In today’s volatile economic landscape, businesses are grappling with unprecedented challenges. The recent imposition of tariffs and the elimination of government contracts have led to significant disruptions, particularly for small businesses. For some companies, these changes are leading to layoffs, reduced hours, and furloughs. According to Forbes, from January to April 2025, the number of unemployment claims has risen by 12%, further highlighting the economic strain. In today’s economic landscape, it is crucial for employers to understand how changes to their workforce can impact their benefits and how they can stay in compliance with applicable regulations.

Employee Benefits in Uncertain Times

As businesses navigate layoffs, reduced hours, and furloughs, continuity of benefits can provide a crucial sense of security for employees. This type of support can play a significant role in fostering a positive work environment and supporting employees’ mental health and overall well-being. For employees, knowing that their health and financial needs are being met can alleviate stress and contribute to a more stable and focused workforce.

For employers, offering robust benefits can enhance employee loyalty and productivity, helping to retain top talent during difficult periods. By maintaining and effectively managing their benefits, employers demonstrate their commitment to employee well-being and foster a resilient workforce.

As a third-party administrator (TPA) of employee benefits, EBC’s expertise in administering account-based benefit plans and COBRA ensures we can provide comprehensive support to our clients. During these uncertain times, our focus is on helping our clients navigate this challenging landscape with expert benefits administration and compliance support.

COBRA: A Safety Net for Employees

In times of economic uncertainty, COBRA serves as a vital safety net for employees who lose their jobs or lose coverage due to reduced hours. COBRA allows employees to continue their group health benefits for a limited period, usually at their own expense. This continuation of coverage is crucial for maintaining access to healthcare during transitional periods.

Understanding COBRA is essential for both employers and employees. Employees who are eligible for COBRA can maintain their health insurance coverage, which is particularly important for those with ongoing medical needs or those who have accumulated flexible spending account (FSA) funds. Through COBRA, employees can continue using their FSA funds for the rest of the plan year, ensuring they do not forfeit their funds. Employees with an FSA who are laid off and do not elect COBRA cannot incur new claims after the date of their termination so their FSA funds are forfeited at the time of termination.

EBC’s COBRA services help our clients provide a seamless continuation of benefits for their employees during challenging times. By maintaining compliance and offering clear communication, we support both employers and employees in navigating the complexities of COBRA.

Options for Furloughed Employees

During periods of furlough, employees may face uncertainty regarding their benefits. FSAs and health reimbursement arrangements (HRAs) can offer employees’ valuable support. However, it’s important that employers understand what happens to these accounts while an employee is on furlough.

Much depends on whether the employer considers a furlough to be a termination of employment or a temporary leave of absence. If the employer considers a furlough to be a termination of employment, the benefit would be terminated when the employee goes on furlough and COBRA offered if applicable.

If, on the other hand, the employer considers a furlough to be an unpaid leave of absence, the employer should follow its leave of absence policies for benefit coverage. Some employers continue benefits for a period of time during an unpaid leave of absence, and either collect the premiums directly from the employees or subsidize the premiums. Other employers terminate benefits during an unpaid leave of absence and offer COBRA if applicable.

Options for Reduced-Hour Employees

If an employer reduced expenses by reducing the hours worked by employees, questions arise regarding benefits eligibility. For example, if an employee must be scheduled to work at least 30 hours per week to be benefits-eligible, what happens to their benefits if the employer changes their schedule to 25 hours per week due to the economic environment? Employers may follow the terms of their benefits plans and terminate coverage when an employee’s hours are reduced, or employers may amend (temporarily or permanently) the terms of their benefit plans to continue coverage during a period of reduced hours. Regardless of approach, employers are advised to consult with their benefits counsel to ensure that any eligibility changes are both compliant and tailored for the situation.

Moving Forward with Confidence

In these uncertain times, it is essential for employers to stay informed. Maintaining and effectively managing benefits can provide much-needed stability and support for employees and foster a loyal and productive workforce.

At EBC, we are committed to helping our clients navigate these complexities with confidence. If you are a current client impacted by a changing workforce, we encourage you to contact your Client Account Representative with any questions or concerns about your benefits plans. Our team is here to provide the support and guidance you need to ensure compliance and continuity.

For prospective clients, we invite you to reach out to EBC to learn more about how we can assist you in managing your employee benefits. Whether you need to get your COBRA plans in order or seek comprehensive benefits administration, our expertise and dedication to excellence make us the ideal partner for you.