Plan Documents and Termination vs. Furlough vs. Lay-Off
Termination, furlough, and lay-off are not defined terms under ERISA or the Affordable Care Act. A furlough is generally considered to be a mandatory leave with limited or no pay, with the expectation that employees return to work once regular business resumes. A termination and a lay-off are more similar, but an employee who is temporarily laid off will likely be asked to return to work. The problem from an employee benefits perspective is that plan documents do not usually differentiate between an employee who is terminated versus one who is laid off versus one who is furloughed. For benefits purposes, eligibility is generally described as an active full-time employee or an employee who works at least a minimum number of hours per week (e.g., 30). If an employee is under-protected leave—such as FMLA—benefits continue during leave. This means that any employee who is not meeting the hours requirement or is not actively at work (work from home is considered actively at work) based on being terminated, furloughed, or laid off–even temporarily—will generally have their benefits terminated and receive an offering of COBRA, state continuation, or no offer of continuation depending on the employer’s size and state in which they are located.
For employers who need to cut costs, now is the right time to start the discussion on how to “right-size” your health plan. As you know we have improved plan designs for employees and lowered costs for everyone. These questions need to be directed to me directly.
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