Pension & Benefits News New opinion letters address FMLA, HSA questions
Tuesday, September 17, 2019

New opinion letters address FMLA, HSA questions

By Pension and Benefits Editorial Staff

On September 10, the Department of Labor issued two new opinion letters that address delayed designation of FMLA leave when a collective bargaining agreement (CBA) is involved, and whether employers’ contributions to employees’ health savings accounts (HSAs) are “earnings” under the Consumer Credit Protection Act (CCPA).

Delayed FMLA designation. In FMLA2019-3-A, Wage and Hour Administrator Cheryl Stanton provided an opinion on whether an employer may delay designating paid leave as FMLA leave when the delay complies with a CBA and the employee prefers that the designation be delayed.

The letter states that once the employer has sufficient information to determine that an employee’s leave request qualifies as FMLA leave, the employer must designate the leave as FMLA leave. This is true even where the employer is obligated to provide job protections and other benefits equal to or greater than those required by the FMLA pursuant to a CBA or under state civil service rules.

Seniority accrual. Here, the employer requires employees to substitute FMLA leave for accrued paid leave, which means that the leave is both FMLA leave and CBA-protected paid leave. If, pursuant to a CBA and other policies, the employer provides for the accrual of seniority when employees are using accrued paid leave, the employer must permit employees to accrue seniority when they are substituting FMLA leave for paid leave.

Failure to let an employee accrue seniority when the employee is substituting FMLA leave for accrued paid leave—if the employee would otherwise be permitted to accrue seniority when using accrued paid leave—would amount to interference with the employee’s FMLA rights, Stanton advised. Accordingly, the employer properly applied the FMLA by requiring that FMLA-qualifying leave be designated as FMLA leave.

Concurrently running leave. Given the employer’s policies on seniority accrual, when an employee takes FMLA leave that runs concurrently with CBA-protected accrued paid leave, the employee's seniority status would be the same as it would if the employee took only CBA-protected accrued paid leave, Stanton noted.

HSAs and CCPA earnings. Another opinion letter, CCPA2019-1, addresses whether employer contributions to employee HSAs constitute earnings for wage garnishment purposes under the CCPA. The WHD Administrator concludes that here, the employer contributions to HSAs are not earnings under the CCPA, and thus are not subject to the CCPA’s garnishment limitations.

At the threshold, Stanton said, “contributions that are already in an HSA are past the point when they may be withheld by or garnished by an employer.” They are like earnings that have been deposited into a bank account.

Are the contributions "earnings?" However, where the employer is still in possession of an HSA contribution and is about to pay it into the account, it could be subject to the CCPA's limits on garnishment, Stanton explained. To determine whether it is, you must determine whether employers’ HSA contributions amount to "earnings." The CCPA defines “‘earnings’ as ‘compensation paid or payable for personal services,’" Stanton noted. Thus, the central inquiry is whether the employer paid the amount in question for the employee's services. To determine whether certain payments are earnings under the CCPA, the WHD "has generally compared the nature of those payments to wages, salaries, commissions, and bonuses," the opinion letter states.

Wages, salaries, commissions, and bonuses. Stanton points to two characteristics of wages, salaries, commissions, and bonuses that distinguish them from employers’ contributions to HSAs. First, wages, salaries, commissions, and bonuses relate in some degree to the amount or value of an employee’s services, and normally reward them for their accomplishments, their amount or length of service, or their contributions to the enterprise. But here it appears that the amounts employers contribute to employees’ HSAs do not vary in proportion to the amount or value of employees’ personal services. In fact, there were restrictions on the extent to which they may do so.

Employers annually determine the amounts of their contributions before the beginning of the plan year or agree to match employees’ contributions up to fixed amounts. Accordingly, although an employer contributes to an employee’s HSA because there is an employment relationship between them, the employer is not doing so to compensate the employee directly for the amount or value of his or her services.

Second, the examples of compensation specified in the definition indicate that the CCPA "is meant to protect funds as they pass from the employer to the employee," Stanton noted. In comparison, an employer’s HSA contributions are made to a trust and are not part of the employee’s take-home pay. Presumably, the contributions are not available to the employee before they are made to the trust account. "The employee may not use the funds in the trust for anything other than qualified medical expenses without subjecting the funds to income tax and a penalty," Stanton observed.

Must be excluded from disposable earnings. Therefore, employer contributions to HSAs are not earnings as defined by the CCPA, according to the opinion letter. "Generally, as long as an employer does not determine its HSA contributions on the basis of the amount or value of individual employees’ services and does not give employees an option of receiving cash in lieu of an employer’s contribution, the employer’s contributions to an HSA are not earnings under the CCPA and are not subject to the CCPA's garnishment limitations," wrote Stanton. As a result, the employer’s HSA contributions should not be included when calculating the employee’s disposable earnings to determine the maximum amount of the employee’s pay that may be garnished under the CCPA.


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