Navigating Benefits

FMLA Regulations: Should You Collect Premiums While Employees Are on Leave?

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Posted by March 26, 2017

When an employee takes a medical leave, it’s important to understand the regulations in the Family and Medical Leave Act (FMLA). After determining whether an employee is eligible for FMLA leave, one of the next things you’ll need to discuss is how her employee benefits will be paid when she is out of work. Will you absorb the employer and employee premiums? Will she be forced to use paid leave to cover the costs? Or, will you bill your employee for her share of the benefit premiums?

With so many FMLA regulations to keep up with, it can sometimes be a challenge to ensure you’re following the rules correctly. As an employer, you want to look out for the welfare of your employees, but at the same time, your company’s bills still need to be paid.

What You Need to Know About Benefits and Premiums

The FMLA requires that all employees taking FMLA leave be allowed to continue their group health insurance coverage even though they are not working (regardless of whether their plan provides individual or family coverage).

The regulations do not specify how you should handle other benefits, such as dental insurance. However, they do require that any benefits that would be continued if the employee were on a different type of leave should also be continued during FMLA leave. It’s up to you to establish your business’ policy on which of these benefits you will maintain and how premiums will be paid. The easiest way to be consistent and avoid errors or misunderstandings is to follow the same guidelines the FMLA sets for group health insurance for all benefits.

Your employees are always required to pay their share of any premiums while on FMLA leave. The U.S. Department of Labor’s “Employee Protections Under the Family and Medical Leave Act” fact sheet advises:

“If paid leave is substituted for FMLA leave, the employee’s share of group health plan premiums must be paid by the method normally used during paid leave (usually payroll deduction). An employee on unpaid FMLA leave must make arrangements to pay the normal employee portion of the insurance premiums in order to maintain insurance coverage.”

The best way to ensure that you and your employees understand the FMLA regulations, and how you have interpreted them for your business, is to write and formalize an FMLA policy for your company. In it, outline how premiums will be paid for all benefits while an employee is out on FMLA leave and what method you will use to capture the employee’s share of the premium.

Taking Premiums Out of Paid Leave

The easiest and most effective way to follow FMLA regulations, while also ensuring your bills are paid, is to use your employee’s accumulated paid leave time to cover her share of the premium. The amount owed can be calculated before the leave begins, so your employee will know exactly how many hours she needs to have banked to cover the premiums. If you plan on requiring employees to use sick leave time to pay for premiums, it must be included in your company’s FMLA policy. Otherwise, this can be allowed at your discretion.

Before going this route, there are a few things to consider. Your employees might not have accumulated enough leave time to pay for their share of the premiums. It’s important to discuss a backup plan with your employee before their leave begins. Will she pay the remaining amount in a one-time payment before her leave begins? Will you bill her? Or will you allow her to repay the remaining balance when she returns to work?

Also, will you allow other employees to donate some of their accumulated leave time to help an employee taking FMLA leave? This may help cover the cost of the employee’s benefits, but it can’t be allowed on a case-by-case basis. Whatever is deemed fair for one employee must be allowed for all employees.

Before allowing employees to share leave with another staff member, you must have a leave-sharing policy in place. Set up guidelines specifying how much time your employees can donate, and make sure the employee receiving the leave time isn’t paid for more hours than they would have worked if not on leave.

Billing Your Employees for Their Share of Benefit Premiums

If your employee is on FMLA leave, but will not be using any paid leave, it’s within your right to bill him for his share of the premium. There are many ways to approach this method. You can bill your employee for one lump sum—the entire amount owed while on leave. However, don’t expect the payment within a short time frame. You may also bill an employee on a monthly basis while he is on leave, or you can bill every pay period.

Choose the billing time frame that makes the most sense for you and your employees. While you should allow for some flexibility for each employee, it’s smart to write a general billing guideline into your FMLA policy, so that you aren’t forced to collect premiums for an extended period of time. If you’re billing an employee while she’s out on leave, it’s reasonable to expect her to make all payments within 30 days of returning to work.

Also, ensure that every bill has a precise due date written on it (usually 30 days from the date of the bill). If you plan on billing your employees for their share of benefit premiums while on FMLA leave, it’s best to get the agreement in writing before they begin their leave. Consistency is key, and an agreed-upon method of sending bills will keep everyone organized and ensure uninterrupted coverage.

One caveat to billing your employees is that they may choose to ignore you and default on their payments. The FMLA states that if an employee is 30 days late in paying their premium, you can drop her coverage. To initiate ending coverage, a written notice must be sent to the employee indicating nonpayment, and coverage must be continued for 15 days following the date of the written notice.

Making Employees Repay Missed Benefit Premiums

While you’re required to pay the employer portion of your employees’ benefits while they are out on FMLA leave, you may choose to allow employees to repay missed premiums when they return to the workforce. This is a popular route for many businesses because it requires fewer internal record-keeping and administrative duties.

However, since many employees are unable to return to work after a medical leave, whether by choice or because of a medical condition, there’s much greater risk that the employee portion of premiums will not get paid. If you’d rather recoup costs when employees return to work, be aware that you may end up blindsided if an employee chooses not to return. If this were to happen, it is within your right to bill the employee for the entire benefit premium (both the employer and employee shares).

It’s important to follow the FMLA regulations when an employee takes medical leave while making sure that your hard-working employees are being taken care of. If you don’t have a company FMLA policy in place, make that the next item on your to-do list. If possible, meet with any employee who needs to take medical leave before it begins to ensure that his benefits continue seamlessly and all premiums are paid on time.

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