Considerations around Layoff · For Applicable Large Employers (ALE), defined under the Affordable...

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Considerations around Layoff

The COVID-19 emergency has presented employers with many challenges to consider, including layoffs for their

employees. As you read the below it should be noted that in the absence of COBRA applicability, state

continuation may apply.

Things to Know:

• Overall

− Layoffs are generally treated as an employment termination. Even though the most common

scenario is a temporary reduction in force, your intent is to eventually recall the employee.

− This is a COBRA-triggering event for any health benefits (medical, dental, vision, Healthcare FSA, HRA,

etc.) upon termination for those covered under these plans. In this situation, you could offer a

severance and subsidize a portion of the COBRA premium for these terminated employees.

• Returning to Work

In the case of a layoff, reinstatement of a returning employee’s benefits will be governed by your layoff

and recall policy and the applicable benefit plan documentation. Careful consideration should be made

regarding formalization of such a policy.

• Other Considerations For Applicable Large Employers (ALE), defined under the Affordable Care Act (ACA), layoffs can have an

impact on your obligations under the ACA Employer Mandate.

Important: This information sheet is meant to provide you with general information and should not be viewed as

legal advice. If you are contemplating the employment actions discussed herein you are advised to consult your

legal counsel regarding these actions to ensure you are in compliance with federal, state and local laws. It is also

important for you to check with your insurance carrier or other TPA regarding any coverage rules that may apply.

Additional Resources We want to help! You don’t need to be a TASC customer to call our hotline or download our helpful documents.

General questions on this information Want us to make changes to your

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Why TASC?

For more than 40 years, TASC has been a leader, an innovator, and a partner of employers committed to ensuring the health, wealth and well-being of their employees and their employees’ families and community. TASC was a pioneer in assisting sole-proprietor farmers and small businesses save billions in tax dollars through the adoption of health reimbursement plans; challenging many ill-informed IRS auditors, accountants, and naysayers along the way. TASC, through FlexSystem, brought the idea of a Cafeteria Plans to large and small businesses; challenging the notion that such plans were burdensome, complicated and difficult to administer.

There from the beginning of Section 125, TASC has brought its knowledge and expertise forward with the idea that together we can improve lives of many, strengthen our communities, and make benefits feel like benefits. TASC understands that each employers circumstance is different. TASC offers its guidance based upon the wealth of its experience as an employer and as a benefits administrator. It is not legal or tax advice and should not be taken as such but is offered to prompt knowledgeable inquiry of your plan professionals and provoke thoughtful plan decision making.

TASC provides its clients with an audit guarantee with respect to serviced tax advantaged accounts. Subject to certain conditions and restrictions, this guarantee provides that in the event a client suffers an adverse finding by the IRS or Department of Labor, despite following TASC’s plans and procedures, resulting in interest charges and/or assessed penalties, such interest and penalties will be covered by the guarantee.



Considerations around Furlough

The COVID-19 emergency has presented employers with many challenges to consider, including furloughs for

their employees. With a furlough, your employee is typically placed on unpaid leave. You may or may not choose

to continue the employee’s coverage. This is determined by how your plan and policy is written. As you read the

below it should be noted that in the absence of COBRA applicability, state continuation may apply.

Things to Know:

• Where you do maintain coverage for your employees

The furlough is typically viewed like a leave of absence and you would take one of three approaches in

handling your employees’ contributions:

− Allow a prepayment of premiums, if time allows and there is a set time when the furlough will end.

− Have your employee make regular recurring payments (“pay-as-you-go”). If the employee fails to pay,

coverage can be terminated for nonpayment. This is not a triggering event for COBRA. You can choose

to subsidize the employee’s cost of coverage.

− Have your employee make up the contributions upon their return to work. You have the option to

simply pay the full premium amount while the employee is out with no expectation of repayment.

• Where you do not maintain coverage for your employees

The furlough and its resulting loss in coverage would be a triggering event for COBRA (assuming the you

are subject to COBRA). The employee would be entitled to elect continuation coverage for health-related

benefits, such as health, dental, vison, Healthcare FSA, HRA, etc.

• Where you treat the furlough is treated as paid leave

− You can continue to collect premiums through salary reduction under your cafeteria plan. This differs

from an unpaid furlough where the “pay-as-you-go” method for collection is utilized, in that case your

employee would pay their amounts to you on a post-tax basis.

− You are required to continue offering coverage to your employees while on FMLA.

• Returning to Work

Once the employee returns to work, their resumption of benefits is typically governed by the applicable

benefit plan documentation and your HR benefit policies. If the employee returns within 30 days, they

would typically step back into their previous elections. Of course, COBRA would end if the employee had

in fact elected to continue coverage. If the employee returns to work after a 30-day break, they would

typically make a new election after re-satisfying any waiting period required by your plan.

• Other Considerations

For Applicable Large Employers (ALE), defined under the Affordable Care Act (ACA), furloughs can have an

impact on your obligations under the ACA Employer Mandate.







Additional Resources We want to help! You don’t need to be a TASC customer to call our hotline or download our helpful documents.


TASC plan?



Call 1-833-433-1002


1-888-595-2261, or Get Started.


Get Started.

Why TASC?










Considerations around Reduction in Hours

The COVID-19 emergency has presented employers with many challenges to consider, including reductions in

hours, furloughs and layoffs for their employees. As you read the below it should be noted that in the absence of

COBRA applicability, state continuation may apply.

Things to Know:

• Overall

− With a reduction in hours, your employee is typically retained but on a modified work schedule.

− This could be a COBRA-triggering event for any health benefits (medical, dental, vision, Healthcare

FSA, HRA, etc.) upon termination for those covered under these plans. At that time, your employee

would determine whether they want to continue coverage. Premiums are typically paid by the

employee but the you could offer to subsidize those COBRA premium payments.

• Returning to Work With a reduction in hours and continued employment, COBRA (if elected) would stop once the

employee’s hours are restored and the employee could re-enroll, subject to any applicable waiting period.

• Other Considerations For Applicable Large Employers (ALE), defined under the Affordable Care Act (ACA), reduction in hours can

have an impact on your obligations under the ACA Employer Mandate.





Additional Resources

We want to help! You don’t need to be a TASC customer to call our hotline or download our helpful documents.


TASC plan?



Call 1-833-433-1002


1-888-595-2261, or Get Started.


Get Started.







Why TASC?




Considerations around Layoff · For Applicable Large Employers (ALE), defined under the Affordable...

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