Family and Medical Leave Act

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The Family and Medical Leave Act (“FMLA”) requires covered employers to grant unpaid leave for family related medical issues, as defined by the Department of Labor.  This applies to health plans in that employers must provide group health plan benefits to employees on a FMLA leave.

Plans Covered

FMLA applies to Medical, Dental, and Vision Care plans, Health FSAs, and HRAs.

Employers with 50 or more employees within 75 miles of the worksite must comply with FMLA provisions.

Employee Rights While on FMLA Leave

During FMLA leave, employers must provide the employee with group health plan benefits on the same terms and conditions as if the employee had continued to work. This includes continuation of employer and employee contributions for coverage at the same level as for active employees.

If the employee is on paid FMLA leave (e.g., the employee is using sick, vacation, or personal time), the employer will continue to make payroll deductions to collect the employee’s share of the premiums for the health benefits.

If the employee is on unpaid leave, the employer may require the employee to pay the employee’s share of the premium for the duration of the medical leave. The employer may use various methods for premium collection.

General Notice Requirements

Poster

To meet the general notice requirements of the FMLA, covered employers must display a poster in plain view for all workers and applicants to see, notifying them of the FMLA provisions and providing information concerning how to file a complaint with the Wage and Hour Division. A covered employer must display this poster even if it has no eligible employees.  Employers may post the Wage and Hour Division’s FMLA Poster, which is available at no cost from the WHD website to satisfy this requirement, or may use another format so long as the information provided includes, at a minimum, all the information contained in the FMLA Poster.

Notice

In addition to displaying a poster, a covered employer who has any eligible employees also must provide a general notice containing the same information that is in the poster in its employee handbook (or other written material about leave and benefits). If no handbook or written leave materials exist, the employer must distribute this general notice to new employees upon hire. Employers may meet this general notice requirement by either duplicating the general notice language found on the FMLA Poster or by using another format so long as the information provided includes, at a minimum, all the information contained in the FMLA Poster.

Electronic Delivery

Generally, the poster may be posted electronically and the general notice may be distributed electronically provided all other requirements are met.

The Wage and Hour Division (WHD) will only consider electronic posting an acceptable substitute for the continuous posting requirement where:

• All of the employer’s employees exclusively work remotely;
• All employees customarily receive information from the employer via electronic means; and
• All employees have readily available access to the electronic posting at all times.

When an employer has employees on-site and other employees teleworking full-time, for example, the employer may supplement a hard-copy posting requirement with electronic posting and the WHD would encourage both methods of posting.

The notice requirements may be met via email delivery (or another similar method of electronic delivery), only if the employee customarily receives information from the employer electronically. WHD will not consider electronic posting on a website or intranet to be an effective means of providing notice if an employer does not customarily post notices to affected employees or other affected individuals electronically.

Penalty

An employer who willfully violates this disclosure requirement may be subject to a civil money penalty.

Benefit Termination

If benefits are terminated for nonpayment during an FMLA leave, the employee must be reinstated to his or her same level of coverage upon return to work.

If an employee does not return to work after an FMLA leave, he or she is entitled to elect COBRA continuation coverage under the group health plan. The COBRA qualifying event is the failure of the employee to return from FMLA, not the date on which the employee begins FMLA leave.

In addition, if an employee fails to return to work from FMLA leave, the employer may recover its share of the premiums that it paid during the leave Note that a somewhat different rule applies to the recovery of premiums paid to maintain benefits other than health coverage. Discussion of those rules is outside the scope of this material. unless the failure to return is due to:

• The continuation, recurrence, or onset of a serious health condition which would otherwise entitle the employee to leave under FMLA. The employer may require medical certification of the condition.
• Other circumstances beyond the employee’s control.

Commencement and return from unpaid FMLA leave are status change events for cafeteria plans and health FSAs.

Premium Payment During Unpaid Leave

If the employee is on unpaid leave, the employer may require the employee to pay the employee’s share of the premium for the duration of the medical leave.

