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Understand What Is and What Is Not an Event.
One of the most common COBRA misconceptions by employers is the belief that going on FMLA - or some other type of leave, such as ADA - is a COBRA Qualifying Event.
The assumption by employers seems to be that since the employee is not getting paid while on leave their employee portion of their benefit premiums isn’t being deducted from paychecks, and therefore they need to elect COBRA so that they can be billed for their premiums. The employer will often list the event type as a Reduction of Hours when sending the COBRA Election Notice in these cases. This of course would be incorrect. A COBRA qualifying event can certainly occur while someone is on FMLA, such as a termination of employment because the employee did not return to work when FMLA mandated or if a dependent has qualifying event while the employee is on leave, but going on a leave of absence in and of itself is not a COBRA qualifying event. It’s important to remember that COBRA qualifying events only occur when there is a loss of coverage.
FMLA & Other Leave Requires Deliberation
FMLA requires an employer to maintain coverage under any group health plan for an employee on FMLA leave under the same conditions coverage would have been provided if the employee had continued working. Ultimately if the employee doesn’t substitute FMLA with paid leave (vacation/sick time/PTO) the employee must continue to make any normal contributions to the cost of their health premiums while on there are out on leave. Unless company policy or special arrangements dictate otherwise, employers have two options to recoup unpaid premiums. The first option is that they give the employee a due date to submit premiums, allowing a 30-day grace period to make the payment. The employer must also provide written notice to the employee that the payment has not been received and allow at least 15 days after the date of the letter before coverage can be terminated for non-payment.
The other option is that the employer can keep the participant’s plan active and the employer can recover the premiums once the employee returns to work. If the employee decides not to return to work after FMLA resulting in a termination of employment, then that would constitute as a COBRA qualifying event and the employer could have a recourse to collect unpaid premiums from the employee.
Tools to Avoid Pitfalls of COBRA in conjunction with Leave of Absence
The take away here is that employers should not, use COBRA as an alternative option (“loophole”) to bill FMLA employees for their premiums while out on a leave of absence. They should however, have a working knowledge of their responsibilities in accordance with Federal and State Mandate to meet compliance standards. Unpaid premiums must be collected from the employee in accordance with the FMLA guidelines.
This can be a confusing and time-consuming compliance liability for any HR Department to deal with. Thankfully, there is a myriad of resources available to employers and PEOs with respect to proper management of these HR aspects.
CobraHelp highly recommends that employers and PEOs seek Expert advice for the management of FMLA, LOA, and COBRA administration. CobraHelp can provide FMLA administration in addition to COBRA administration through intuitive tools, and an Expert team, allowing you to focus on other aspects of your business. To learn more, contact us today!