Employers Ask: What happens to benefits eligibility during an unpaid leave of absence?
By Danielle Capilla
Chief Compliance Officer for United Benefit Advisors
Question: If an employee of an applicable large employer takes an unpaid leave of absence (not Family and Medical Leave Act), what happens to their benefit eligibility during that time?
Answer: The answer depends on whether the employer is using the measurement and lookback method of tracking employees or the monthly method.
Measurement and lookback: If the employee is on an unpaid leave of absence and in a stability period, the employee must be offered coverage through the stability period. When the employee's hours are calculated during the contemporaneous measurement period, the leave of absence will count as zero hours of service. If an employee declined coverage for a stability period, and then has a leave of absence that is less than 13 weeks, upon return the employer is not obligated to make a new offer of coverage to the employee.
Monthly: The employee would not be credited with hours of service. Once the employee drops below 30 hours per week for the month, the employer does not need to offer coverage.
Employers should note that unpaid FMLA is handled differently and special rules apply for educational institutions.
Leaves of absence can make it difficult for an employer to determine if or how an employee counts toward the applicable large employer (ALE) threshold of 100, as well as determining if an employee is considered full time and must be offered coverage. Request UBA’s ACA Advisor, “Perfect Attendance! How to Handle Leaves of Absence under the ACA” which defines service hours, exceptions, methods for counting hours, FMLA, USERRA, and jury duty, unpaid leave, layoffs, disability, conveying policies, determining ALE status, and crediting hours to employees.