Nuances of Termination
Overview With the COVID-19 pandemic, employers and carriers alike are in uncharted waters relative to benefits termination and continuation for employees. The general rule is very clear: if any employee does not work the requisite number of hours (according to the contract), benefits are terminated. However, there are some important exceptions to that rule:
• ACA Stability Period • FMLA Leave • Personal Leave
ACA Stability Period This is an area that can be tricky. Employers using the Safe Harbor for determinizing plan eligibility under the ACA are familiar with the look-back process, which includes a measurement period, an administration period, and a stability period. If an employee has “earned” coverage based on working an average of at least 30 hours during the measurement period, their coverage must be continued through the duration of the corresponding stability period. Their coverage is effectively locked in for the period. Importantly, this coverage lock applies even if a reduction in hours (to below the 30-hour threshold) would normally cause a termination in benefits. Although no regulations specifically outline this, it can be presumed that the benefits lock-in would span a furlough, since termination of employment is typically the only event that would allow termination of locked-in benefits during a stability period. Employers should carefully assess employees in a stability period prior to taking action regarding benefit coverages. FMLA Leave The FMLA requires that employee benefit coverages be continued during a protected FMLA leave. This would apply to an EFMLA leave as well. As with a regular FMLA leave, employers may require employees to pay their normal contributions for coverage during a leave. Personal Leave Some employers have personal leave policies, either for reasons different than the FMLA allows or as an extension of FMLA benefits. Here, the written personal leave policy would need to address any continuation of benefits. Employers should carefully confirm the alignment of any benefits continuation promises within a personal leave policy with their underlying insurance policies. Benefits Contributions While on Leave As with the regular FMLA, the new EFMLA law requires employers to continue all employee benefit plans during a COVID-19 paid family leave. Employers may require (and typically do require) employees to continue paying the contributions for their benefit coverages. There are three different ways an employee can pay the contributions for their coverages: • Pre-pay: Employees may pay the required contributions prior to departing for their leave. These contributions would be taken in advance from current pay and thus could be made on a pre-tax basis.
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