Federal Government Shutdown Impact on Contractors
With the ongoing federal government shutdown and no resolution in sight, federal contractors may face difficult questions about how furloughs or reduced hours affect employee benefits.
Who this applies to:
Employers with federal contract workers unable to work full-time or furloughed due to the lapse in appropriations.
Key considerations:
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Employers should review plan language to confirm how long employees can remain covered when not working full-time.
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Without clear furlough or layoff provisions, coverage typically ends at the end of the month in which full-time work stops, and COBRA should be offered (if applicable).
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Employers using the ACA lookback method must continue full-time medical coverage for employees in a full-time stability period, even if the employee is temporarily not working full-time. Employers will need to determine how employees will pay their share of premiums while not receiving a paycheck.
Practical impact:
Employers should consult employment law counsel to understand their specific obligations under government contracts. If an employer wants furloughed employees to remain enrolled in benefits but current plan terms don’t allow it, they’ll need to adopt a plan amendment and obtain carrier or stop-loss approval.
For applicable large employers (ALEs), any employee who loses coverage but returns to full-time work within 13 weeks must be reinstated without a waiting period. If the shutdown extends beyond 13 weeks, employers may want to adopt an amendment to waive the waiting period for this and future government shutdowns.