reduced or eliminated cost sharing for mental health benefits, and 6% have relaxed or eliminated eligibility requirements.
Nearly All Employers Are Offering Telehealth Services
To help workers receive medical care while reducing their risk of exposure, nearly all employers are offering telehealth services. Prior to the pandemic, 88% of employers had telehealth services in place. Since then, an additional 10% of employers have implemented or are considering implementing telehealth. To encourage the use of these services, nearly half of employers (49%) have reduced or eliminated telehealth cost sharing.
[Upcoming Webcast: Capping Medical Plan Costs and Improving Care in the Aftermath of COVID-19 | May 21, 2020]
Retirement Plan Changes Due to COVID-19
Some Employers Have Reduced or Suspended Matching Contributions
For organizations that provide matching contributions to their employees’ retirement plan, 2% have reduced the matching contribution and 8% have suspended it. An additional 18% report that they have not yet made changes but are considering it for the future, and 9% say it is too early to tell what changes they will make.
Employers Are Implementing DC Plan Changes as Permitted by the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to make changes to their defined contribution (DC) retirement plans (such as 401(k) plans) to help workers financially affected by the crisis.
More than half of employers (63%) are allowing workers to take new special COVID-19–related early distributions from their DC accounts. These distrubtions are not subject to the 10% early withdrawal penalty or the 20% mandatory tax withholding. To provide further relief, 60% of employers are allowing workers up to three years to pay back their early distributions, if the worker would like to do so.
Employers are also implementing changes for DC plan loans. Nearly half of employers (48%) have temporarily increased DC plan loan amounts to a maximum of 100% of the vested balance or $100,000, whichever is less (up from the previous maximum of 50% or $50,000). Additionally, many employers (61%) are allowing workers to delay, for up to one year, making payments on retirement account loans that originally required payment March 27–December 31, 2020.
Currently, 15% of employers have seen an increase in the number of employees who have taken hardship withdrawals from their DC plans, and 12% report an increase in employees taking DC plan loans. Many employers report that it is too early to tell.
Staffing Changes Due to COVID-19
A Significant Number of Employers Have Furloughed or Laid Off Workers
Due to the pandemic, employers across a wide range of industries have made difficult changes to their workforce. The report found that 31% of employers have temporarily furloughed workers, 29% have reduced worker hours, and 21% have laid off workers or reduced their workforce. Looking ahead, many employers are considering future changes—13% are considering furloughs, 14% reduced worker hours and 18% layoffs.
Just under half of employers (44%) have implemented a temporary hiring freeze for their organization.
Health Care Benefits for Furloughed and Laid-Off Workers Varies by Employer
Employers are handling health care benefits for furloughed employees in a variety of ways.
- 7% are providing employee health care coverage through COBRA, with the worker paying the full cost.
- 38% are continuing health care coverage for the entire period, with the cost shared as usual between worker and employer.
- 23% are continuing health care coverage for the entire period, with the employer paying the full cost.
- 25% are continuing health care coverage for a limited time, with the cost shared as usual between worker and employer.
- 7% are continuing health care coverage for a limited time, with the employer paying the full cost.
For employers that have laid off workers, the majority (61%) are offering health care coverage to laid-off employees through COBRA, with workers paying the full cost.
Download the full report: Employee Benefits in a COVID-19 World: April 2020 Survey Report to learn more about how employers are reacting to the COVID-19 pandemic. The report is available free to International Foundation and ISCEBS members.
The data above reflects the responses from corporate private sector employers. Learn more about other employer types:
- Public Employers React to the COVID-19 Pandemic
- Multiemployer Trust Funds React to the COVID-19 Pandemic
Find more coronavirus-related resources for employers on the Foundation’s Coronavirus (COVID-19) Resources page.
Communications Manager at the International Foundation
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