All benefit plan sponsors are facing economic and coverage challenges during this coronavirus crisis, and multiemployer trustees are no exception. In a recent webcast, Paul Catenacci, an attorney with the law firm of Novara Tesija & Catenacci, reviewed several issues on the minds of multiemployer plan sponsors during the COVID-19 pandemic.
Families First Coronavirus Response Act
Although employers with fewer than 500 employees have the responsibility to comply with the paid leave provisions of the recently enacted Families First Coronavirus Response Act (FFCRA), multiemployer plans may also play a role. The law provides a mechanism whereby multiemployer plans can act as a pass-through for the amounts a contributing employer is required to pay for emergency paid sick leave and emergency paid family leave. Specifically, employers that are covered by a multiemployer collective bargaining agreement can comply with the leave requirements of FFCRA by making contributions to a multiemployer plan to pay for that leave. The multiemployer plan would then pay employees for the leave. The receiving multiemployer plan would have to develop a process to make that happen or modify an existing process to do so. Even under the above scenario, the compliance obligation remains with the contributing employer to pay the required leave.
FFCRA also requires that all group health plans, including multiemployer plans (even those that are grandfathered under ACA), cover coronavirus testing without any cost-sharing for participants. This means no deductibles, copayments or coinsurance. Also, the testing cannot be subject to prior authorization or any other medical management requirements. Catenacci explained that coronavirus testing includes all the services and items related to determining a coronavirus diagnosis. It is conceivable that multiemployer plans could receive bills for tests for other conditions, such as the flu, that could be classified as part of the evaluation for COVID-19. Catenacci suggests that treating coronavirus testing as an ACA preventive service is a good safe harbor until guidance is released.
[Related Reading: DOL Issues Additional Guidance on FFCRA]
Multiemployer Trustee Considerations
The COVID-19 pandemic has brought about great economic concerns, stock market volatility and record-breaking unemployment. With fewer people working, there will be fewer contributions to multiemployer plans. Plus, the illness will increase health care costs now and possibly in future years. Catenacci provided several ideas that multiemployer trustees may want to consider while dealing with these extraordinary times.
Health and Welfare Plans
To help stop the spread of COVID-19, anyone who has been diagnosed with or has been exposed to the virus is advised to self-quarantine for two weeks. To accommodate this advice, trustees may want to consider waiving the elimination period for their short-term disability (STD) plans. STD plans typically require a worker to have an illness for seven days before being eligible to receive STD benefits. By waiving the elimination period, workers can get STD benefits right away.
Health and welfare plans typically have reserves to manage fluctuations in demands for claims. Trustees may need to watch the reserves for these plans very closely. A combination of investment losses, higher claims and fewer work hours that result in lower contributions could quickly burn through a plan’s cash reserves. Although health plans don’t typically have a large amount of equity exposure with respect to their investments, Catenacci reminded trustees to focus on the cash flow needs of the plan, and if investment adjustments are made, make sure they follow the plan’s investment policy statement.
[Upcoming Webcast: Global Economic Outlook | April 8, 2020]
Pension and Retirement Plans
For multiemployer defined benefit (DB) pension plans, the extreme volatility and decreases in the stock market are causing great concern. As with health and welfare plans, Catenacci suggests that trustees be mindful of the liquidity needs of the DB plan. The plan needs to be able to pay benefits to retirees. There may be a need to update your investment policy statement if the portfolio is rebalanced.
Recent investment losses may increase the likelihood of a shift to a lower funding status as defined by the Pension Protection Act of 2006 in the following year. If a plan does look likely to slide to a lower zone, it’s important to work closely with the plan’s professional service providers. An actuary can do modeling of various scenarios to aid in making good decisions about next steps. This is particularly important for those trustees with plans with funding improvement or rehabilitation plans as they will need to make informed wage allocation recommendations to the union.
For defined contribution (DC) pension plans, such as 401(k) plans, trustees will want to learn about the new provisions spelled out in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The law gives workers new options for DC plan withdrawals and loans. If a plan allows loans and hardship withdrawals, an uptick in applications is likely and could result in increased administrative costs. It’s important that trustees make sure that the plan’s holdback percentage is high enough. With increased volatility for investments, if the fund does not do daily valuations of account balances, participants could withdraw more than their accounts are worth.
[Related Reading: COVID-19: How to Handle Confidentiality of Medical Information Under ADA]
Catenacci also provided tips related to the unique concerns for training and education funds, vacation funds and supplemental unemployment benefit funds. Multiemployer plan collection policies should also be reviewed at this time. In addition, as contributing employers lose business, the potential for partial or complete withdrawals increases. COVID-19 has created a very fluid situation, and new laws, regulations and guidance are being released almost daily. It’s overwhelming, but it’s important to stay up to date.
Finally, although trustees may not be able to meet in person, it’s crucial that plan trustees maintain their meeting schedules and even meet between meetings, if warranted. Catenacci’s parting message was to communicate and “stay on top of your plans!”
Tune in to the webcast Understanding the Families First Coronavirus Response Act of 2020 to learn more about how multiemployer plan sponsors are impacted by FFCRA and the COVID-19 pandemic. Free for International Foundation members.
Other Resources for Plan Sponsors:
- Visit the International Foundation Coronavirus (COVID-19) Resources page
- Catch up on the latest COVID-19 and the workplace issues from Word on Benefits
- Tune in to live or on-demand webcasts, including these specifically for multiemployer plans:
Kelli Kolsrud, CEBS
Director, Research and Publications at the International Foundation
The latest from Word on Benefits: