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Group Insurance For Furloughed & Laid Off Employees

The coronavirus pandemic has taken a toll on many small businesses, and many are now struggling to stay afloat. In order to keep going, many small business owners had no choice but to furlough or lay off employees in order to save money. If you are one of them, you might be wondering what your former employees’ health insurance options are after you let them go. Is there still a way you can offer them group insurance? You can choose whether to pay monthly health insurance premiums on behalf of your employees, but if it is not possible due to financial constraints, your employees do have other options.

Furloughed Vs. Laid Off

Health coverage for an employee is determined by the employer’s (your) health plan. The plan indicates how many hours an active employee has to work to be eligible for health insurance. There are also rules surrounding what happens to their health insurance when they are no longer an active employee. When an employee is :

Laid off, their employment is terminated, even if you are considering the lay off temporary. After an employee is laid off, their health insurance plan ends on the last day of the month they were laid off.
Furloughed, their hours are reduced, or they might not be working at all. The difference is that they can expect to return to work again when the furlough is over, so they can continue to get health insurance coverage during the furlough period. If this is the case, the employee will either be responsible for their share of the plan’s premiums, or you, the employer, can temporarily waive employee contributions and pay all of their premium.

ERISA & Federal Income Tax Rules

In general, nothing actually prevents you from paying monthly premiums on behalf of furloughed or laid-off employees. You have the option to choose to pay monthly premiums as long as you are able to. The premium will continue to be excludable from the gross income of the employees. Be aware, though, that if the plan rules do not permit an employee to be covered, then you are in danger of:

Potential loss of tax-exempt status of the plan, which means both you and your employees might owe back taxes, since pre-tax qualification would be lost.
Your insurance company denying claims for any employees that they determine are not eligible to participate in the plan.
A possible fiduciary breach under the Employee Retirement Income Security Act (ERISA) if plan assets were used to pay for benefits of non-eligible employees.
Laid-off and furloughed employees qualify for COBRA insurance.

COBRA Insurance

Another option to continue coverage for your employees is the COBRA program. Both laid-off and furloughed employees qualify for a Consolidated Omnibus Budget Reconciliation Act (COBRA) plan if their group plan is terminated and you can no longer pay their premiums. COBRA can be expensive for your former employees, because if you do not contribute to their premiums, they will have to pay the full amount.

ACA Marketplace

Last but not least, losing a job is considered a qualifying life event, so a Special Enrollment Period will open up for your former or furloughed employees after they lose their job and their coverage. This means that they will have 60 days to get a health insurance plan on the ACA Marketplace. This could be a cheaper option for your employees than COBRA.

EZ Can Help

The pandemic has actually caused some changes in the way that group health insurance works. For example, some states have issued orders requiring or encouraging insurance companies to allow employers to make changes to their eligibility requirements so they can continue to offer group insurance to furloughed or laid off employees. Some states are even allowing a grace period for premium payments. To find out if your state is one of them, speak to an EZ agent, who can help find out the information for you. If you are interested in continuing to offer a group insurance plan, we can help you find a reasonable way to provide insurance to the employees that you had to let go. The times we are living in are not normal by any means, and we know it is not an easy decision to let go of your valued employees. EZ can help by offering our services for free, which includes checking all possible options, answering any questions, and comparing quotes.

To get started, simply enter your zip code in the bar above, or to speak directly with an agent, call 888-998-2027.

W-2 Requirements for a QSEHRA

If you decide to offer a qualified small business health reimbursement arrangement (QSEHRA) to your employees, you might have some questions about how to report the benefits on your employees’ W-2s. The IRS requires employers to report these benefits, including how much each employee is entitled to receive in reimbursements in a calendar year. There are different variables to consider when it comes to filling out your W-2s, such as what you need to do if an employee did not participate in the QSEHRA or how to report carryover amounts, so let’s go over the most important things that you need to be aware of.

Reporting QSEHRA Benefits On the W-2

paper with tax incentive in the middle and a computer mouse and pen over the papers. — *You can report your QSEHRA contributions on the W-2 form in Box 12.*

If you have an employee who is participating in your offered QSEHRA, you must report the total amount of the employee’s permitted benefit on Form W-2 in Box 12, using Code “FF.” The IRS description for this code is: “Permitted benefits under a qualified small employer health reimbursement arrangement.” This benefit is not counted as taxable income for the employee.

