Employees on disability – does your plan cover them forever?

One of the most frequently asked questions by Plan Sponsors is the following.  We have an employee who is on our health and dental benefits plan and is not actively at work, what is our obligation to this member?  Unfortunately, when a plan sponsor asks this question, we know that it is too late as there was no forethought given to establishing a proper policy, nor communicating this policy to workers.  At this point, our response is, ‘call your lawyer’. Having said this, there are numerous situations where organizations have established a defensible internal corporate policy that provides them with a solid leg to stand on should they be challenged in the future.  As with any benefits initiative, it is important that the policy form part of a larger Human Resource manual, member handbook or similar, readily distributed governance document.  The policy is most effective when it can be shown that a member was furnished with an electronic copy of same, or that a confirmation signature is on file signify that the member was in receipt of the document.  To clarify, a signature would only be obtained to show receipt of the agreement, not agreement by the member of the document contents. Various Provinces have statutes that require a Plan Sponsor to fulfill a minimum obligation with respect to the continuation  of health benefits in the case of WSIB.  In Ontario, we have been advised that the current practice is 12 months, but it should be understood that this is the minimum obligation.  Since not all sectors have coverage for WSIB, this ‘guiding principle’ is just that.  In fact, it is more common for plan sponsors to tie the extension of health and dental coverage to the change in the definition of disability for Long Term Disability.  This date, in most contracts is 24 months and as such the extension of benefits would continue up to change in the definition of disability from “own occupation” to the more restrictive definition of disability based on ‘any occupation’. Once again, it is always prudent to obtain legal counsel prior to making any decision regarding extension of benefits.  The following draft policy, courtesy of Maximum Benefits; a Third Party Administrator used by our firm, provides one such attempt at providing a generic policy that one would have to agree is much better than having no policy at all.

Should an member who is not actively at work due to Illness or Injury for a prolonged period of time and who is unable to perform the duties of his or her job and is in receipt of disability benefits, coverage for Extended Health care and Dental benefits will be continued for a maximum of 24 months from the date of disability. The extension of these benefits shall terminate at the earlier of recovery from the disability, termination of disability payments or termination of employment. Where the premium for these benefits is shared between members and the Employer, the member must make arrangements to pay their share of the premium by authorizing a deduction from unpaid earnings or otherwise providing the Employer with funds. If the required member’s share of the premium is not paid, the Employer is not obligated to pay its share of premium and the coverage will cease according to the Plan. In the case of members who request a Leave of Absence for reasons other than illness or injury, the issue of continued benefit coverage during the Leave of Absence is a matter of management discretion, except as it may be governed by the Employment Standards Act, and is always subject to the terms of the Insurance Program and Plan Document.

As noted above, the  inclusion of this draft policy is not an ‘iron-clad’ guarantee that an Employer will not be challenged after enforcement of this provision, but it is a defensible strategy in many situations. It should be specifically noted that the issue of benefit continuation for actively at work members is not mutually inclusive with any other obligations that an Employer may or may not have with respect to current Employment Standards, Severance or Common Law obligations.  Thus, Plan Sponsors need to separate the POLICY of extending health and dental from the total and distinct act of terminating a member on a medical/disability leave.  Terminating a disabled member without regard to applicable Employment Standards or Severance considerations would in most cases attract the scrutiny of litigators and government agencies and is not the intent of such a policy document.

For over 20 years, Chris Pryce of Human Capital Benefits has been advising employers on all aspects of managing employee benefits programs and related products. If you have any questions, you can contact Chris at 416.924.8280 or by email at chrispryce@www.humancapitalbenefits.com