The FMLA Freight Train: How You Can Ride it to Your Advantage

1. The FMLA Freight Train: How You Can Ride it to Your Advantage Presented by: Melissa Harrison-Hiatt and Michael Klachefsky The Standard

2. Agenda • Foundations of absence and FML administration • Key terms • Absence & disability programs • Why important for employers? • Why important for you? • Consulting to clients and prospects on FMLA • Leave management best practices • Case study

3. Foundations of Absence and FML Administration

4. Key Terms • Absence: any form of time away from work: • Planned; vacation and holidays • Incidental: unplanned, less than 5 days • Extended disability: 5 days or longer • Leaves of absence • Family Medical Leave Act (FMLA): job protected time away from work for family or employee’s own serious health condition • Short term disability: Income replacement for time away from work for employee’s own medical condition

5. Key Terms • Absence management: authorizing, monitoring, coordinating time away from work which is job protected by the FMLA, or other mandated leaves, and which may or may not include income replacement from an STD plan

6. Absence & Disability Programs Company & Mandated LOA Job Protection • FMLA • State LOA • Company LOA • Military Leave • Sabbaticals • STD • Insured • Self-Insured • ASO • ATP • LTD Carrier Income Replacement Company Income Replacement • Sick Leave • Accident and Sickness • Salary Continuance • STD (Employer paid and administered) • Paid Time Off (PTO) Banks • Extended Illness Banks

7. Absence & Disability Programs-Start Point Carrier Income Replacement Insured STD ASO STDATP STDState STD LTD Sick Leave Accident & Sickness Salary Continuance STD (ER Paid & Admin.) PTO Banks Company Income Replacement Extended Illness Bank TIME Mandated Job Protection FMLA State LOA Military Leave Jury Duty Company Job Protection Company Leave Sabbatical

8. Why is it Important for Employers? • For employers? • Complexity • Patchwork of federal, state, and some municipal laws • Company sponsored leave policies • Compliance • DOL • Audits • Fines • Wrongful termination lawsuits • Lost productivity

9. Why is it a Freight Train? • FMLA becoming complicated by ADA • DMEC: 13% of employees used FMLA in 2011 • 36% of employers reported increase in FMLA requests in 2013* • “…intermittent leaves almost unanimously (described by corporate benefit managers) as their biggest FMLA headache”** • 180% increase in smaller employers outsourcing between 2010-2012*** *Mercer survey on Absence and Disability Management, 2013 Survey Report **Integrated Benefit Institute, Using FMLA to Understand and Manage Disability Absence, February, 2013 ***Source: 2011/2012 4th Consecutive Employer Survey of Integrated Disability, Absence, and Health Management, Spring Consulting

10. Indirect Cost of Absence: 6.1% Payroll* • Overtime • Staffing up • Replacement labor • Replacement training • Late deliveries • Lost production • Variable product quality • Lost customers • Low morale • Turnover * Kronos Survey on The Total Financial Impact of Employee Absences, 2010

11. Gallup: Absence Causes Lost Productivity

12. Why is This Important for You? For brokers and consultants: • Clients need advice • How much is it costing? • How to manage AM internally • Outsource? • Advantages • Disadvantages • How to choose an AM administrator • Prospects need to know if you can help them

13. Consulting to Clients & Prospects on FMLA

14. Where ERs are Today: The Absence Management Continuum Total Absence Management Outsource Leave of Absence Outsource Corporate Centralization Internal Management Manager Facilitation Internal Management Centralized Location Role Internal Management • Outsourced leave administration, plus • Disability & WC claim handling with clinical management • Integrated health and absence reporting • Incidental time off can be outsourced or owned by employee location site • Outsourced LOA to central group • Standard set of LOA policies to administer • Aggregate reports • Time off handled at employee location site • Enhanced communication with employers and managers • Self administered by each manager • Individual interpretation • Individual time-off management • Individual management reports • One point of contact per location • Greater consistency in administration • Individual location interpretation • Time-off still handled by manager • May include aggregate reports for location • Centralized functions for all leaves • Consistency in leave administration • Time off tracked at location level • Aggregate reporting may exist by location and companywide

15. Who Should Outsource? • Over 250 lives • Multiple locations • Multiple work groups • Locations in states with mandated leaves • 24/7 operations • Low wages and challenging working conditions • Presence of collective bargaining agreements • Wish to ease the transactional burden on HR staff • Want compliant system of recordkeeping and correspondence • Experiencing FMLA abuse

16. Selecting an Absence Management Administrator

17. Types of FML Administrators • Third party administrators (TPAs) • Consistently manage FML • Maintain up to date compliance information • Group life and disability carriers • Able to do everything TPAs can do • Able to underwrite & coordinate insured STD & LTD • Usually have more extensive medical resources • Payroll and other technology providers • Relatively new to the market • Provide tracking and information, not management

18. How to Position Yourself • Give insight into risks associated with FML and absence • Provide knowledge on different solutions • Consult on best alternatives • Continue managing internally vs outsourcing • Help client use best practices when continuing to manage internally • If outsourcing, assist in design of program and selection of provider

19. Leave Management Best Practices

20. Managing Leave Incidence & Duration Best practices: • Review Health Care Provider certification forms • Require intermittent leave to be identified as FMLA • Request intermittent leave be taken off work hours • Enforce reasonable call in procedures • Track and review FMLA usage • Require re-certification when needed • Use second & third medical opinions • Track leaves concurrently wherever possible

21. Design & Implementation of a Leave Management Program • Start conversations early • Keep expectations realistic • Review employer leave policies in detail • Should support company objectives and other benefit programs • Simplify company sponsored leaves where possible (e.g. use rolling backward calculation method) • Plan implementation thoroughly • Where is client on continuum? • Can client actually utilize solution (from tech/data standpoint)? • Does it make business sense? • Timing, communication and rollout

22. Return to Work Reduced Schedule • When medically necessary for own serious health condition of care of a family member. • Must be agreed upon in cases of birth or placement of a child. • Employees must not be required to take more FMLA leave than necessary. Fitness for Duty • Handle using return to work authorization form • Provide a list or employee’s own description of essential functions Additional leave as an accommodation under ADAAA, even when FMLA exhausted

23. Case Study: Food Manufacturer

24. Final Thoughts • Most employers and their advisors are focused on healthcare • Employers are also quickly starting to see that they need help with the FMLA and its impacts on the workplace • Brokers should start playing a more active role in helping their clients with FML • Enhances existing relationships • Leads to acquiring new clients • Major consulting firms see the FMLA freight train as an opportunity to break into the small to midsized employer market

25. Question? Melissa Harrison-Hiatt Melissa.Harrison.Hiatt@standard.com Michael Klachefsky Michael.Klachefsky@standard.com Charlie Weisbecker Charlie.Weisbecker@standard.com