It is important to note that over-the-counter medications used to require a prescription for reimbursement. However, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed in March 2020, has made over-the-counter medications eligible for reimbursement without a letter from a doctor or prescription. The medications should be reported on the W-2 Form as income in box 1 as well as in box 3, Social Security wages, and box 5.

Calculating The Benefits

When reporting on your W-2s, the permitted benefit amount should include only newly available QSEHRA funds. Any carryover amounts from previous years should not be included. However, if you use a non calendar-year QSEHRA, you will need to report a prorated amount.

Take the following example of a QSEHRA with a plan year that runs from August 1 to July 31:

For the plan year beginning August 1, 2020, a QSEHRA benefit of $3,000 was available to every employee for August 1, 2020 through July 31, 2021. The amount reported on the employee’s 2020 Form W-2, box 12, code FF is $1,500 (for August-December 2020).
In the new plan year (2021), the QSEHRA provides $3,500 to every employee for August 1, 2021 through July 31, 2022. The amount reported on the employee’s 2021 Form W-2, box 12, code FF is $3,250 ($1,500 for January-July 2021, and $1,750 for August-December 2021).

What About Carryovers?

When a QSEHRA has a carryover provision, only the newly available amounts are reported. If the QSEHRA allows for the use of carryover amounts from prior years, those amounts are not included in the amount reported for the current year. For example, if your employee has a remaining allowance of $1,000 in their QSEHRA allowance for 2020 and they receive $3,000 for the following year, only the $3,000 in new funds will be reported on their 2021 Form W-2 in box 12, Code FF.

What If An Employee Didn’t Participate?

Even if an employee did not participate in your QSEHRA, the benefits must still be reported on the employee’s W-2. You will report the amount of benefit that they were entitled to receive.

What About Employees With No MEC?

Employees who do not have the required minimum essential coverage (MEC) can still receive reimbursement through the QSEHRA, but will have to pay income tax on it. Specifically, any taxable reimbursements should be included as other compensation in box 1: Wages, tips, and other compensation.

If you issue a QSEHRA reimbursement and then later learn that the employee did not have MEC for the period in which the reimbursement occurred, the employee must repay the reimbursement as soon as possible.

However, if W-2 reporting is required before the employee has repaid the amount, that amount is taxable to the employee:

The amount must be included in the employee’s gross income on Form W-2, box 1.
The amount is not subject to FICA tax and should not be included in box 3, Social Security wages, or box 5, Medicare wages.

Have Questions?

If you choose to provide a QSEHRA to your employees, great! They are an excellent way to help your employees get the healthcare they need. But know that you will have to report these reimbursements on your W-2s, and it is important that you do it correctly in order to abide by the QSEHRA’s guidelines. If you need help exploring different types of small business HRAs, or have questions about offering healthcare in general, EZ can help. We will compare quotes, answer any questions and even sign you up for a plan at no cost to you. To get started, simply enter your zip code in the bar above, or to speak directly with an agent, call 888-998-2027.

Employee Assistance Programs 101

Employee Assistance Programs (EAPs) have been around for longer than you might think, and have an interesting origin. They began in the 1940s as programs to help combat employee alcoholism, and from there the Employee Assistance Program evolved to help employees manage daily challenges in work and life. Maintaining a healthy work life balance can be difficult for many employees, which can cause stress, affect well-being, and lower productivity levels. As an employer, an EAP can be a major benefit to you; having one in place can help keep your employees healthy and happy, which will in turn help boost your bottom line. Before you can decide whether an EAP is right for your business and your employees, you need to know exactly what they are and what you can offer your employees through them.

What Is An Employee Assistance Program?

EAPs are voluntary benefits that employers can choose to offer. You are not required to provide them, but they can be useful. Not all Employee Assistance Programs offer the same services, but services offered can include:

Counseling for personal and work-related issues, including anger management, anxiety, depression, substance abuse, psychological problems, psychiatric disorders, chronic disease, stress management, and grief.
Training and development for things like communication skills, conflict resolution, team-building, leadership coaching, and more.
Resources and referrals for childcare, and other forms of care.
Financial or legal resources for planning, retirement, divorce, custody cases, debt, and more.
Access to wellness programs such as those for weight management and substance abuse, as well as gym memberships.

