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©2025 OneDigital | HR Consulng 1 Disclaimer: The statements made herein are informaonal only and are not legal advice. Because applicable laws change, the informaon provided may become outdated. OneDigital makes no express or implied representaons or warranes arising by law or otherwise, all of which are expressly disclaimed. What is the Dierence Between a Layo, Furlough, and Other Leaves of Absence? • Furlough: a temporary unpaid leave from work where the employee remains in an “employed” status. • Layo: an employer-iniated terminaon of employment that may be temporary or permanent. • FMLA: a federally mandated unpaid leave for family and medical-related care. • Other Employer Leave: non-legally mandated leave of absence that may be paid or unpaid. For the purpose of this FAQ, the focus is on employees who are on a furlough – a form of leave without pay (LWOP). What Eect Does a Furlough Have on an Employee’s Eligibility for Their Employer’s Benet Plan? Employers need to start by reviewing their plan documents to determine what their eligibility rules are and if a furlough is going to result in employees no longer meeng the eligibility requirements. Most benet plans set eligibility based on the number of hours that an employee must work (for example, 30 hours per week) and a furlough is likely going to result in an employee’s hours dropping below the required amount. When an employee’s hours drop below the required amount, unless the plan documents include an excepon, the employee’s benets should be terminated according to the plan documents. However, be careful if your plan is following one of the ACA methods for determining eligibility. Employees whose eligibility is determined using the ACA’s look-back or monthly measurement method might not lose eligibility due to a temporary reducon of hours: • If the employee’s eligibility is determined under the look-back measurement method and they are in a stability period at the me of the furlough, they will retain their eligibility classicaon for the extent of the stability period (even during a furlough). If a new stability period starts during the furlough, an employee who measures as full-me for that new stability period must be oered coverage for the extent of that new stability period. • If an employee’s eligibility is determined using the monthly measurement method, hours of paid leave or for which the employee is entled to pay are counted. If the employee works, uses paid leave or is entled to pay for at least 130 hours per month, they will retain their status as full-me for the duraon of the month and be remeasured for the next month. FAQs on Benets During a Furlough E M P L O Y E R I N S I G H T
©2025 OneDigital | HR Consulng 2 Disclaimer: The statements made herein are informaonal only and are not legal advice. Because applicable laws change, the informaon provided may become outdated. OneDigital makes no express or implied representaons or warranes arising by law or otherwise, all of which are expressly disclaimed. When Would Medical Coverage be Reinstated Aer the Furlough? Upon return to work from a break-in-service of less than 13 weeks, an employer is prohibited from reapplying a waing period to an employee who already sased the waing period or restarng the look-back measurement. If an employee was in a waing or measurement period when the furlough occurred, the employee will generally resume that process at the same stage as before the furlough. For breaks-in-service longer than 13 weeks, the employer is permied to treat the employee as a new hire. NOTE: The ACA Rule of Parity allows a shorter period for employees with fewer than 13 weeks of employment. Employers have the opon to be more generous than the 13-week rule but must ensure their plan documents and the insurance carrier will permit reenrollment. Can Furloughed Employees Remain on the Plan Even Though They Do Not Meet Eligibility Requirements? Plans must operate in accordance with the plan documents, including the carrier’s cercate. If the plan allows for eligibility to connue during a furlough, then you may connue to cover employees up to the me specied within the plan. If the plan does not permit employees on furlough to be covered, their coverage must be terminated and COBRA or state connuaon must be oered, if applicable. Many benet plan documents state that coverage terminates on the day that eligibility is lost or may allow connued coverage only through the end of that month. These provisions can usually be found in a secon regarding terminaon or end of coverage or by searching for the words “absence” or “leave”. If Employees Can Connue Parcipaon in The Plan During a Furlough, How Do They Pay Premiums? Because furloughs are generally unpaid, the employer should establish a wrien policy that outlines when premium contribuons are due, how they must be paid, and when coverage will terminate due to non-payment. As a reminder, terminaon of coverage for non-payment is not a COBRA qualifying event. Employers are advised to consult an employee benets aorney for assistance in draing their policy. If coverage is subject to portability or conversion, the employer should include relevant paperwork with any noce of coverage cancellaon. Is a Furlough a COBRA Qualifying Event? A furlough is a reducon of hours and if this reducon of hours results in the employee’s loss of eligibility and terminaon of coverage under the plan, this would be a COBRA qualifying event and they must be oered COBRA connuaon coverage. Be sure to review plan documents for compliance.
©2025 OneDigital | HR Consulng 3 Disclaimer: The statements made herein are informaonal only and are not legal advice. Because applicable laws change, the informaon provided may become outdated. OneDigital makes no express or implied representaons or warranes arising by law or otherwise, all of which are expressly disclaimed. How Does a Furlough Impact Life and Disability Coverage? Life and disability insurance contracts are wrien for acvely working employees. Coverage ends the month that the furlough starts or at the end of the next month, depending on the contract. It is very important that the employer not connue coverage unless the policy permits it. There are numerous court cases in which the employer was sued because claims were denied aer the employer promised coverage during an employee’s extended LOA or furlough. Upon terminaon of coverage, the employer must provide conversion and/or portability informaon in me so that the employee does not lose rights to keep the coverage. How Does a Furlough Impact Flexible Spending Accounts? Health FSA. Many cafeteria plans connue health FSA parcipaon when there is a reducon in work hours, including during a furlough. However, plans oen allow parcipants to reduce contribuons or pause parcipaon during the furlough period. If the parcipant ceases to be eligible for the plan, this is a COBRA qualifying event. Dependent Care FSA. Parcipants may wish to stop contribuons since dependent care expenses incurred during a furlough longer than 2 weeks are generally not eligible. (Please see “Temporary absence from work” on page 7 of IRS Publicaon 503.) Stay Informed . Stay Compliant . Stay Ahead. Workplace regulations are evolving, and the decisions made in Washington could directly impact your business. OneDigital’s team of HR, insurance and workforce compliance consultants are tracking key legislative and regulatory developments so you don’t have to. Get the latest insights on pending changes in healthcare, benefits, HR compliance, and workforce policies—so you can plan with confidence. Visit the OneDigital Hub: 2025 Federal Updates for Employers for more, or connect directly with our team of HR and workforce consultants.