Managing Employee Leaves of Absence

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1 Managing Employee Leaves of Absence Laura Jordan Mike Lane TM Copyright 2012 Thompson Coburn LLP

2 Agenda USERRA FMLA Workers Compensation ADA And how all of these laws intersect with your employee benefit plans

3 USERRA Provides reemployment rights to those who have been absent due to military service Active military duty Related training National Guard duties Fitness for service examinations Funeral honors duties Disaster response services and related training

4 USERRA Reinstatement rights generally expire after 5 years of continuous service May be extended longer than 5 years if service related to National Security Domestic Emergency Review service orders to identify any service not counted toward 5 years

5 USERRA Reinstatement rights Service of 1 90 days: Same position employee would have held as if continuously employed Service of 91 days or more: Same position employee would have held OR position of like seniority status and pay if qualified

6 USERRA USERRA leave impacts benefit rights under: Welfare plans/cobra 401(k) plans Pension Plans

7 USERRA and COBRA USERRA provides health plan rights similar to COBRA Medical, dental, vision and FSA plans Some rights may be more expansive than COBRA Generally, employers apply USERRA and COBRA rules concurrently

8 USERRA and COBRA USERRA 24 month benefit continuation If leave is 30 days or less, premium is based on active employee rates If leave is longer than 30 days, premium may not exceed 102% of total COBRA 18 month benefit continuation Premium may not exceed 102% of total

9 USERRA and Retirement Plans Death during qualified military service Deemed return to active employment Check vesting and special death benefits Optional Provisions During Leave Continued accruals and contributions Disability retirement disabled during leave May recognize differential pay for contributions Distributions of elective contributions (deemed severance from employment)

10 USERRA and 401(k) For USERRA covered employees who have outstanding 401(k) loans 6% interest rate limitation applies Employee may suspend payments and extend loan term for the length of the covered service period Subject to loan provisions in plan (or loan policy)

11 USERRA and Retirement Plans After Return from Leave No break in service for eligibility, vesting or service credits Automatic vesting service and pension accrual during leave Automatic profit sharing contributions Right to make up contributions and receive related matching contributions Lesser of 3xs leave period or 5 years Exception from discrimination testing

12 FMLA Available for continuous or intermittent absences of up to 12 weeks / year Childbirth, adoption or foster care placement Care for a family member with a serious health condition Due to employee s own serious medical condition Because of qualifying exigencies arising from a family member s active duty in military Also covers absences to care for an injured service member (but leave available for up to 26 weeks in a 1 year period)

13 FMLA Job reinstatement law If the employee returns by or before expiration of covered leave, employee is generally entitled to be reinstated into same or equivalent position Leave may be unpaid Check state based FMLA laws No such laws in Missouri or Illinois Greater rights may apply (e.g. NJ, WA, CA)

14 FMLA & Health Plan Benefits Continue group health plan benefits as if the employee had continued to work If employer has a 125 plan, then premiums can be made by: Prepay Pay as you go Catch up Rights apply during reduction of hours under FMLA that would otherwise cause coverage loss Employees may be allowed to drop other non health plan coverage during leave

15 FMLA and Health Plan Benefits Health plan coverage may drop during leave If employee fails to pay premiums (15 days advance notice) If employee opts out of coverage If employee fails to return to work after leave Must restore health plan and other coverage upon return to work No waiting period / preexisting condition exclusions If employee fails to return to work, employer may require reimbursement for employer paid premiums during leave Subject to certain exceptions

16 FMLA & COBRA Failure to return from FMLA leave may be a COBRAqualifying event (but not the leave itself) COBRA applies if employee was covered before leave commenced (even if coverage lapses during FMLA leave) Maximum coverage period runs from the date of the qualifying event, not the beginning of the leave COBRA date may be different than HIPAA creditable coverage certificate (if coverage drops during leave)

17 FMLA & 401(k) Loans Review terms of plan and 401(k) loan policy Suspension of payments may be permitted under certain types of leave 1 year maximum suspension period Suspension cannot extend beyond 5 year loan term No extension of loan term permitted Loan policy should address re amortization or balloon payment options Rules apply to leave generally (non military)

18 ADA Prohibits discrimination against a qualified individual with a disability Requires employers to make reasonable accommodations Workplace modifications Schedule modifications Use of accrued leave is a reasonable accommodation

19 ADA Extended time off FMLA is generally considered the floor of leave accommodations Whether additional leave is reasonable depends on the circumstances Is the leave request for a definite period of leave? Has the employee made multiple requests to extend leave? Is the leave period shorter than the time required to fill the position? Will the requested leave create an actual undue hardship?

20 ADA Good faith interactive process required Employer is entitled to consider effective alternative accommodations Will schedule modifications or workplace changes facilitate a return to work? May be necessary to evaluate medical documentation or communicate with health care provider to evaluate accommodation needs

21 Workers Compensation Insurance generally mandated by state law Employees often emphasize seriousness of the injury to enhance recovery Maximum Medical Improvement (MMI) rating may not be binding on ADA entitlements Employee should be allowed to present evidence of potential for reinstatement and evaluate reasonable workplace accommodations

22 Workers Compensation State laws vary widely Several states prohibit terminating employees while on workers compensation leave Extended leave may be required, even if all available time off has been exhausted

23 ADA & LTD Conflicting interests Job preservation is goal of ADA Identification of termination date is key to benefit rights Until termination : Employee may be an active participant in health and pension plans COBRA timeline may be delayed Position cannot be filled

24 STD & LTD Benefit plans vary widely in terms of amount, length of compensation, and eligibility terms Plans may be self insured or third party insured May be self administered or third party administered

25 ADA issues in STD/LTD Administration Beware of automatic involuntary termination of employment for LTD Voluntary resignation as condition for eligibility of LTD benefits may be permissible Communication with benefits administrator re: STD & LTD is NOT a substitute for the reasonable accommodation interactive process

26 STD & LTD Benefit Considerations Will medical claims be covered by terms of insurance policy or stop loss? Is cafeteria plan document consistent with tax treatment of employee welfare contributions? Are distributions consistent with pension and 401(k) plan terms? Distributions may be on account of disability or termination of employment

27 STD & LTD Benefit Considerations (cont d) Does your plan include 415 compliance language? In some cases, disabled participants can actively participate in qualified plans Are disabled employees properly offered COBRA? Up to 29 months available after SSA Disability Determination in certain circumstances Consistent policy for termination and COBRA notice may raise employment concerns

28 Social Security Disability Insurance Employees on LTD may apply for SSDI SSDI requires medical evidence of total and permanent disability SSDI does not presumptively exclude an employee from ADA protections SSDI does not take into account whether an employee could work with reasonable accommodations

29 Copyright 2012 Thompson Coburn LLP Q&A