Services provided are free to employees, and sometimes for their families, as well.

Why Offer an EAP?

According to the Journal of the American Medical Association, in 2003, U.S. companies lost more than $44 billion due to low productivity related to employee depression. Companies also lost $100 billion annually, or $3,000 per employee, because of substance abuse and mental illness. If you can help your employees manage their stress, you can help avoid this decrease in productivity.

blue arrow going downward with a blue background. — *Employee Assistance Programs will help decrease turnover rate of your employees, as well as absenteeism due to stress.*

Employee Assistance Programs provide emotional support and help employees maintain a healthier lifestyle. Employees can meet with EAP consultants by telephone or in person for assistance with problems that keep them from doing their best. Offering an EAP can increase employee satisfaction and productivity, while decreasing:

The cost to your business of employee stress
The risk of workplace violence
Turnover
The risk of litigation
Absenteeism

Determine What To Offer

Your employees have different needs, so it can be difficult to determine which benefits to provide. In order to determine which services to offer, you should conduct a healthcare survey. Ask your employees what matters most to them, but remember to keep it confidential.

The well-being of your employees matters. There are a variety of Employee Assistance Programs to choose from, and even some comprehensive group health insurance plans that offer some of these services. EZ can help sort through all of your options. Our highly-trained agents can assess your business and what your employees need. We will provide you with guidance to find a great plan that works for everyone and will save you money. To compare quotes instantly, simply enter your zip code in the bar above, or to speak directly with an agent, call 888-998-2027.

Can Employees Have Both A HRA & HSA?

Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) are both great options for employees and employers who want to save money on group health insurance costs. Many employers and employees wonder if they can have both at the same time, and the answer is: yes! If you are willing to offer your employees both, a HRA and HSA, you need to have an understanding of how the two benefits interact with each other in order to get the most out of each.

The Difference Between HSAs & HRAs

HSAs are savings accounts that work alongside your employees’ health insurance plan. Employees are only eligible for a HSA if they are enrolled in a qualified high-deductible health plan. Your employees can contribute money to the account, which then acts like a bank account for medical expenses; you can also contribute to their HSAs, and receive some of the tax benefits. The money that you both contribute is pre-tax, earns tax-free interest, and will not be taxed when employees withdraw it to use for qualified medical expenses.

HRAs are not savings accounts like HSAs, they are arrangements that allow employers to reimburse employees for medical expenses. They are intended to help employees pay for out-of-pocket health-related expenses, and are often used in place of a traditional group health insurance plan. Depending on the type of HRA you offer, there may or may not be a limit on the amount that you can reimburse your employees in a given year.

The Different Types of HRAs

First, let’s take a look at the different types of HRAs you can offer your employees. There are integrated HRAs, which are offered alongside traditional group health insurance, including:

5 different colored signs on a pole pointing in different directions. — *There are 5 different HRA types to choose from to offer your employees.*

ICHRAs (Individual Coverage Health Reimbursement Arrangements), which allow tax-free reimbursement of benefits for any size business, and for any amount.
EBHRAs (Excepted Benefit HRAs), which are limited to paying for excepted benefits, such as premiums for vision and/or dental coverage and premiums for plans that are exempt from ACA rules (short-term plans).

Standalone HRAs do not have to be tied to a group plan. These include:

QSEHRAs (Qualified Small Employer HRAs) – These are meant for businesses with less than 50 employees that do not offer a group insurance plan. Business owners can set up a QSEHRA for their employees to help pay for benefits tax-free.
Spousal HRAs– These are for employees who are covered by a spouse’s group plan. They cannot be used to reimburse employees for their premium payments.

Retiree HRA– These are for former employees. They allow you, the employer, to help pay for any retired members’ insurance premiums and medical expenses.

