Benefits Q&A: Can We Delay Coverage if an Employee Returns from Leave Mid-Month?
December 5, 2022
Julie Athey answers a question on the protocol for delayed coverage when an employee returns from leave mid-month.
Julie Athey answers a question on the protocol for delayed coverage when an employee returns from leave mid-month.
We use a 12-month measurement period to determine an employee’s eligibility for medical benefits. Employees who go out on an extended leave will sometimes voluntarily drop their medical benefits and re-enroll when they return.
I am unsure when an employee’s coverage should take effect in this situation, but I have read that it must be “immediately.” Our medical carrier generally requires coverage to start on the first day of the month. Even if the carrier didn’t require it, that is what we would prefer. If an employee returns from leave mid-month – for example, on December 15th – can we delay the effective date of her coverage until the first day of the next month (i.e., January 1st)?
The answer to your question is based on a number of variables. The following principles generally apply to employers that have at least 50 full-time employees and utilize a lookback measurement process to identify full-time employees who should be offered health insurance.
Employees who average at least 130 hours per month during a 12-month measurement period are considered “full-time” for the purpose of eligibility for health benefits. This means they are generally entitled to keep those benefits during what is known as a “stability period” (often the current plan year), regardless of the number of hours they work.
When an employee in a stability period takes leave, she has the option of dropping health insurance and re-enrolling when she returns to work. If the leave lasts 13 weeks or more, you may treat her as a new employee for the purpose of health insurance. For example, you may require her to satisfy a new waiting period.
However, if the employee returns from leave after a break of less than 13 weeks, she must be treated as an ongoing employee upon her return. While it’s generally true that you must reinstate the employee’s coverage “immediately” after her leave ends, the IRS says coverage may take effect the first day of the first calendar month after the employee returns to work.
Similar principles apply when an employee is rehired.
Finally, note that some possible scenarios are too complicated for this discussion – such as if the employee hasn’t been with you for a full measurement period. I am happy to discuss such scenarios in more detail if needed.
