Most employers have procedures in place to ensure that an employee who takes leave under the Family and Medical Leave Act (FMLA), whether as a reduced schedule or an extended leave of absence, retains his or her eligibility under the employer-sponsored health plan. But many employers have gaps in their procedures when an employee’s reduced schedule or leave of absence occurs when the employee is not yet eligible for
Benefit Plan Eligibility
To ensure procedures account for these non-FMLA employer-approved leaves, employers must review and understand the eligibility requirements in their benefit plans. Regardless of the type of benefit plan—whether a health plan, a short-term or long-term disability
Loss of Eligibility
What are some consequences that can exist for an employer if its procedures fail to identify an employee’s loss of eligibility in a benefit plan? If the employee seeks benefits under the plan and the benefits are denied because the employee is no longer eligible for them, the employee may try to seek those denied benefits directly from the employer by alleging that the employer improperly failed to provide notice that eligibility would cease despite the employer’s approval of the employee’s reduced schedule or leave of absence. On the other hand, if the employer approves a claim for benefits despite the employee’s no longer meeting the eligibility requirements under the plan, an insurer that funds any portion of the benefits may deny the claim based on the employee’s lack of eligibility—with the employer held responsible for the full benefit amount.
To address these potential risks, employers may want to periodically review their procedures to ensure there are no gaps in determining when an employee may no longer meet benefit plan eligibility requirements, especially when the employee is on an approved reduced schedule or a leave of absence that falls outside of the FMLA.
For a discussion of these and other important employee benefits and plan administration issues, join us for our Employee Benefits and Executive Compensation Symposium, March 22–23, 2017, in Austin, Texas.
Tina M. Bengs counsels business clients on various employment and labor issues relating to the ADA, ADEA, FMLA, worker's compensation, Title VII, unemployment, termination and discipline, labor issues and collective bargaining agreements, FLSA, NLRA, employment policies and handbooks, and other Indiana and federal employment laws.