FMLA2006-3-A — Cafeteria plan allotments and maintenance of group health benefits during FMLA leave

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

January 31, 2006 FMLA2006-3-A

Dear Name*:

Both the City and the Union have requested an interpretation regarding the application of the Family and
Medical Leave Act of 1993 (FMLA), 29 U.S.C. § 2601 et seq., to a “cafeteria plan” under which the City
allocates all or a portion of an employee’s benefit plan allotment to pay for group health insurance. Based
on the information you have provided, the Department’s opinion is that those employees taking unpaid
FMLA leave must have that portion of their cafeteria plan allotment allocated to group health insurance
(including dental) premiums paid by the City in the same amount as paid prior to the start of FMLA leave.

You represent that the City allocates to each employee $452.08 per month under the cafeteria plan.
From this sum, each employee must pay the premium for one of the City’s group health plans with the
balance of the allotment to be used, at the employee’s option, to provide dental/disability/life insurance or
compensation. You ask whether the FMLA requires the City to continue cafeteria plan health payments
for an employee on unpaid FMLA leave if City policy requires all employees on unpaid leave of any kind
to make their own group health coverage payments. City policy precludes accrual of additional benefits
during unpaid leave. Although the City pays the group health insurance premium during a period of
unpaid leave, it requires employees to repay the City for the premium payments upon the employee’s
return to work. City policy also requires that employees exhaust all accrued paid leave before taking
unpaid FMLA leave. When FMLA leave is unpaid leave, no cafeteria plan allotment is provided during the
leave. The City believes that it complies with the FMLA and thinks that if it paid the cafeteria plan
allotment for an employee on unpaid FMLA leave, it would be discriminating against employees on other
types of unpaid leave whose cafeteria plan allotments are not paid.

The Union disagrees with the City and believes that the portion of the allotment paying for an employee’s
group health insurance must be maintained during unpaid FMLA-qualifying leave. In practice, according
to a telephone conversation a member of my staff had with the Union’s representative, the City has
agreed to pay this portion of the allotment until this office issues an opinion letter.

The FMLA provides that “during any period that an eligible employee takes leave under section 102, the
employer shall maintain coverage under any ‘group health plan’ (as defined in section 5000(b)(1) of the
Internal Revenue Code of 1986) for the duration of such leave at the level and under the conditions
coverage would have been provided if the employee had continued in employment continuously for the
duration of such leave.” 29 U.S.C. § 2614(c)(1). The FMLA regulations state that the “benefit coverage
during FMLA leave for medical care, surgical care, hospital care, dental care, eye care, mental health
counseling, substance abuse treatment, etc., must be maintained during leave if provided in an
employer’s group health plan, including a supplement to a group health plan, whether or not provided
through a flexible spending account or other component of a cafeteria plan.” 29 C.F.R. § 825.209(b).

Consequently, as the FMLA and its regulations require maintenance on the same conditions of any group
health plan coverage (whether or not provided through a flexible spending account or other component of
a cafeteria plan), the Department takes the position that employees taking unpaid FMLA leave must have
that portion of their cafeteria plan allotment allocated to group health insurance (including dental)
premiums paid by the City in the same amount as paid prior to the start of FMLA leave. See 29 U.S.C. §
2614(c)(1); 29 C.F.R. § 825.209(a). Moreover, because the City provides the money for the group health
insurance coverage when employees are working, it may not recover such payments for periods of FMLA
leave. See 29 U.S.C. § 2614(c)(1).

An employee’s entitlement to benefits other than group health insurance during a period of FMLA leave
(e.g., holiday pay) is to be determined by the employer’s established policy for providing such benefits
when the employee is on other forms of leave (paid or unpaid as appropriate). Although the FMLA does
not require the maintenance of benefits other than group health insurance during the period of the leave,
at the end of an employee’s FMLA leave “benefits must be resumed in the same manner and at the same
levels as provided when the leave began, and subject to any changes in benefit levels that may have
taken place during the period of FMLA leave.” 29 C.F.R. § 825.215(d)(1). For example, if an employee
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U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

was covered by a life/disability insurance policy before taking leave but is not covered or coverage lapses
during the period of unpaid FMLA leave, the employee cannot be required to meet any qualifications,
such as taking a physical examination, in order to requalify for life/disability insurance upon return from
leave. Accordingly, some employers may find it necessary to arrange for continued payment of costs to
maintain such benefits or to pay the costs of these benefits during the period of FMLA leave in order to
restore employees to equivalent benefits upon return from FMLA leave. However, the employer may
recover the employee’s share of those payments when the employee returns from leave. See 29 C.F.R.
§§ 825.213(b), -.215(d)(1).

This opinion is based exclusively on the facts and circumstances described in your request and is given
based on your representation, express or implied, that you have provided a full and fair description of all
the facts and circumstances that would be pertinent to our consideration of the question presented.
Existence of any other factual or historical background not contained in your letter might require a
conclusion different from the one expressed herein. You have represented that this opinion is not sought
by a party to pending private litigation concerning the issue addressed herein. You have also
represented that this opinion is not sought in connection with an investigation or litigation between a client
or firm and the Wage and Hour Division or the Department of Labor.

Sincerely,

Alfred B. Robinson, Jr.
Deputy Administrator

Enclosures:

* Note: The actual name(s) was removed to preserve privacy in accordance with 5 U.S.C. 552 (b)(7).

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