SABC Newsletter

IRS RELEASED FINAL REGULATIONS ON FAMILY MEDICAL LEAVE ACT (FMLA) AND CAFETERIA PLAN

Employers are required under the FMLA to allow employees taking FMLA leave to continue their health coverage under the same conditions as coverage would have been provided if the employee had been continuously working. Employees on FMLA may retain their group health coverage by continuing to pay their share of the cost. In addition to this option, the regulations require employers to provide employees taking an unpaid FMLA leave of absence with one of the following options: 1) revoke coverage; 2) continue coverage without having to pay the employee share of the contribution during the unpaid leave. If the employee chooses to continue coverage without paying the employee contribution, the employer may recoup the employee's contributions upon return from leave.

Under a Cafeteria Plan the employer may offer one or more of the following options to an employee who continues group health plan coverage (including unreimbursed medical) while on unpaid FMLA leave; provided that the payment options for employees on FMLA leave are offered on terms at least as favorable as those offered to employees not on FMLA leave.

Pre-pay - A cafeteria plan may permit an employee to pay, prior to commencement of the FMLA leave period, the amounts due for the FMLA leave period. However, FMLA provides that the employer may not mandate that an employee pre-pay the amounts due for the leave period. Contributions under the pre-pay option may be made on a pre-tax salary reduction basis or on an after-tax basis. The pre-pay option can not be the sole option offered to employees on FMLA leave.

Pay-as-you-go- Employees may pay their share of the premium payments on the same schedule as payments would be made if the employee were not on leave or under any other payment schedule permitted by the Dept. of Labor FMLA regulations, or any other system voluntarily agreed to between the employer and employee. Contributions under the pay-as-you-go option may be made on an after-tax basis or on a pre-tax basis to the extent that the contributions are made form taxable compensation (e.g. from unused sick days or vacation days) that is due the employee during the leave period. Employers are not required to continue health coverage for those employees who choose this option and fail to pay their premiums.

Catch-up -If an employee elects the catch-up option, the employer and the employee must agree in advance of the coverage period that: the employee elects to continue health coverage while on unpaid FMLA leave; the employer assumes responsibility for advancing payment of the premiums on the employee's behalf during the FMLA leave; and these advance amounts are to be paid by the employee when the employee returns from leave. The catch up option may be the sole option offered to employees on FMLA leave if and only if the catch-up option is the sole option offered to employees on non-FMLA leave without pay.

Unreimbursed medical coverage- If an employee allows their coverage to terminate under their unreimbursed medical spending account, the employee is not entitled to receive reimbursements for claims incurred during the period when the coverage is terminated. If an employee subsequently elects or the employer requires the employee to be reinstated in unreimbursed medical upon return from FMLA leave for the remainder of the plan year, the employee may not retroactively elect unreimbursed coverage for claims incurred during the period when the coverage was terminated.

IN OBSERVANCE OF THE HOLIDAYS WE WILL BE CLOSED DECEMBER 24TH, 25TH & 31, AS WELL AS NEW YEARS DAY. HAPPY HOLIDAYS!