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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 Because applicable laws change, the informaon provided may become outdated.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 benet connuaon for employees who are on a leave of absence, not employment connuaon or terminaon. Employer-sponsored group benefit plans are generally designed to cover only those employees who actively work a minimum number of hours. When employees take short-term leave for vacations, holidays, or sick days during the normal course of business, their benefits continue uninterrupted. However, employees occasionally take longer leaves of absence (LOA), and in these instances, benefit continuation becomes more complicated. Employers should review plan contracts, certificates, and SPDs, along with relevant federal and state laws to determine if and how benefits may continue during an LOA. In all cases, we recommend that the benefits while on leave are administered fairly and in a nondiscriminatory manner to similarly situated employees. How Long Can My Employee Remain on Their Benets as an Acve Employee During an LOA? The answer depends primarily on two factors: • Does the leave qualify under FMLA or a similar state/local benet-protected leave law? • What does the insurance or vendor policy state regarding when coverage must terminate based on loss of eligibility (reducon of hours)? Whether the LOA is paid or unpaid will rarely be a factor in how long the employee can connue coverage as an acve employee. FAQs on Benets During a Leave of Absence 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 Because applicable laws change, the informaon provided may become outdated.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. If the Leave Is Protected Under FMLA (Federal), What Benets Must Be Connued? During an eligible leave, FMLA requires the employer to maintain the employee’s coverage under any group health benets on the same terms that would apply if the employee was not on leave. Group health benets include medical, dental, vision, health exible spending account (FSA), and health reimbursement arrangement (HRA) plans. FMLA also requires the employer to connue non-health benets if the benet would connue during a non-FMLA leave (paid or unpaid, as applicable). For more informaon, please see pages 59-60 of the DOL’s Employer’s Guide to the Family and Medical Leave Act. During FMLA Leave, What if the Employee Does Not Want to Connue Benets? FMLA allows employees to elect to stop their benets during FMLA. If applicable, employers should get the elecon in wring. Upon return to work at the end of FMLA, the employee is entled to have all benets restored without any waing period or other requirements. For more informaon, please see page 60 of the DOL’s Employer’s Guide to the Family and Medical Leave Act. During FMLA Leave, How Do Employees Pay for Their Connued Benets? Employees cannot be charged more during FMLA than they would pay for their coverage while working, but they are sll responsible for paying their regular share of premium. During paid FMLA, payroll deducons should connue as normal, unless the employee chooses to stop the benet. During unpaid FMLA, including when the employee is receiving pay from a third party (e.g., insurance carrier or state program), the employer must provide the employee with the available payment opons in wring, in advance. FMLA allows the employer to oer any of the following methods: • Prepaid (payroll deducons): To comply with state payroll laws, employers should always get the employee’s agreement in wring for this arrangement. • Pay-as-you-go: Premium could be due on the same schedule as either payroll contribuons or that would apply under COBRA. It is up to the employer whether to accept checks or other forms of payment, as long as there is no addional cost to the employee. • Any other system agreed to between the employer and employee, including allowing the employee to pay back the premium through payroll deducons upon return to work. The employer may only cancel the employee’s coverage for non-payment if the premium is at least 30 days late and the employer mailed wrien noce of the cancellaon for non-payment at least 15 days prior to the cancellaon. If coverage
©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. is cancelled for non-payment, it must be restored upon the employee’s return to work when FLMA ends. Terminaon of coverage for non-payment is not a COBRA qualifying event. However, if the employee fails to return to work aer FMLA, the last day of FMLA is a COBRA qualifying event due to reducon of hours or terminaon of employment, as applicable. For more informaon, please see pages 60-62 of the DOL’s Employer’s Guide to the Family and Medical Leave Act. What if the LOA Is Eligible Under a State/Local Protected Leave Law? Some states and localies have laws that protect employees during an LOA. Some of these laws provide income replacement without job or benet protecon. Other laws provide job protecon, but not benet protecon, or do not protect benets under the same rules as FMLA. Please check your state and local laws carefully to determine whether the law protects your employee’s benets during their absence and whether there are specic rules that apply for premium collecon. When an employee’s leave qualies under both FMLA and a state or local law, the laws will generally run concurrently unless stated otherwise in the state or local law. For more informaon, please see page 70 of the DOL’s Employer’s Guide to the Family and Medical Leave Act. During an LOA That Is Not Protected (Or Once the Protected Period Has Been Exhausted), How Long Can My Employee Stay on Benets as an Acve Employee? This depends on the eligibility and terminaon rules for each benet. An employer cannot extend the coverage beyond what is permied by any benet policy. Please check your benet contracts carefully. 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”. • Fully-insured benets: Employers must follow the rules stated in their carrier’s policy. If the employer extends benets beyond the period permied by the policy, the carrier could determine that the employer is in breach of contract and that the carrier is not responsible for claims. • Self-insured benets: Employers may have a bit more say; however, they must sll follow their policy as wrien or conrm with their vendor that the extended coverage period is permied by their stop-loss coverage. • Health FSA: Many cafeteria plans connue health FSA parcipaon when there is a reducon in work hours, including during an LOA. However, plans oen allow parcipants to reduce contribuons or pause parcipaon during an unpaid leave.
©2025 OneDigital | HR Consulng 4 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. • Dependent Care FSA: Parcipants may wish to stop contribuons since dependent care expenses incurred during an LOA longer than 2 weeks are generally not eligible. (Please see “Temporary absence from work” on page 7 of IRS Publicaon 503.) • Life and disability: See details below. What if the Benet Policy Allows the Employer to Determine How Long Coverage Connues? Some policies allow coverage to connue during an approved LOA for as long as the employer connues to pay the premium. To avoid the risk of potenal discriminaon, the employer should always allow the same coverage period under the same terms for all similarly situated employees. Employers should establish a standard maximum leave period for terminang coverage and oering COBRA. Oering COBRA protects the employer in case the employee does not return to work and provides a familiar procedure for collecng premium or terminang benets due to non-payment. What if We Are Hesitant to Oer COBRA? When an LOA causes a loss of eligibility for a health benet, the employer must terminate the acve coverage and oer COBRA or state connuaon, as applicable. However, the employer could oer to subsidize the COBRA rate during the approved LOA so that the employee sll pays the regular employee rate. If the employee returns as scheduled, then they would transion back to acve employee status without any break in coverage or added expense. If the employee does not return, then the employer is protected because they have already taken care of the required paperwork and the employee would become responsible for the full cost of COBRA going forward. How Does an LOA Impact Life and Disability Coverage? Life and disability insurance contracts are wrien for acvely working employees. FMLA does not automacally protect this coverage, but some contracts mirror FMLA provisions. More oen, coverage ends the month that the LOA starts or at the end of the next month. 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. When the LOA is due to the employee’s disability, the disability coverage will generally connue through the eliminaon period if the employer connues paying the premium. If the life insurance contract includes a “waiver of premium” provision, the employer may be able to connue to pay the life insurance premium while the employee is disabled and waing for waiver of premium approval to keep coverage in eect. Note that the life “waiver of premium” provision is only available for employees who qualify. The life insurance contract may also include a provision that premium can be paid for a limited period if the LOA is due to illness or injury to keep coverage in eect. Please review the carrier contract for details.
©2025 OneDigital | HR Consulng 5 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 the employee is not disabled, or does not qualify for a waiver of premium, the employer must provide conversion and/or portability informaon in me so that the employee does not lose rights to keep the coverage. What Rules Apply for Collecng Premium During Unpaid, Non-FMLA Leave? If benet policies allow coverage to connue, 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. Stay Informed . Stay Co mpliant . 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.