When employees request Family and Medical Leave Act (FMLA) leave, payment of their share of insurance premiums during the leave often presents a dilemma.
Employers are required to maintain employee insurance while the employee is on FMLA leave, while the employee is also required to pay their portion of benefit costs. However, since FMLA leave is unpaid, and the employee may be also incurring medical expenses and other extraordinary costs while on medical leave, maintaining insurance premiums may be difficult or impossible. In that situation, employers are often faced with difficult alternatives.
Employers often maintain the coverage by paying their share of premiums while advancing the employee’s share. Employers may not be able to recoup those advanced premium costs, especially if the employee separates from employment during or shortly after returning from FMLA, which may happen in cases of serious medical conditions.
In some situations, there are potential solutions that allow the premiums to be paid without undue burden to either the employee or employer.
Using Paid Leave
If the employee has earned or accrued vacation or PTO available, they may choose to apply, or may be required to apply, some of that paid time off concurrently with FMLA. PTO doesn't have to be exhausted during FMLA and need not be used at the beginning of FMLA leave. Applying just a few days of PTO each month during the 12 weeks of FMLA will often be enough to cover insurance premiums and maintain benefits. This does not violate the terms of FMLA and does not void the job protection or other provisions of FMLA.
A U.S. Department of Labor Wage and Hour Division FAQ further explains as follows:
“Under the regulations, an employee may choose to substitute accrued paid leave for unpaid FMLA leave if the employee complies with the terms and conditions of the employer’s applicable paid leave policy. The regulations also clarify that substituting paid leave for unpaid FMLA leave means that the two types of leave run concurrently, with the employee receiving pay pursuant to the paid leave policy and receiving protection for the leave under the FMLA. If the employee does not choose to substitute applicable accrued paid leave, the employer may require the employee to do so.”
Pre-Paying
In some cases, employees may be allowed to pre-pay the expected cost of insurance premiums on a pre-tax basis using payroll deductions before beginning FMLA leave. This applies to companies with Section 125 cafeteria insurance plans that allow such pre-tax treatment. Prior to starting FMLA leave, contributions that would be paid by the employee are made in advance by several payroll deductions prior to the leave.
Employees voluntarily agree to make extra payroll deductions for their share of the premiums expected during the FMLA leave. The regular salary deductions during FMLA leave would be suspended, but their benefit elections would remain valid, while the employer continues to make its share of the premium payment as scheduled. When the leave ends, the employee’s previous premium payment deduction would resume. For Section 125 plans, consult your insurance carrier. Employers should verify eligibility with their insurance carrier prior to implementing payment arrangements.
Employers Council members wanting to learn more about FMLA leave can access our whitepaper and sample handbook policies. If you have any questions, please contact us.
Ivy N. Voss is an attorney for Employers Council.