Outsourcing FMLA Administration to Your Disability Insurance Carrier

The Family Medical Leave Act (FMLA) is a federal law that requires covered employers to provide job-protected and unpaid leave for qualified medical and family reasons.  It’s a fairly complex piece of legislation, and many employers struggle with compliance and administration.  This can be costly in two ways:

  • Some employers are too lenient and approve too much leave in an effort to be cautious.
  • Others deny leaves that should be approved, leaving the employer open to hefty fines and settlements.

A quick Google search of large FMLA settlements will illustrate the magnitude of the risk.  Fines in the tens and hundreds of thousands of dollars are fairly common, and you’ll also see some for over $1MM.   I know of at least one Western Massachusetts employer that lost a costly FMLA case recently.

The complexity and risk associated with FMLA has created a robust market for third party administrators (TPAs) that will allow you to outsource FMLA administration.  Some of these TPAs are owned or private-labeled by disability insurance companies who can provide one stop shopping for absence management.

Last week, I did a quick survey of group disability insurance companies.  Every one of the companies offers FMLA administration.  Here is a quick summary of what I learned:

  • The majority of larger group disability insurance companies offer both FMLA administration, ADA administration, and other forms of absence management.
  • Some insurance companies will only offer the service for larger employers (500+ lives), but others will offer it to companies as small as 50.
  • A couple companies offer full indemnification to the employer for errors or negligence on their part.
  • Some report they can help an employer manage the Massachusetts sick leave law in addition to other types of leaves: jury duty, witness, and military leaves are examples.
  • Most of the insurance company programs require that the employer use their company for disability insurance, particularly short term disability insurance (STD).
  • A common feature is a single number to call or a single form to complete to start a leave AND apply for short term disability insurance.
  • One insurer has a mobile app that can be used to start a leave and an STD claim.
  • Some claim they are often able to demonstrate a positive return on investment by comparing the savings with better leave management to the fees charged for the service.
  • The range of pricing seemed pretty reasonable: $1.10 PEPM to $3.00 PEPM

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