This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLP in conjunction with United Benefit Advisors This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLP in conjunction with United Benefit Advisors
Kansas City = Omaha = Overland Park St. Louis = Jefferson City www.spencerfane.com
www.ubabenefits.com
Benefits Aspects of Employee Leaves of Absence Robert A Browning, Esq. and David Wing, Esq.
Presenters Rob Browning
[email protected] 913-327-5192
Dave Wing
[email protected] 913-327-5143
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Program Overview
Leaves of Absence
Effect of both types of leave on:
Federal FMLA Leave Non-FMLA Leave (including military leave) Group health plans Cafeteria plans Other welfare plans and programs Retirement plans
COBRA and HIPAA issues USERRA and ADA issues
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Leaves of Absence
So what’s the big deal? Case study:
Plan document, employee handbook, HR Department
Each has a different policy for continuation of benefits during a leave of absence
Which leave policy wins?
Answer: the reinsurer’s policy
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Federal FMLA Leave
General legal framework of FMLA leave:
Eligible private employer: 50 or more employees
Eligible employees:
Must have worked for employer for at least 12 months Must have worked at least 1250 hours in 12 months prior to leave Must work at location with at least 50 employees w/in 75 miles 6
Federal FMLA Leave
General legal framework
Eligible employees are entitled to 12 weeks (unpaid) leave in an employer-designated 12month period for:
Serious health condition of the employee or the employee’s spouse, child or parent; Birth or adoption of employee’s child; or Qualifying military-related exigency
Eligible employees are entitled to 26 weeks leave to care for seriously ill military member who is employee’s child, parent or next of kin 7
Federal FMLA Leave
General legal framework
Serious Health Condition
Illness, injury, impairment or physical or mental disability that involves inpatient care or continuing treatment by a health care provider Absent complications or inpatient care, following are usually not serious health conditions—cosmetic treatments, cold, flu, ear aches, upset stomach, headaches 8
Federal FMLA Leave
General legal framework
Employer may require or employee may elect to substitute available paid leave for unpaid leave
PTO Vacation Sick
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Federal FMLA Leave
General legal framework
Employer must designate for all employees an FMLA year
Calendar Any fixed 12 months 12 months looking forward Rolling 12 months looking backward
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FMLA Leave
Application to group health plans
Employer must maintain employee’s group health plan coverage on same conditions as if employee had been continuously employed during the FMLA leave
A group health plan includes a separate dental, vision or prescription drug plan A group health plan includes HRAs, but generally does not include HSAs
Must offer same type of coverage (single vs. family) during leave as employee had prior to leave 11
FMLA Leave and Health Plans
If employer provides a new health plan or new benefits, or changes benefits in a plan during the leave, the employee is entitled to the new/changed plan and benefits
Example - if dental care is added to the Plan, then the employee must be given the same opportunity as other employees to receive the same dental care benefit
Example - changes in premiums, deductibles and any other benefit changes also apply
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FMLA Leave and Health Plans
Notice of any opportunity to change plans or benefits must be given to any employee on FMLA leave
Notice of the opportunity to add family members must also be given
In other words, don’t forget employees on FMLA at open enrollment or any special enrollment 13
FMLA Leave and Health Plans
An employee on FMLA leave may choose not to keep his/her group health plan coverage during the FMLA leave
However, the employee must be reinstated to the plan (upon returning to work) on the same terms of coverage that were in place prior to the leave without any waiting period or new pre-existing condition limitations 14
FMLA Leave and Health Plans
The employer’s obligation to maintain health benefits ceases when:
The employee informs the employer he/she will not return from the leave of absence; or
The employee fails to return from the leave of absence; or
The employee continues on non-FMLA leave of absence after the FMLA leave expires 15
FMLA Leave and Health Plans
Payment of group health plan premiums:
The employee is responsible for his/her regular share of the health premiums
Payment will generally be with after-tax dollars, unless employee is on paid-leave (and can continue to make pre-tax contributions through a cafeteria plan)
If premiums rise or fall, the employee pays the new rate 16
FMLA Leave and Health Plans
How does the employer collect premiums?