When Offering Both HSAs & HRAs

In order for your employees to be eligible for a HSA, they must have a high-deductible health insurance plan (HDHP) that is HSA-qualified. If you choose to offer a HRA and a HSA, then the HRA has to follow the same rules as a HDHP, and cannot begin paying out until your employee’s minimum “deductible” amount is met.

male caucasian dentist looking in the mouth of a patient — *Limited-purpose HRAs will reimburse employees for expenses exempt from HSA deductible, such as dental work.*

Another way to offer a HRA that is HSA-qualified is by offering a limited-purpose HRA that only reimburses employees for expenses that are exempt from the HSA deductible requirement. Expenses exempt from the HSA deductible are:

Health insurance premiums
Dental
Vision
Long-term care premiums
Wellness and preventive care such as check-ups and quitting smoking or weight loss programs

You want to help your employees with their healthcare costs, but there is nothing wrong with also wanting to offset the costs of group health insurance. One way to do this is by offering both a HRA and a HSA. It can be done! As long as you follow the guidelines, then everyone can benefit from these arrangements. If you are unsure or need some help, then we can assist you. To compare plans, and to find a plan with the most coverage and savings, enter your zip code in the bar above. Or to speak directly to one of our licensed agents, call 888-998-2027.

Effective Ways To Reduce Group Costs

One of the best ways to attract better employees is by offering group health insurance. Unfortunately, providing high quality health insurance usually means that your business is going to pay a lot for premiums. With premium prices soaring, many small businesses are struggling to continue offering group health insurance to their employees. In fact, according to the US Chamber of Commerce, of the more than 45 million Americans who are uninsured, 60% are employed by small businesses. If you want satisfied, productive, and healthy employees, but are struggling to provide the health insurance options they’re looking for, here are some tips to reduce your group costs.

Get More Employees to Participate in Your Plan

In order to get a good price on group health insurance, make sure that as many of your employees are participating in your plan as possible. If you’re in the financial position to do so, you can even consider hiring more employees – the more employees that you cover, the lower your premiums will be. How will your premiums be lower? Well, insurance companies face large risks for every employee that they have to cover, so having a smaller pool of employees paying into the plan means that they are taking on more risk. However if you have a larger amount of employees paying into the plan, then there will be less risk for the insurance company, and they will be able to offer you a better deal.

Reduce Coverage: Exclude Dental & Vision

Reducing the amount of coverage that you offer is a simple way to keep your insurance costs low. You can do so by cutting dental and vision from your plan and having your employees decide whether they would like to purchase their own dental and vision coverage. These costs will come out of your employees pockets, but eliminating these plans will help to lower your premium costs and save you money.

Consider Switching Plans

The most common way to control the costs of your group insurance plan is by switching plans. Consider switching to a high-deductible health plan (HDHP). Doing so will increase your employees’ deductibles, but it will also reduce the cost of their premiums, and your premium contributions. Another route you can take is switching to a more cost effective plan with a smaller network, such as an HMO.

money on a table near some prescription medications — *There are different ways you can save on prescription medication costs.*

Take Control of Prescription Drug Costs

Medications are necessary, but they can be expensive. There are ways, though, to save on prescription drug costs in your plan by:

Having a plan that mandates a generic substitution for any medication that has one.
Having a limit on coverage, which will allow you to save on dispensing fees.
Encouraging your employees to shop at less expensive pharmacies, use money-saving apps, or request 90-day supplies of their medications.
Checking your plan’s drug formulary, and making sure that it includes a large range of drugs in the lowest tier. These generic, lower cost drugs will most likely be covered 100%.

Keep Your Employees Healthy

The healthier your employees are, the lower your insurance costs will be. Offer a wellness program, which could include perks like fitness membership stipends, free flu shots, help quitting smoking, and cancer screenings. This is a cheap and easy way to not only make your own employees happier and more productive, but also a great way to save money in the long run.

Provide An HSA

If you decide to switch to a high-deductible health plan (HDHP), consider offering a health savings account (HSA) alongside it. HSAs are only available with a qualified high-deductible health plan, and will allow your employees to contribute tax-exempt dollars to a fund that can only be used for medical expenses. These funds also accrue tax-free interest and roll over each year, so employees will have money for healthcare when they really need it. The benefits for you? Tax breaks for you if you choose to contribute to your employees’ HSAs, and a healthcare plan that is more attractive to your employees.

