The scope of the COVID-19 economic impact makes your head hurt when you think about it. 30M Americans have filed for unemployment already and the numbers continue to pile up. Economists predict the number could go as high as 32% or 1 in 3 American workers. More than ever, we need to start planning for Employee Assistance Funds.
The vast majority of those furloughed or laid off employees have rent or a mortgage and utilities to pay. Groceries they need to buy. A phone bill, which is often a lifeline to getting benefits and finding a new job. Add credit card bills, car payments or student loans. Unemployment assistance, where offered, doesn’t begin to cover most expenses for most people, even with enhancements. Even if many start getting back to work in the next month or two, the shutdowns will have inflicted significant financial hardship.
What may be less obvious is how much this is also affecting even those who are still working, as unplanned expenses, like suddenly needing a printer or computer for the house for school and work. The vast majority of Americans, 63%, have less than $1,000 in savings. Nearly half of employees, prior to COVID, said that they are stressed dealing with their financial situation. As we begin opening up, even more hardships may arise as schools are canceled, but work is now open or accessing public transportation during certain times isn’t feasible.
There is a part of the IRS tax code, Section 139, that allows, under a qualified disaster, for funds to be donated as tax-deductible contributions to an Employee Assistance Fund. It also enables those donations to be distributed, tax-free, to help individuals cover qualifying expenses tied to the disaster. It essentially grants charity status to disaster-affected individuals. In the context of a pandemic, qualifying expenses could include medical expenses not covered by insurance, health-related expenses (e.g., hand sanitizer, face masks, sanitizing cleaning products), dependent care expenses due to school/place of care closings, tutoring and home-schooling related expense (e.g., Internet, computers to directly aid the education, online education applications), work from home expenses (e.g. home office set-up, internet, printer, cell phone costs), transportation expenses incurred as a result of public transportation terminations and/or work relocation, counseling and more.
I learned about Employee Assistance Fund about a month ago from WeSpire’s charity partner, Givinga, who runs the foundation that powers our employee giving solution. We’ve already helped a number of customers set up public and private fundraising and matching campaigns to drive charitable contributions. We are now working to give every one of our customers the ability to create and run a disaster relief fund, if they desire, as well. Why?
First, it will encourage companies to support those they really do care about the most: their employees (whether currently working or not). They could also open it up to key partners, both for contributions and for their partner’s employees as well or even their customers, who may really want to support their team. Demonstrating that they understand the hardships most people are facing will strengthen trust and relationships battered by furloughs or layoffs.
Second, using existing technology like WeSpire’s and fund structures like Givinga’s streamlines the process of setting up a fund, taking applications, reviewing applications, and processing approvals. Many people need these funds now. By using an established partner, a company can begin taking applications and processing payments in weeks, not the months it might take on their own. Some companies may already be reimbursing some of these expenses without realizing there is a better way, from a tax standpoint, to do it. The costs are also very modest to administer, equivalent to a credit card processing fee.
Finally, and most importantly, it democratizes, and hopefully destigmatizes, asking for help. It’s nearly impossible, and a somewhat risky business, to assume who needs help and who does not at this time. Nearly 40% of people won’t even tell their family that they are having financial issues, let alone their employer. An Employee Assistance Fund process enables anyone who meets the company’s eligibility criteria, and who has a qualifying expense, to apply for assistance. The review process can involve a very limited pool of people for confidentiality reasons, and then the third-party processes the reimbursement.
The disaster that is COVID-19 is far from over and the economic impact will be with us for months, if not years, to come. Employers have a big role to play in the recovery process. A great place to start is acknowledging that many of your people are hurting and that you have a new way to help those who need it.
Quote of the Week: People seldom refuse help, if one offers it in the right way.A.C. Benson