Financial First Response Part III: Admin of Employee Relief Funds

As the Coronavirus (COVID-19) pandemic continues, millions of people across the country are dealing with significant uncertainty. This includes not only physical and emotional difficulties, but also serious financial strain.

Many employers are responding with employee relief funds. If done in partnership with a public charity, contributions to the fund (which can come from any source, including the employer and employees) are deductible, and grants are received tax free.

This article discusses the reporting, compliance, and general resources necessary to support a successful employee relief fund. Although these items are not the most obvious factors to consider when setting up a fund (unlike financial items or grant criteria), they are important. Overlooking them can be disastrous in certain circumstances.

Fund Administration

Processing grants quickly and efficiently during times of crisis and disaster is a critical component to making a powerful impact. However, regulatory red tape and lack of resources can often slow down the application review, approval, and payment process. There are ways around these obstacles to ensure grantees receive payments as quickly as possible, but advance planning prior to the launch of a fund is the easiest way to avoid these issues.

Resource allocation is another vital element for effectively administering financial assistance to employees during a crisis. It is common for companies to underestimate the amount of resources needed to manage the influx of grant applications during times of disaster, including:

1. Collecting applications,
2. Reviewing applications,
3. Collecting documentation from applicants,
4. Applicant support,
5. Making grant decisions,
6. Grant payment processing,
7. Fund accounting,
8. Tax reporting, and
9. Regulatory compliance

If a fund does not have a third party administrator, the organization needs to prepare for significant workload burdens to HR, legal, administrative, and financial teams. Simply answering applicant questions can require significant, dedicated staff support.

Privacy, Data Security, and Reporting Concerns

Most mid-sized and large companies have data privacy and information security policies in place. But when it comes to relief funds, data collection and security processes and procedures are unique. Many privacy policies are focused on external rather than internal constituents. Here is an example of questions to ask regarding data collection and privacy:

If a relief fund provides family hardship applications for a sick child, how do existing policies cover a non-employee (i.e., the child)? How is the application completed (paper, fax or online)? How is the application data transmitted and stored? What about federal healthcare information compliance (particularly HIPAA)? How does the technology also reconcile with standard data privacy, the California requirements (CCPA) and the EU’s General Data Protection Regulation (GDPR)? For financial and legal audit and IRS compliance requirements, how, where and how long are applications and supporting documents maintained?

Also, many relief fund sponsors find if they are overly strict on data security, applicants may not be able to receive the intended help. For example, an employee who lost her house from a hurricane may not be able to access the employer intranet for days or weeks after the storm. These are just some of the data security and storage technology implications.

As a general practice, it is better to collect less personal information rather than more. It may be counter-intuitive, but less information means less risk from a data security perspective.

During non-disaster periods, access to real-time data is important but not critical. During disaster periods, it’s mandatory. To make informed decisions in real time, management and senior leadership need to ask questions like: 1. How many applications have been received and in what geographic/global areas? 2. What is the average grant request? 3. What percentage of applications are being approved and why are some not? 4. How much money is in the fund today? 5. What do we need to raise in the next 30 days to meet the need? 

Even in non-disaster times, questions arise that can critically affect the level of impact possible, such as: 1. What is our expense ratio for the fund? 2. What percentage of our employees are donating? 3. How do we measure up against peers? 4. What kinds of grant requests are most common within our criteria? 

It’s essential to have a reporting platform that can easily and quickly provide this strategic management information. Asking someone on the relief fund team to manually compile this data is not a workable solution for all but the smallest employers.

Global Grants and Program Administration

Finally, it is worth noting how employee relief funds can assist companies with operations outside the U.S. This is particularly relevant for events that have a wide-scale global impact, like COVID-19, where companies need to consider how to assist employees overseas.

Generally, the administrative costs of international grants should not be significantly higher than domestic grants. But, to minimize costs, the company must be thoughtful in addressing the unique circumstances of awarding grants in multiple countries. This is another area that, while vitally important, can be difficult to navigate without the proper expertise. This is especially true when it comes to the new and complex area of GDPR compliance, along with efficient payment processing.

If an organization chooses to partner with a third party to assist in the international grant-making process, the organization should ensure the administrator has strong relationships with global financial services firms. It is especially critical that such firms understand the local compliance requirements and can seamlessly transfer the funds directly to the grantee’s bank account.

There are many elements to consider when providing financial assistance to employees during times of personal hardship and disaster. However, the fact remains, when an employee relief program is executed properly, it results in positive and sustainable impact on a global scale.

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MORE FROM FORBESFinancial First Response Part I: Employee Hardship Relief FundingBy Bryan K. Clontz, Ph.D., CFP®, CAP®
MORE FROM FORBESFinancial First Response Part III: Admin of Employee Relief FundsBy Bryan K. Clontz, Ph.D., CFP®, CAP®