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Risks of Keeping an Employee on Your Benefits When They Are Not Actively at Work

Have you ever had an employee on medical leave or disability remain on your benefits for months — even years?

Maybe you think you’re doing them a favor by keeping them on the benefits plan. Many plan managers mistakenly believe that they are helping when, in fact, they may be putting the company, and employee, in harm’s way.

I’m often asked, how long can I keep someone on the benefits plan if they are no longer working? This is an essential question as carriers set limits on how long an employee can stay on a plan while not actively at work.

Group benefits (medical, dental, vision and even life and disability) have an actively at work clause for eligibility. An employee who is not actively working can often stay on the plan for up to three months to coincide with the Family Medical Leave Act (FMLA). It’s best to check your plan documents as they differ between carriers. If you are self-insured, it’s even more critical to check those plan documents.

If an employee is still on the plan beyond the time period listed in the document, then stop loss may not cover any claims. And from what we have noticed, stop loss companies have been very diligent about checking to see if an employee is actively at work before paying a large claim, usually by asking for payroll records. While the length of time may differ between carriers, the result is the same – employees left on the plan when not actively at work could have their claims denied.

What can you do to ensure you don’t violate the actively at work provisions?

  1. Have a clear policy on how long someone not actively at work can remain on your benefits plan.

    Check your plan documents and determine how long an employee can stay on that plan if not actively working. After this time period, Cobra should be offered for medical, dental and vision, and a conversion form for life insurance. Often life insurance contracts will have a “waiver of premium” provision if the employee is totally disabled after a certain amount of time (typically 6-9 months), and the employee does not need to be employed for this waiver to be in effect. Disability plans are designed to provide income replacement to a totally disabled employee up to normal retirement age, even if the employee is not employed. It’s a critical reason as to why this benefit is so important.

  2. Make the “Actively at Work” policy a part of your employee handbook.

  3. Communicate directly with the employee going out on leave or disability.

    Direct them to the handbook and provide clear communications outlining when benefits will end so they know what to expect with their benefits before their leave starts.

Looking to learn more? Review this blog: How to Correctly Administer an Actively-At-Work Clause

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