If leave is paid leave, the employer collects the premium by the method it normally uses for any paid leave (i.e., by payroll deduction)
If leave is unpaid, the employer may require that payment either be made to the employer or to the insurance carrier
May not charge an administrative premium (unlike COBRA)
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FMLA Leave and Health Plans
For unpaid leave, employees may pay premiums in any of the following ways:
At the same time the premium would have been deducted from payroll
On the same due dates as COBRA payments;
In advance, pursuant to 125 plan, if EE elects
By the same method as non-FMLA unpaid leave, so long as the method does not require prepayment of premiums
By method agreed to by employee/employer 18
FMLA Leave and Health Plans
Two important rules regarding payments:
The employer may not impose greater requirements on the FMLA employee than it imposes on non-FMLA employees (who are on leave without pay)
The employer must provide advance written notice of the payment conditions
Can satisfy with DOL Form WH-381 (Notice of Eligibility)
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FMLA Leave and Health Plans
What if employee fails to pay premiums?
Coverage may be dropped if payment is more than 30 days late Employer must give 15 days advance notice that coverage will terminate Example: Premium due May 1; employer gives notice by May 15 that coverage will cease on May 31 unless premium is received by that date Same example: if notice not provided until May 20, coverage must last until June 4 20
FMLA Leave and Health Plans
What if coverage lapses due to non-payment? The employee remains entitled to restoration of coverage when the employee returns to work
No waiting periods
No new pre-existing condition limitations
Employee may elect COBRA at the end of the leave (if he/she does not return to work)
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FMLA Leave and Health Plans
What if coverage lapses because the employee fails to return to work?
Employer may recover the employer’s share of premiums if employee fails to return to work (for at least 30 days) following the FMLA leave unless
The serious health condition continues (and the employer may request medical certification at the employee’s cost) Circumstances beyond the employee’s control:
Examples are limited and fairly extreme, such as parent must stay home with seriously ill child (but not healthy child)
Employer may not recover if leave is paid leave (including worker’s compensation leave)
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FMLA and Cafeteria Plans
Paid leave - premiums simply continue and are deducted from pay Unpaid leave:
Employees are allowed to revoke coverage; or
Employer may require coverage to continue, but must allow employee to discontinue payment
Employer pays the premium and recovers employee’s share upon return to work 23
FMLA and Cafeteria Plans (cont.)
Unpaid leave (continued)
If employee elects to continue coverage, the employer may offer (not mandate) the following options (which must be as favorable as non-FMLA options):
Pre-pay (reduce pre-leave checks) with pre-tax $ Pay as you go (generally after-tax $) Catch-up options - employer advances payment and employee repays with salary reduction contributions upon return to work (generally pretax $) 24
FMLA and Other Welfare Plans
Voluntary benefits (such as AFLAC polices for cancer, ICU, etc.) are not group health plans, but only if they meet the non-ERISA rules:
No employer contributions (there is uncertainty whether employee pre-tax contributions under cafeteria plan are treated as employer contributions for purposes of this rule) No employer involvement other than collecting premiums (i.e., no “endorsement” by employer) Employee participation is completely voluntary
If above requirements are not met, program is subject to the FMLA group health plan rules
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FMLA and Other Welfare Plans
Group life, AD&D, long-term disablity:
If employer pays the premiums, continued coverage is not required (but can’t treat worse than non-FMLAEEs)
If employee pays the premiums:
If unpaid leave, employee must be given the opportunity to pay premiums if employer’s policies/practices permit employees on other types of unpaid leave to continue coverage If paid leave, presumption is that employee payments will continue (via payroll deduction) 26
FMLA and Other Welfare Plans
Group life, AD&D and long-term disability (cont.):
If employee drops coverage:
Employee is entitled to resume participation (after leave) at same level as before the leave No requalification (such as medical exam) or waiting period DOL says that the employer may need to continue the premium payments if the insurer will not allow the employee to immediately resume coverage at same level
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FMLA and Other Benefits
Vacation/Sick Pay/PTO:
No requirement that employee accrue PTO during a FMLA leave of absence (but can’t treat those on FMLA leave worse than non-FMLA leave)
Employer may not forfeit PTO time accrued prior to the leave of absence
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FMLA and Bonuses
FMLA employee need not be paid a bonus that is based on an “achievement of a specified goal” standard that was not met by the employee, such as:
hours worked; products sold/produced; or attendance
If bonus is paid to employee on non-FMLA leave, it must be paid to FMLA employee
This includes using paid vacation for non-FMLA leave
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Non-FMLA Leave and Benefits
Generally, the treatment of benefits during a non-FMLA leave of absence is governed almost exclusively by the employer’s policies, plan documents and procedures
One exception: some state workers’ compensation laws mandate health coverage during leave
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Non-FMLA Leave
Policies, Plan Documents and Procedures
Clarity and consistency are key
Back to the example:
Employee handbook – says benefits last forever Summary Plan Description – allows for benefits for FMLA leave only HR Department – says benefits are tied to LTD eligibility 31
Documents, Policies, Procedures
Are employees on leave of absence eligible for benefits?