The employer may use any of the following methods:

1. Payment would be due at the same time as it would be made if by payroll deduction;
2. Payment would be due on the same schedule as payments are made under COBRA;
3. Payment would be prepaid pursuant to a cafeteria plan at the employee’s option;
4. The employer’s existing rules for payment by employees on leave without pay would be followed, provided that such rules do not require prepayment (i.e., prior to the commencement of the leave) of the premiums that will become due during a period of unpaid FMLA leave or payment of higher premiums than if the employee had continued to work instead of taking leave; or,
5. Another system voluntarily agreed to between the employer and the employee, which may include prepayment of premiums (e.g., through increased payroll deductions when the need for the FMLA leave is foreseeable).

The employer must provide the employee with advance written notice of the terms and conditions under which these payments must be made.  An employer may not require more of an employee using unpaid FMLA leave than the employer requires of other employees on leave without pay.

Cafeteria Plans and Health FSAs

Commencement and return from unpaid FMLA leave are status change events for cafeteria plans and health FSAs. If an employee’s coverage under the health FSA terminates while the employee is on FMLA leave, the employee is not entitled to receive reimbursements for claims incurred during the period when the coverage is terminated.

Upon reinstatement into a health FSA after return from FMLA, the employee can:

• Resume coverage at the level in effect before the FMLA leave and make up the unpaid premium payments; or
• Resume coverage at a level that is reduced and resume premium payments at the level in effect before the FMLA leave.

If an employee chooses to resume health FSA coverage at a level that is reduced, the coverage is prorated for the period during the FMLA leave for which no premiums were paid. In both cases, the coverage level is reduced by prior reimbursements.

A couple of example from the regulations will help clarify this rule.

Example 1

Scenario: Employee B elects $1,200 worth of coverage under a calendar year health FSA provided under a cafeteria plan, with an annual premium of $1,200. Employee B is permitted to pay the $1,200 through pre-tax salary reduction amounts of $100 per month throughout the 12-month period of coverage. Employee B incurs no medical expenses prior to April 1.

On April 1, B takes FMLA leave after making three months of contributions totaling $300 (3 months x $100 = $300). Employee B’s coverage ceases during the FMLA leave. Consequently, B makes no premium payments for the months of April, May, and June, and B is not entitled to submit claims or receive reimbursements for expenses incurred during this period. Employee B returns from FMLA leave and elects to be reinstated in the health FSA on July 1.

Result: Employee B must be given a choice of resuming coverage at the level in effect before the FMLA leave (i.e., $1,200) and making up the unpaid premium payments ($300), or resuming health FSA coverage at a level that is reduced on a prorata basis for the period during the FMLA leave for which no premiums were paid (i.e., reduced for 3 months or 1/4 of the plan year) less prior reimbursements (i.e., $0) with premium payments due in the same monthly amount payable before the leave (i.e., $100 per month).

Consequently, if B chooses to resume coverage at the level in effect before the FMLA leave, B’s coverage for the remainder of the plan year would equal $1,200 and B’s monthly premiums would be increased to $150 per month for the remainder of the plan year, to make up the $300 in premiums missed ($100 per month plus $50 per month ($300 divided by the remaining 6 months)). If B chooses prorated coverage, B’s coverage for the remainder of the plan year would equal $900, and B would resume making premium payments of $100 per month for the remainder of the plan year.

Example 2

Scenario: Assume the same facts as Example 1 except that B incurred medical expenses totaling $200 in February and obtained reimbursement of these expenses.

Result: The results are the same as in Example 1, except that if B chooses to resume coverage at the level in effect before the FMLA leave, B’s coverage for the remainder of the year would equal $1,000 ($1,200 reduced by $200) and the monthly payments for the remainder of the year would still equal $150. If instead B chooses prorated coverage, B’s coverage for the remainder of the plan year would equal $700 ($1,200 prorated for 3 months, and then reduced by $200) and the monthly payments for the remainder of the year would still equal $100.

Example 3

Scenario: Assume the same facts as Example 1 except that, prior to taking FMLA leave, B elects to continue health FSA coverage during the FMLA leave. The plan permits B (and B elects) to use the catch-up payment option described in Example 3 of this section, and as further permitted under the plan, B chooses to repay the $300 in missed payments on a ratable basis over the remaining 6-month period of coverage (i.e., $50 per month).

Result: Thus, B’s monthly premium payments for the remainder of the plan year will be $150 ($100 + $50).