Health Insurance Premiums and Paid Time Off payments upon termination

[waid10]

My employer has changed computer systems and will now receive premium payments from health plan participants after the month for which the coverage applies (e.g., participant makes payment on March 1 for insurance coverage received in February). Consequently, if a participant terminates employment in the middle of a month, the employer must bill the employee for the premiums for the weeks of coverage he/she received during that month (e.g., employee terminates employment May 18; employer must bill the terminated employee for premiums owed for May). So, the employer may have trouble getting paid.

My employer is worried about losing a lot of money after employees leave. The employer realizes that they cut checks for accrued but unused vacation to employees when they terminate. To ensure payment of the the health plan premiums, the employer wants to withhold the vacation payout checks until the terminated employee pays the premiums owed. Or the employer wants to deduct the the premiums owed from the vacation payout check before the check is mailed to the terminated employee.

Withholding checks for this reason may violate state law. Reducing vacation payouts by the premiums owed just seems sticky to me. These appear to be separate things and shouldn't be combined. Does anyone know if the Fair Labor Standards Act addresses anything like this? Or the DOL? Can reducing the amount of the vacation payout checks really be permitted?

Anyone have any thoughts?

Thanks for your help.

[mbozek]

The risk of not getting paid for coverage is the price of switching systems to payment at the end of the month. The simplest solution is to return to withholding payments at the beginning of the month. Whether your employer can recover the health care premiums from the employee's accrued vacation pay will be determined under state labor and wage laws. In some states (CA) employee accrued vacation pay is vested and must be paid upon termination. In other states the employer obligation's to pay accrued vacation upon termination is contractual and can be limited by the employer. You need to retain an attorney to review the applicable state law or set up a VEBA for vacation benefits which would make payments under terms of the plan.

[GBurns]

Could you really have a VEBA set up for vacation benefits, withhold or condition the payment of those vacation benefits, because of an amount owed for something not related to either the VEBA or the vacation benefits?