The number one issue we see with employers


It’s extremely common for employers to offer benefits to employees who are on some sort of non-FMLA leave of absence. While there’s several good reasons an employer may do this, it’s likely they are violating the eligibility terms spelled out in the SPD or carrier contract by being so generous. Typically, a carrier’s contract or the SPD states that an eligible employee is one who is regularly scheduled to work 30 or more hours per week and actively at work, or who is out on FMLA leave, which is generally only 12 weeks per year (or is eligible for emergency paid sick or family leave). In contrast, the employee handbook or leave policy may promise something like, "Employees on disability leave of absence will retain their on-going seniority and benefits. Health and Life insurance coverage will be provided for a period of six months." This is a considerable problem - the employee handbook is promising something in direct conflict with the carrier’s contract. It happens all too often and can get the broker in serious trouble.

Any benefits continued while not actively-at-work must be allowed under the eligibility provisions of the plan document and the stop loss or carrier's contract, including ancillary benefits. Under ERISA, the plan sponsor has a fiduciary duty to follow the terms of the plan document/SPD. Otherwise, if someone incurs a big expensive claim or dies while out on non-FMLA leave and the policy or SPD says this person is ineligible, the employer could wind up self-insuring a claim. In worst-case scenarios, this could cost hundreds of thousands, if not millions of dollars.  The fix is simple: discuss how the benefits are treated when someone goes out on an approved leave of absence and ensure that the carrier contracts, stop loss contracts and SPD all allow for it. 

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