Or must they be “actively at work”?
Any distinction between paid/unpaid leave?
Does eligibility change from plan to plan (e.g., health plans vs. life insurance vs. disability plan)?
Vacation/bonus programs should also be addressed 32
Documents, Policies and Procedures
Are premiums the same, and who is responsible for paying the premiums? Does the employee receive the employer’s share?
When and how long must premiums be paid? How long does coverage continue? When does coverage lapse?
If coverage lapses, what are employee’s rights when they return to work?
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Documents, Policies and Procedures
Most importantly, is the policy or procedure (or plan document) consistent with the insurance contract or with the documents furnished to the reinsurer (in the case of self-funded benefits)?
You don’t want to promise a benefit that your insurer won’t provide (or that your reinsurer won’t pay for), particularly in the area of long-term disability benefits 34
FMLA Leave and COBRA
The employer must offer COBRA coverage (at the end of the leave) if:
The employee (or spouse or dependent) is covered by a group health plan the day prior to the leave of absence; and
The employee does not return to work at the end of the leave of absence; and
The employee would, in the absence of COBRA, lose coverage within 18 mos. 35
FMLA Leave and COBRA
What if the employee declines health coverage during the FMLA leave, or fails to pay his/her portion of the premium?
COBRA continuation coverage must be offered
COBRA coverage starts on the last day of the FMLA leave of absence (or, if earlier, the date the employee clearly informs the employer that he/she is not returning to work)
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Non-FMLA Leave and COBRA
Basic rule is that the “qualifying event” occurs at the beginning of the leave (i.e., upon the “reduction in hours”), unless:
Plan and policies are key
Coverage continues for at least 18 months (this is very rare); or Plan provides that the qualifying event is when coverage ends Plan may treat the beginning of the leave of absence as the qualifying event (this is the default if the plan is silent); or Plan may treat the employee’s termination of employment as the qualifying event (if coverage continues unchanged until then)
Key is that employer must specify this date in the plan documents and apply COBRA consistent with the terms of the plan
Don’t offer COBRA if the plan/policies are clear that coverage will continue unchanged during leave Do offer COBRA if coverage changes during the leave
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Leaves of Absence and HIPAA
How do HIPAA privacy rules apply to medical certifications and health information obtained in connection with a leave of absence?
