CORONAVIRUS CRISIS
Employment and Benefits Cost-Savings Option

April 3, 2020

Cost Saving Option

Ease of Implementation; Duration

Key Legal Issues

Cost Savings

Employee Impact

Reduction in employee hours/salary

Easy to moderate; duration within the control of employer

FLSA, nondiscrimination laws, coordinate with welfare benefit providers (COBRA, conversion options, etc.)

Moderate

Mild to moderate; not considered terminated for retirement plan and welfare plan purposes; watch for deferred compensation/

severance triggers

Reduction in retirement plan benefits

Easy to moderate; duration generally within the control of employer

Nondiscrimination testing, benefit accrual and compliance issues

Depends on the existing level of benefits

Potential loss of employer funded benefits

Use of federal subsidies – tax credits for paid leave under the Emergency Family and Medical Leave Expansion Act 

Moderately difficult; no later than 4/2/2020 through 12/31/2020

Smaller employers (less than 500) only; available only for employees unable to work because of loss of child care; paid for through tax credits; potential reinstatement rights

Moderate (capped at $200/day and $10,000/employee)

Mild

Use of federal subsidies – tax credits for paid leave under the Emergency Paid Sick Leave Act 

Moderately difficult; no later than 4/2/2020 through 12/31/2020

Smaller employers (less than 500) only; generally available only for employees subject to quarantine/isolation order or told to self-quarantine (or caring for a person in either category), experiencing COVID-19 symptoms and seeking diagnosis, or caring for child with closed school/childcare site due to COVID-19 precautions; paid for through tax credits

Moderate (capped at $511/day and $5,110/employee if for employee’s own use and $200/day and $2,000/employee if caring for child or quarantined individual)

Mild

Use of federal subsidies – pay certain business expenses with loans on favorable terms and that may be forgivable 

Moderately difficult; limited pool of $349B; applications 4/3/2020 through 6/30/2020

Smaller employers (less than 500) or in hospitality or dining industry; funds needed to support ongoing business operations and used to retain workers, maintain payroll or make certain mortgage, rent and utility payments; employee retention obligations and limits on future personnel reductions

Substantial (loan principal capped at 2.5 times average total monthly payroll costs for 12-month period prior to loan; capped at $10M)

None

Use of federal subsidies – new employee retention credit 

Moderately difficult; applies to wages paid after 3/12/2020 and through 12/31/2020

Available to all employers (unless “forgivable”loan described above is obtained), although calculation varies for large (more than 100) and small employers; business either fully or partially suspended by COVID-19 related government order or more than 50% reduction in comparable prior year quarter receipts[, employee retention obligations, limits on future personnel reductions – TRUE??]

Mild to moderate (50% of qualifying wages, including proportion share of cost of employer provided health care, up to $10k/employee)

None

Furlough

Moderate

Nondiscrimination laws, FLSA, WARN Act (and state equivalents), coordinate with welfare benefit providers (COBRA, conversion options, etc.)

Moderate to extreme

Extreme; may not be considered terminated for retirement plan, deferred compensation and welfare plan purposes

Permanent/temporary layoff

Moderate

Nondiscrimination laws, FLSA, WARN Act (and state equivalents), state wage laws, severance agreements, COBRA, retirement plan vesting (partial termination), retirement plan and deferred compensation / severance distributions

Moderate to extreme

Extreme

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