Find A Good Agent

Health insurance is complex. But if you have a good insurance agent, they can help you shop around for plans from different providers and help you to reduce your health insurance costs. Many insurance agents charge a fee for their services, but not EZ. We will provide you with one dedicated agent who will navigate through all available plans and provide you with instant, accurate quotes. All of our services are free – our mission is to help you find an affordable plan that provides great coverage. To compare group insurance quotes in minutes, simply enter your zip code in the bar above, or to speak to one of our agents, call 888-998-2027.

The Advantages of Group Insurance

Being a small business owner means being on a tight budget, so fitting in a group health insurance plan for your employees can seem a bit overwhelming. Offering group health insurance, though, is not something that you should overlook. If you do not offer a healthcare plan, you might find that it is more difficult to recruit and retain good employees. In fact, surveys show, most employees say that they would prefer to be offered health insurance over a pay raise. While group health insurance can seem unaffordable or unattainable, providing healthcare has many advantages that can balance out the costs – and there are ways to get great plans at an affordable price.

Tax Credits & Deductions

Contributing to your employees’ premiums can be expensive, but you can get some of that money back through tax credits and deductions. If you run a small business, you might qualify for the small business health care tax credit if you offer your employees a plan through the Small Business Health Options Program, or SHOP. To qualify for the minimum credit, you must have fewer than 25 full-time or full-time equivalent employees earning an average of $50,000 or less per year; to qualify for the maximum credit, you must have fewer than 10 employees earning an average of $25,000 or less per year.

If you decide to offer a HRA or HSA, your employees will get tax advantages (all of their contributions and reimbursements are pre-tax), and so will you. Contributions to your employees’ HSAs and HRA reimbursements are tax-deductible.

Lower Payroll Taxes

Another tax benefit of offering group insurance is the ability to lower your payroll tax. When employees pay for health insurance, the cost of their premiums is typically excluded from their taxable income. This lowers most workers’ tax bills, and in turn reduces their after-tax cost of coverage. Lower taxable income for your employees means lower business payroll taxes for you. In addition, if you contribute to your employees’ HSAs, you can also save on payroll taxes because HSA contributions are deducted from your payroll on a pre-tax basis.

caucasian hand with a suit on holding a blue card with a heart on it and a family holding hands together — *You and your family can participate in your group insurance plan.*

You Can Participate In The Plan

Offering health insurance to your employees means that you and your family can also participate in the plan. Compared to individual plans, group policies offer more pre-deductible benefits such as preventative care and primary doctor visit coverage. They also offer lower copays for prescription drugs and routine care.

Lower Costs Due To Larger Risk Pool

The higher the number of employees that participate in your group plan, the lower the cost of health insurance. When more people are included in your plan, you have a larger risk pool, and everyone will have more options at a lower price.

Attract & Retain Employees

Do you want healthy, productive employees who show up to work and boost your bottom line? Then provide them with group health insurance! If you want employees who come to work and work hard for you, there’s no better way to ensure you’ll get that than by offering health insurance. They’ll be able to receive care when they need it, and they will feel like you have invested in them, so they will invest in you. This will lower your hiring costs, improve morale, and reduce absenteeism and risks associated with poor health.

Health insurance can help you keep your current employees happy and healthy, and it can also help you to attract the best employees when it comes time to hire. Job seekers expect employers to offer health insurance and partially pay for their premiums, so you risk missing out on great candidates and potential employees if you’re not offering some sort of plan. You don’t want to be disappointed if a candidate rocks the interview, you offer them the job, and they turn it down because you’re not offering the benefits they’re looking for!

You Can Save Money

When searching for a group health insurance plan, you have to look beyond the premium. The costs associated with group health insurance plans include premiums, which you contribute to, but also co-payments, deductibles, and coinsurance, which your employees are responsible for. If you are looking for a way to lower your premium costs, consider offering a high deductible health plan. The higher the deductible a plan has, the lower the premium costs will be, so you can save on contributions. You can also offer a HSA with qualified high deductible health plans, so your employees will be able to put money aside to help with the cost of the higher deductible.

Affordable group health insurance plans are out there, and you can find the right one for your business as long as you use a licensed, trained agent to help you. There are ways to offer everyone the most coverage while saving the most money. The best way? Start by talking to an EZ agent! All of our services are completely free, and there’s never any hassle or obligation. To instantly compare plans in minutes from top rated carriers around the country, enter your zip code in the bar above, or to speak directly to one of our agents, call 888-998-2027.

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