Many employers are faced with a significant number of employee leaves of absence and employment terminations related to COVID-19. While questions regarding how employers determine whether leaves, furloughs or lay-offs are appropriate, including the handling of wages, would be better addressed by HR or employment law counsel, we can help provide some clarity around how to handle benefit eligibility. We expect additional guidance and clarification from federal and state government agencies over the next several weeks, perhaps providing some exceptions and requirements in regard to benefit eligibility; however, there are some general guidelines which already exist that we can follow in the meantime.
For those employees who request leave due to their own COVID-19-related illness, or to care for a sick family affected by COVID-19, it is necessary to consider whether FMLA-protected leave applies.
All public entities are subject to FMLA, regardless of size, while private employers are typically subject to FMLA only if the employer has 50 or more employees. Employees who request leave for qualifying reasons are eligible for FMLA-protected leave if they: (i) work for a covered employer; (ii) have worked for the employer for at least 12 months as of the date the FMLA leave is to start; (iii) have at least 1,250 hours of service for the employer during the previous 12-month period; and (iv) work at a location where the employer employs at least 50 employees within 75 miles of that worksite. For more detailed information discussing employers subject to FMLA and FMLA requirements, see DOL’s Guide for Employers found here.
If the employee qualifies for FMLA-protected leave, the employer should continue to offer group health plan benefits with the same employer and employee contributions for at least 12 weeks.
For those employees who do not qualify for FMLA-protected leave, benefit eligibility may be lost upon leave (or at the end of the month in which leave is taken) unless the employer has a leave policy which allows for an extension of benefit eligibility. If the employee is no longer considered eligible and there isn’t a leave policy extending benefit eligibility, coverage should be terminated and COBRA offered.
Employers may be forced by government order, public health considerations, or economic circumstances to furlough employees for a period of time due to COVID-19. Typically, furloughed employees remain employed, but have reduced hours or are placed on a temporary leave of absence. If employment is not terminated, but there is a reduction in hours/leave of absence, it’s necessary to consider plan eligibility rules and any applicable leave policies in order to properly administer benefits.
- If an employer is using the look-back measurement method, employees may remain eligible for benefits, at least for the duration of the current stability period. The general rule is that those who averaged full-time hours in the previous measurement period are considered eligible for the corresponding stability period, even during a reduction in hours, unless employment is terminated.
- If an employer is using the monthly measurement method, employees are unlikely to meet plan eligibility requirements during a period of reduced hours.
- An employer may have a leave of absence policy for specified circumstances which extends benefit eligibility for a period of time. An employer might also adopt such a policy specifically related to COVID-19. If choosing to adopt such a policy, the safest approach would be to make it available to all similarly situated individuals. In addition, any such policy should be carefully coordinated with the carrier or stop-loss vendor to ensure claims coverage during the leave of absence. Without their blessing, the carrier could refuse to provide coverage and leave the employer liable for medical expenses incurred.
While on furlough, if employees no longer meet the plan eligibility rules and there isn’t a leave policy in place which extends benefit eligibility, coverage should be terminated and applicable COBRA or state continuation coverage should be offered.
Employers may have to make the tough decision to lay-off employees due to circumstances created by the COVID-19. A lay-off is an considered a termination of employment, although potentially short-term under these circumstances. If employment is terminated, the former employees will typically no longer be eligible for benefits, in which case those covered when the lay-off occurs should have coverage terminated and be offered COBRA or state continuation as applicable.
As mentioned above for furloughs, there may be some flexibility to extend benefit eligibility beyond employment for a short period of time under these circumstances. However, any efforts to extend benefit eligibility to former employees should be coordinated with the carrier or stop-loss vendor to ensure claims coverage, and the recommendation would be to offer such extended benefit eligibility to all similarly situated individuals to avoid potential discrimination issues.
Whether active coverage continues to be available, or federal/state continuation coverage is offered following a termination of active coverage, the employer could choose to adjust employer contributions or subsidize the premiums for a period of time. We recommend that employers adjust premium contributions in the same fashion for all similarly situated individuals and also carefully communicate any employee responsibilities and applicable time frames.
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