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FMLA Ends. COBRA Subsidy?


Guest SLSHAHAN
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Guest SLSHAHAN

I just want someone to tell me that my thinking is correct.

In this case we have a person who's FMLA will end in two weeks. He is on Short Term Disability and has applied for Long Term Disability. He has a terminal illness and is not able to physically return to work.

My answer for this case would be no because the employer has not initiated termination of employment - the employee is not returning due to a illness or disability.

In reference to Notice 2009-27

A1: An involuntary termiantion meas as severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee's implicit or explicit request, where the employee is willing and able to continue performing services...

A1: "... In addition, involuntary termination does not include the death of an employee or absence from work due to illness or disability"

Q4: Does involuntary termination include an employer's action to end an individual's employment while the individual is absent from work due to illness or disability?

A4: Yes. Involuntary termination occurs when the employer takes action to end the individual's employment status (but mere absence from work due to illness or disability before the employer has taken action to end the individual's employment status is not an involuntary termination)

Please let me know your thoughts!!

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I think it depends. Are you terminating the employment due to the inability to return to work, or will they still employed in an inactive status?

We have always administratively terminated employees when they exhaust their FMLA and cannot return to work yet. In that case, I think subsidy will apply, based on that Q4.

I think if you were to leave them employed and give them COBRA due to reduction in hours or something, then subsidy would not apply.

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Guest SLSHAHAN
We have always administratively terminated employees when they exhaust their FMLA and cannot return to work yet. In that case, I think subsidy will apply, based on that Q4.

Now I don't agree - the statement above specifically states that an employee must me "willing and able to continue performing services".

A4 also states that an employee is not eligible for the subsidy unless the employer has taken action prior to the illness or disability.

Anyone else?

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Now I don't agree - the statement above specifically states that an employee must me "willing and able to continue performing services".

It says that in Q1 not in Q4. I think it is referencing different circumstances.

A4 also states that an employee is not eligible for the subsidy unless the employer has taken action prior to the illness or disability.

I don't see how it says that. It says employer action to end employment due to illness or disability is an involuntary termination. It says simply being absent due to the illness or disability is not an involuntary termination, until the employer takes the above action to end employment.

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A1: "... In addition, involuntary termination does not include the death of an employee or absence from work due to illness or disability"
A4: Yes. Involuntary termination occurs when the employer takes action to end the individual's employment status (but mere absence from work due to illness or disability before the employer has taken action to end the individual's employment status is not an involuntary termination)

The nuiance between A1 and A4 is the phrases I've underlined.

Be careful in reading the part in parentheses.... you're reading it to mean the action must be before the illness/disability. Remove a couple of clauses and re-read it: "mere absence before the employer has taken action is not an involuntary termination." The action by the employer is the triggering event for it to become involuntary termination.

Now the questions are: How does your company treat the end of FMLA for health insurance, does the EE stay in or go to COBRA? Do you have any legal reason to not terminate the employee? What impact would action to terminate have on STD and LTD?

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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Guest SLSHAHAN
Be careful in reading the part in parentheses.... you're reading it to mean the action must be before the illness/disability. Remove a couple of clauses and re-read it: "mere absence before the employer has taken action is not an involuntary termination." The action by the employer is the triggering event for it to become involuntary termination.

Now the questions are: How does your company treat the end of FMLA for health insurance, does the EE stay in or go to COBRA? Do you have any legal reason to not terminate the employee? What impact would action to terminate have on STD and LTD?

Ok - then go back to the first question - "an employee must be willing and able to continue to performing services".

In this case the employee will be terminated when FMLA ends and will be offered COBRA (is still on the active plan at this time) Their job is still available to them, they just cannot physically return to work. The employer is actually looking for a way to get the subsidy for this person, but we also administer COBRA of numerous other groups that will have the same sistuation with other employees and obviously the employers do not want to do this wrong in either case.

Does anyone know if the DOL webcast next week might touch on this subject? Typical government - leave holes in their language and leave it up to us to figure it out.

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Afraid I don't have an answer but I've got to say that I too have puzzled a bit over the guidance in question 4 and how to reconcile that with the "willing and able to perform" portion. I agree that Q&A 4 suggests that termination following a failure to return from disability (either expressly by the employer or as a result of a resignation by an employee in anticipation of termination by an employer) would appear to be an involuntary termination. However, from a policy standpoint that seems a bit difficult to really reconcile. These disability terminations are not the typical situations the subsidy was presumably intended to address--i.e., situations where somebody willing and able to work is terminated (or basically forced to terminate employment) by the employer in a down market.

Part of me questions why an employer's decision to terminate an employee who fails to return to work after an extended period due to serious disability is really any different from a voluntary vs. involuntary termination perspective than cases involving death. In both cases, the employer is left without a willing and able worker and presumably would not have terminated employment but for the individual's failure to report to work due to death or disability.

Some of this probably stems from the fact that death is an independent COBRA qualifying event and so is clearly outside of the ARRA subsidy provisions whereas disability is not in itself a COBRA qualifying event and so must tie into a termination of employment. Before ARRA, the hard part with disability seemed to be figuring out when a termination of employment occurred (as a result of disability) and when COBRA would start but plans did not really have to worry whether termination was voluntary versus involuntary.

I think the guidance here may really be read to say that the IRS is willing to provide a more generous / employee friendly interpretation of involuntary termination in disability cases than it might otherwise have adopted. Sorry if that raises more questions than it answers or stirs the pot more but I guess my general point is, as was noted before, it may not really be necessary to try and reconcile the two Q&As if the IRS seems to have provided some pretty clear guidance on disability terminations.

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Ok - then go back to the first question - "an employee must be willing and able to continue to performing services".

On that phrase, I sincerely think you're trying to over-interpret. You can't cross-apply from A1 to A4. A1 gives the basic definition of involutary termination. In A4, the IRS says: in case there's any doubt of our specific intent, we are explicitly telling you that involuntary termination results from an employer action to terminate someone absent for illness or disability (whereas merely being absent isn't enough by itself).

If someone is absent for illness or disability, they are involuntarily terminated if and only if the employer takes action to terminate. If the employer does nothing, then no involuntary.

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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Masteff,

Thanks. I think that's probably right.

Contrast the disability situation with one where an individual just stops showing up for work. No formal resignation by the employee and no sick leave or disability or other approved leaves--they just don't show up. At some point the employer will take official action to terminate their employment. I suppose it is debatable over what action terminates the relationship (the individual's failure to show or the employer actually terminating them) but it seems the employer has arguably involuntarily terminated the individual in that case because the employer takes final formal action. As I read the guidance, however, the individual should not be considered to have been involuntarily terminated for subsidy purposes because the individual was not willing to work. As a result, seems the language there is useful in some cases--no reason somebody that just quits on their own should get the subsidy simply because the employer is the one that takes the final formal action terminating the relationship. I agree though that disability is a bit of a different / special case and, as previously noted, think the specific guidance in Q&A-4 probably overrides the more general rule.

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