Human resource and benefits professionals have to be constantly on the top of their game. Navigating the acronyms of health benefits or the alphabet soup of pre-tax benefits is challenging enough on its own. That’s why many are turning to their administrators for support with streamlining their workload with FMLA and Direct Billing.
What is FMLA?
“FMLA” refers to the Family and Medical Leave Act. It guarantees employees meeting certain criteria up to 12 workweeks of unpaid leave each year with no threat of job loss. Additionally, FMLA requires that employers covered by the law keep the health benefits for eligible workers the same as if they were working. (That is where FMLA and Direct Billing come together. We’ll cover that in a minute.)
When does FMLA apply?
FMLA provides protected leave and benefits coverage under five situations:
- The first year (12 months) after the birth of a child
- The adoption or foster care of a child (within the first year of placement)
- The care of a spouse, child or parent who has a serious health condition
- A serious health condition that makes an employee unable to perform essential job duties
- A qualifying leave arising from a spouse, child or parent as a “covered active duty” military member
FMLA typically allows employees to take up to 12 workweeks of leave in a 12-month period. In certain cases, leave can be extended to 26 workweeks.
But wait, there’s more
You’re caught up on FMLA. Now come the State Family and Medical Leave Laws.
While all states must abide by the Federal Law, many states have taken additional steps to expand the availability of Family and Medical Leave Laws. The Department of Labor provides links to states with similar statutes. See if your state is on the list.
State laws vary widely on the specifics. However, the general goal of state laws is to extend the length of leave available and the situations in which leave can be taken. Be sure to check the laws for your state.
New York provides one of the most robust programs, which now includes employee payroll contribution and wage requirements. In 2018, the Paid Family Leave benefit for New York includes up to 8 weeks of wages at 50% of wages, with a maximum benefit of $652.96 per week. In exchange, employees must pay a small per pay period payroll contribution.
It is easiest to think of it as essentially a forced short-term disability policy. Nearly all private companies in New York are required to comply. State Family and Medical Leave Laws can get a little complicated so it is best to consult a qualified benefits consultant or labor attorney to understand your obligations.
What is the connection between FMLA and Direct Billing?
As FMLA becomes more widely available and more employees take advantage of it, employers find themselves in a difficult situation. They are required to not only provide leave for employees, but also ensure health benefits continue to be available. The only problem is, the employer often is either paying the employee a reduced wage (or no wage at all). This makes premium collection a problem. This is where Direct Billing comes into play.
Direct Billing is similar to COBRA, but with far less regulatory rules. Direct Billing allows employers to easily collect premiums (or other payments) from employees during FMLA. Employers have taken many routes in the past to collect premiums. Some would prorate premium contributions upon an employee’s return to catch-up on past payments. Others would take a more aggressive approach and push for pre-payment prior to an employee’s departure. Both options tend to be problematic for employees and can create some real cash flow problems.
Direct Billing gives employees a “pay-as-you-go” option. As an added bonus, employers no longer have to chase down premiums. Reconciliation processes are minimized. Employee premium collection is simplified.
Where do I go from here?
Step 1: Set-up the Plan
The first step is to set-up a Direct Billing plan with Benefit Resource. Typically, you don’t even need to wait around for a new plan year to get started. Set-up can occur in 30 days or less if you manage premium collection in-house or don’t have any employees actively on Direct Billing. If you are transitioning services, we typically recommend 45-60 days for implementation. This ensure employees are properly notified of changes.
We understand FMLA and Direct Billing require a certain level of flexibility. Employers set the rules regarding non-payment, late payment or even short-payment.
Contact your assigned Account Executive or request a proposal.
Step 2: Report new Direct Billing participants
Benefit Resource provides robust online management tools to make managing Direct Billing easy. Simply login to your account. Then enter a new participant, eligible coverages, and premiums. Benefit Resource also supports subsidy (or employer payments).
Benefit Resource takes it from there.
Step 3: Employee communication, enrollment and premium collection
Benefit Resource sends the employee a notification including an election form and premium amounts. The employee completes the form or enrolls online. Coupon books are mailed to the employee as a reminder of payments and due dates. The employee can pay premiums online by ACH, credit card or by sending a check.
Step 4: Consolidate premiums and provide to the employer
Finally, Benefit Resource consolidates premiums and provides a premium remittance report itemizing payment information.