The “covered entity” is the physician, not the employer The physician, therefore, will be releasing “protected health information” and must comply with HIPAA authorization rules and other HIPAA privacy rules. 38
Leaves of Absence and HIPAA
The health information is not PHI after it reaches the employer, and is therefore not subject to HIPAA privacy laws at that time But beware that such health information may be subject to state privacy laws and ADA confidentiality In addition, a leave of absence may trigger a group health plan’s obligation to issue a certificate of creditable coverage (if coverage is lost as a result of the leave of absence) Coverage gaps during FMLA leave don’t count as coverage gap for purposes of HIPAA
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Leaves and Retirement Plans
401(k) deferrals and matching contributions continue as long as compensation continues (unless employee elects to cease deferrals) “Last day” employment requirement to receive an allocation is satisfied if employee is on a leave of absence (whether FMLA or not) Unpaid leave does not count towards the 1000 hour requirement for a Year of Service or the 500 hour requirement to avoid a Break in Service
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Leaves and Retirement Plans
Distributions: a leave of absence is not a “severance from employment,” and therefore not a distribution event
However, event causing leave of absence may be a qualifying hardship distribution event
Plan loans: plan may permit suspension of payments for up to one year*, but interest accrues, and the loan must still be repaid within the maximum (5-yr) loan period
May re-amortize loan when employee returns, or employee may make balloon payment at maturity date of the loan * = Special rule for military leave (addressed in later slide)
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Leaves and Retirement Plans
Hour of Service: includes any paid leave (up to 501 hours, excluding workers’ comp or insured disability leave, but does not include unpaid leave, even if FMLA leave Break in Service: is not triggered by FMLA leave Employee on FMLA leave is immediately eligible to re-commence participation following the leave
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Leaves and Retirement Plans
Employees on maternity/paternity leave are credited with up to 501 hours of leave time so as not to incur a oneyear Break in Service. However, the maternity/paternity leave time is not counted as an hour of service for other purposes, such as vesting 43
Military Leave under USERRA
Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA):
Governs employee’s rights when returning to work after serving in the uniformed services for < 5 years Employees returning to work are to be:
Promptly reemployed Reinstated with all rights and benefits that they would have earned without the break in employment Protected from discrimination
Employer must provide health benefits during first 24 months of military leave, but if leave is longer than 30 days, employee may be required to pay up to 102% of premiums
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USERRA and Benefit Rights
Must restore the benefits the service member participated in at the time the military leave began, and must offer any benefits that began during the military leave for which the service member would have been eligible. Must treat a re-employed member as not having incurred a break in service with the employer maintaining the plan. 45
USERRA and Qualified Plans
Rights are governed by Code Section 414(u) (as amended by 2008 “HEART” Act) 401(k) plan participants may make additional “make-up” deferrals (and receive related matching contributions) for up to the lesser of 3 times the period of military service or 5 years Plan loan repayment period may be extended by up to the period of military service
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USERRA and Qualified Plans
Service in the military counts as service under the plan (for purposes of vesting) Plan must count military service for purposes of benefit accrual if EE returns; “may” count service if EE does not return “Differential wage payments” are 415 compensation, and may (but are not required to be) treated as “Plan Compensation” for purposes of accruals and/or allocations 47
USERRA and Qualified Plans
Persons on military leave for at least 30 days are treated as having a “severance from employment” for purposes of withdrawal restrictions, but plan is not required to allow a distribution
If plan allows a distribution on account of the “deemed” severance from employment, the individual may not make salary deferrals for at least six months after the distribution 48
Americans with Disabilities Act
Requires covered employers
Not to discriminate against applicants or employees with disabilities
To provide reasonable accommodation to applicants and employees with disabilities
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Americans with Disabilities Act
Disability
Physical or mental impairment that substantially limits one or more of the major life activities of such individual
A record of such an impairment
Being regarded as having such an impairment
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Americans with Disabilities Act
ADA Leave
Reasonable accommodation of last resort
Explore other accommodations to keep employee working first
Leave can be ADA reasonable accommodation
Following expiration of FMLA For employees not eligible for FMLA
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Americans with Disabilities Act
ADA Leave Benefits
Legal requirement is non-discrimination
Employer cannot treat employee on ADA leave worse than an employee on non-ADA leave
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Workers Compensation Leave
Benefits continuation determined by state law General rule is non-discrimination
Employer must provide same benefits as for comparable non-workers compensation leave
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This Employer Webinar Series program is presented by Spencer Fane Britt & Browne LLP in conjunction with United Benefit Advisors
= Omaha = Overland Park Kansas = Jefferson St. LouisCity City www.spencerfane.com
www.ubabenefits.com
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