Health Coverage on Non-Protected Leave

I'm hoping someone can help set me straight here.

An employer offers two medical plans. Plan 1's self-only coverage is $500/month. Plan 2's self-only coverage is $1,200/month. In order to use the ACA FPL safe harbor, the employer offers a $400/month employer contribution toward either Plan 1 or Plan 2. After the employer contribution, Plan 1's coverage is $100/month and Plan 2's is $800/month. Assume that neither $500/month for Plan 1 nor $800 or $1,200/month for Plan 2 meets any ACA safe harbor (i.e., without the employer contribution, no coverage is affordable). 

The employer's policy is to stop the $400/month employer contribution if an employee is out on unpaid non-protected leave (e.g., not yet FMLA eligible, not ADA, no state law, etc.). The medical insurance policy allows active coverage to continue for up to six months. 

An employee is going out on a three-month non-protected leave during a stability period in which they are full-time. Active coverage will be offered for the full three months.

• If the employee is on Plan 1 and the employer stops the $400/month credit, the employee will not have affordable coverage ($500/month). I assume this will be a problem as the employee still needs access to affordable coverage while in a stability period.
• If the employee is on Plan 2 and the employer stops the $400/month credit, the employee will not have affordable coverage ($1,200/month) but is not enrolled in the "affordable" coverage (Plan 1) to begin with, i.e., it was already not affordable but they had access to an affordable plan during open enrollment. Is this a problem?
• What if the employer only continued the $400/month credit during non-protected leaves for employees who were already enrolled in Plan 1 (but not any other plan)?
• If the employer's plan terms or policies say as much, is it permissible to continue/stop the employer credit only for employees enrolled in certain plans?
• If so, might the cost increase allow them to switch from Plan 2 to Plan 1?

Appreciate any input. 

This is an interesting one I've had come up too in various forms.  Basically the overriding issue is a conflict between the plan's definition of full-time eligible and the ACA's definition (via the look-back measurement method) of full-time.

The options I always offer here are:

1. Treat the employees on non-protected leave as full-time eligible (not just full-time ACA) for any stability period in which the employee is considered full-time, thereby continuing active coverage.  This might not be possible if there are carrier/stop-loss limitations.
2. Continue the current practice of terminating active coverage for employees in a stability period as full-time but on non-protected leave, and expose the employer to potential B penalties for that employee because the COBRA offer is not affordable under any of the ACA safe harbors.  The potential B penalty liability is often less than (or comparable to) the employer contribution anyway.
3. Continue the current practice of terminating active coverage for employees in a stability period as full-time but on non-protected leave, and subsidize COBRA by providing the amount needed to meet the applicable affordability safe harbor.

Brian, thanks for your thoughts. I was coming at this from a slightly different - and possibly incorrect - angle.

The insurance carrier will allow active coverage to continue for six months.

My line of thinking was whether the employer could stop making its $400/month contribution during the unpaid, non-protected leave. The employee would still be on active coverage, but would be paying the full self-only cost.

If dropping the $400/month employer credit during a non-protected leave would make the lowest-cost self-only coverage unaffordable, I think it would be a problem. 

The follow-up would be if the employer continued the $400/month credit during non-protected leave, but only for people on the lowest-cost plan, could it drop the $400/month credit for someone on the higher-cost plan?

Or, put another way, can an employer stop paying an employer credit during an unpaid non-protected leave as long as in doing so there is at least one affordable option at all times (but if the employee is not enrolled in that option, their premium will go up by $400/month)?

Yeah I think that would be a problem in the sense that it would expose the employer to B Penalty liability, but the question this is whether that's really a "problem".  The B Penalty would be $371.67/month (2024), which is lower than the $400 contribution anyway.  So the employer comes out ahead in that a) some employees in this type of leave situation probably won't trigger the B Penalty, and b) for those who do, the company pays less than the cost of the health plan to be affordable.

Your follow-up question is a good one that I'm not aware of any clear answer.  I think if they were trying to avoid the B Penalty (again, not a major concern anyway) they would probably need to continue the $400 contribution.  But I take your point that they weren't in the plan option that's designed to meet the affordability safe harbor in the first place, so there's an argument no contribution should be required.

Thanks, as always, for your input and generosity with your time and expertise. Very much appreciated.