Many employers face a significant number of employee leaves of absence and employment terminations related to COVID-19. This article provides some clarity about how to handle benefit eligibility. Over the next several weeks, additional guidance and clarification from federal and state government agencies is expected, perhaps providing some exceptions and requirements regarding benefit eligibility. However, there are some general guidelines that we can follow in the meantime.
It is necessary to consider whether FMLA-protected leave applies for employees who request leave due to their own COVID-19-related illness or to care for a sick family affected by COVID-19.
All public entities are subject to FMLA, regardless of size. 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:
- Work for a covered employer;
- Have worked for the employer for at least 12 months as of the date the FMLA leave is to start;
- Have at least 1,250 hours of service for the employer during the previous 12-month period; and
- Work at a location where the employer employs at least 50 employees within 75 miles of that worksite.
See DOL’s Guide for Employers for more detailed information discussing employers subject to FMLA and FMLA requirements.
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 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 that allows for an extension of benefit eligibility. Coverage should be terminated and COBRA offered if the employee is no longer considered eligible and there isn’t a leave policy extending benefit eligibility.
Employers may be forced by government order, public health considerations, or economic circumstances to furlough employees for a period due to COVID-19. Typically, furloughed employees remain employed, but have reduced hours or are placed on a temporary leave of absence. It’s necessary to consider plan eligibility rules and any applicable leave policies to administer benefits properly if employment is not terminated, but there is a reduction in hours/leave of absence:
- Look-back measurement method: 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.
- Monthly measurement method: If an employer is using the monthly measurement method, employees are unlikely to meet plan eligibility requirements during a period of reduced hours.
- Leave of absence policy: An employer may have a leave of absence policy for specified circumstances that extend benefit eligibility for a period. 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 that 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 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. 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 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. The recommendation would be to offer such extended benefit eligibility to all similarly situated individuals to avoid potential discrimination issues.
- Premium Contributions
The employer could choose to adjust employer contributions or subsidize the premiums for a period. Whether active coverage continues to be available, or federal/state continuation coverage is offered following a termination of active coverage. It’s recommended that employers adjust premium contributions in the same fashion for all similarly situated individuals and carefully communicate any employee responsibilities and applicable timeframes
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