Exclusion of Employees on Leave of Absence for ER Contribution

[Guest J&D]

A client is insisting on excluding employees, on LOA (including maternity) at pye, from receiving a profit sharing contribution. Their agreement allows them to exclude those not "actively employed" at pye from sharing in the allocation. They are defining actively employed as anyone not working at pye.

The individuals in question were covered under the company's health coverage during their leaves and their jobs were held for them.

We have strongly advised them not to do this, but they are insistent.

We would like any opinion or advice you would like to share.

[david rigby]

Isn't this question already answered in the plan provisions?

If ambiguous (could be, but should not), what precedent has been set?

[austin3515]

If they don't define "actively employed", I think the client has a reasonable intepretation. Active employment seems to indicate ongoing services, which by defintion, is not occuring in a leave of absence.

I would pay more attention to the Plan's definition of Leave of Absence though. If it doesn't say they will continue to be treated as actively employed, I think they're case is pretty solid. Just giving them credit for at least 501 hours doesn't mean they're treated as actively employed at year end.

How about recommending a "clarifying amendment" that LOA's at pye are excluded?

[Guest Pensions in Paradise]

So anyone who calls in sick on the last day of the plan year won't receive an allocation! Under the client's interpretation, they would be on sick leave and therefore not "actively" employed.

How does the plan's allocation condition read exactly?

[Guest J&D]

They are on a prototype. It reads:

"Requirements for participants who are not actively employed at the end of the plan year (except for death, total & permanent disability & retirement):

Participants will NOT share in such allocations, regardless of service."

[david rigby]

The original post discussed LOA, which is not the same as calling in sick. If the plan does not already define "actively employed" (look again, it probably comes close), then the plan administrator should either make an administrative interpretation (in writing), or request that the plan sponsor amend the plan to remove ambiguity.

[Guest Pensions in Paradise]

I beg to differ. When someone calls in sick, they are on sick leave. Unless your company has some other creative reference for sick leave, I would be very weary of excluding someone from receiving an allocation if they are on maternity leave while including someone on sick leave.

Any labor lawyers out there who can elaborate on this issue?

[chris]

If such persons are on leave under FMLA (Family Medical Leave Act), FMLA will require that such persons be deemed to be employed as of the last day of the plan year if employer has 50 or more e/ee's. Don't think that would require hours to be credited unless they were on paid leave. See 3.95 of ERISA Outline Book.

[mbozek]

If an employee calls in sick why are they automaticly on sick leave instead of being marked absent or some other status? Sick leave is only available if employer provides for sick leave. And what if ee has exceeded number of days for sick leave at year end? Plan can provide that no allocations will be made to all persons not activley employed at year end, e.g. on any leave of absence, but include employees who are absent from work for another reason, eg. vacation, holiday, day off, illness, etc without violating discrimination provisions. Actively employed does not mean that employee must be on the job on the last day of the year to receive an allocation.

[Guest cosmo1215]

Please keep in mind that LOA employees might include those covered under USERRA for military leave, who, generally, may not be "excluded" from receiving the profit sharing for the year. This is assuming that they meet the requirements to receive "reemployment rights".

[GBurns]

The original post stated:

The individuals in question were covered under the company's health coverage during their leaves and their jobs were held for them.

From this I read that these were approved LOAs, some of which was specifically related to FMLA and some which might even be related to ADA, USERRA etc, but approved LOA anyhow. Absent specific wording in the PD and SPD defining this particular circumstance as being not "actively at work", I would think that the employer would be asking for trouble to exclude these employees.

A salaried exempt employee who calls in sick cannot be treated in the same manner as a non-exempt employee would, because of the docking of pay and the possibility of "making up" the missed hours. You cannot arbitrariliy treat missed time as absence. There might also be complications of PTO banking and shared leave programs etc which might cover missed time and/or absences. So an exempt employee who calls in sick and is not present physically at pye might very well be covered for the absence and is still an employee "at work" and get paid for the time though not present. It seems a stretch to have to pay the employee yet claim that they are not "actively at work".