FMLA and COBRA

mushroomHR

An employee is on FML and collecting short term disability. She is also responsible for maintaining her portion of her insurance premium contribution to us each month. Let's say that this employee does not make her contribution to us and we terminate her insurance. After her insurance is terminated, is this employee eligible for COBRA until she returns to work? Someone informed me that while an employee is on FML we must maintain their insurance and could not cancel it. They also said that an employee on FML is not eligible for COBRA. I have never heard this before and searched the regs but did not locate anything that addressed this issue. I did find 825.212 that talked about unpaid premiums but did not see anything about offering COBRA coverage. Thanks.

LindaS

This is an issue that has been addressed before so I will try to give you a quick synopsis -

You should NOT cancel an EEs coverage as long as they are on FMLA. You have the right to recoup any unpaid premiums once the EE returns. Some HR people may tell you it is okay to terminate the coverage but most will tell you that this is not something that is recommended.

As for COBRA, termination of coverage while on FMLA is not a COBRA qualifying event. They would not qualify for COBRA until their FMLA expires.

mushroomHR

Linda: Thanks for your reply. I did a search before posting this question and could not find an answer. I did look in the regs. 29 CFR 825.212 and it does address the fact that you can cancel coverage for someone on FML if their premium is more than 30 days late. It states that if coverage lapses because an employee has not made required premium payments, upon the employee's return from FMLA leave the employer must still restore the employee to coverage/benefits equivalent to those the employee would have had if leave had not been taken and the premium payments had not been missed.

It appears to me that you can either cancel their coverage or pay their premium(s) and recoup them when the employee returns to work. Is there a problem with the employer deducting these missed premiums from the employee's paycheck? I know employers aren't supposed to make deductions from an employee's wages so I'm assuming it would be OK to make the deductions in this case.

Could you point me in the direction of where it states loss of coverage during FML is not a COBRA qualifying event? Thank you.

Kai

According to the IRS ( IRS notice 94-103) taking leave under FMLA does not constitute a COBRA qualifying event that sets off COBRA notice requirements. However, a qualifying event does occur if 1) the employee is covered by your group health plan before the first day of FMLA leave, 2) the employee does not return to work at the end of the FMLA and 3) the employee would lose coverage under the plan before the end of the maximum coverage period provided by COBRA.

My source* also says a qualifying event occurs if an employee fails to pay his or her share of the group health plan premiums during the FMLA leave or declines group health plan coverage during the leave.

*Business & Legal Reports FMLA compliance guide

Don D

But the bottom line is you are required to maintain the healthcare coverage for the duration of FMLA. You have the right to recover the employee's cost, if not paid, but you must maintain the coverage.

mushroomHR

OK so you can recoup their premiums when they return to work. Is there a problem with the employer deducting these missed premiums from the employee's paycheck? I know employers aren't supposed to make deductions from an employee's wages so I'm assuming it would be OK to make the deductions in this case? Do you have to get something in writing from them to make these deductions? Or can the employer just go ahead and deduct upon the employee's return?

Don D

[font size="1" color="#FF0000"]LAST EDITED ON 09-30-04 AT 08:26AM (CST)[/font][br][br]After re-reading the regs, I find that I was wrong when I said (above) the employer MUST maintain health coverage for the duration of FMLA. If the premium payment is more than 30 days late, and you have provided written notice to the ee that payment has not been received and you then wait 15 days, you may drop the coverage on a specified date, unless the premium is received by that date.

Someone indicated this would not be a COBRA 'qualifying event'. I don't know why it wouldn't be. The fact that they were out on FMLA when their coverage was terminated wouldn't affect it meeting the definition as far as I know.

Regarding your last question, although the FML regs do give the employer the authority to pay the ee's portion of the premium and indicates it can be recovered later, FMLA does not trump other mandates that you not make payroll deductions except for certain allowed things. Collecting a debt is not one of them.

mushroomHR

I've got the answer. This is from a COBRA publication faxed to me by a COBRA administrator:

"Q. Does an employee's failure to pay group health plan premiums while on FMLA leave affect COBRA rights?

A. COBRA rights are not affected if an employee fails to pay the employee portion of premiums for coverage under a group health plan during FMLA leave. Any lapse of coverage under a group health plan during FMLA leave is irrelevant in determining whether circumstances constitute a COBRA event, according to the Internal Revenue Service. And if the employer paid the employee's health plan premiums during the leave period, COBRA coverage may not be conditioned on reimbursement of those premiums.

Loss of coverage due to nonpayment of premiums during FMLA leave is not a COBRA qualifying event and is disregarded for COBRA purposes."

This issue has never been addressed in the many FMLA/COBRA seminars I have attended. They've only said you can discontinue coverage for non payment of premiums. That's as far as they've gone on the subject.

irenesmsaclaims

There are previous threads about this.

The employer may terminate coverage during FMLA for non-payment of premium.

The COBRA qualifying event only occurs when the employee notifies that he/she is not returning to work, or does not return to work. Then and only then does the employee become qualified for COBRA.

The end of FMLA is not a qualifying event.

Gloria

If an employee cannot return to work at the end of FMLA, wouldn't this be qualifying event because of reduced work hours unless specified in an employer's policy procedures to maintain an employee's health benefits under certain circumstances.

irenesmsaclaims

If the person does not return to work, then it is a qualifying event. Reduced work hours during FMLA is not. There are special rules with COBRA and FMLA.