Q&A: Administrators: Compliance

Here is a brief overview of 2 types of Leaves of Absence:

FMLA - Only larger employers(1) are subject to the Family Medical Leave Act of 1993. This Act requires up to 12 weeks' leave for eligible(2) employees during any 12-month period for any of the following situations:

• to care for the employee's child after birth, or placement for adoption or foster care;
• to care for the employee's spouse, son or daughter, or parent, who has a serious health condition; or
• for a serious health condition that makes the employee unable to perform his/her job.

During an FMLA Leave, the participant may revoke his participation in a group health plan(3), but has a protected right to continue coverage.

"REGULAR" Leave of Absence - In the case of a regular leave of absence, an employer may terminate medical coverage. In this case, COBRA-qualifying employers (4) must offer COBRA rights to the employee.

In addition, the beginning of or return from an unpaid Leave of Absence constitutes a "Status Change." Participants can thus take this opportunity to make a change in group health coverage(3).

If the participant does declare a Status Change, coverage can be suspended during the leave. If, however, a Status Change is not requested, coverage can continue.

How will contributions be paid during the unpaid leave?

In either type Leave of Absence, premiums can be:

1. Pre-paid on a pre-tax(5) or after-tax basis
2. Paid as due, on an after-tax basis
3. Reimbursed to the employer in arrears, either pre-tax(5) or after-tax.

Summary: It is important to treat Leaves of Absence with care and plenty of advance planning, to avoid violating IRS rules under your Flexible Benefit Plan.

Notes:

1. Employers of 50 or more workers within a 75-mile radius of the workplace are subject to FMLA.
2. An "Eligible Employee" is one who has worked for the employer at least 12 months and 1,250 hours during the 12-month period immediately preceding the start of the FMLA leave.
3. Medical plans include health insurance and medical FSAs.
4. COBRA applies to groups employing 20 or more employees for over 50% of the year.
5. Pre-tax payments cannot be allowed to span flex plan years. Pre-tax payments must relate to benefits provided in the same plan year as the payment made.
   Example: In a calendar year plan, you cannot pre-tax payments in October for benefits through February. You could pay pre-tax only for benefits through December 31st.