Benefits and Compensation, Recruiting

Sabbaticals Are Becoming Less Radical: Designing and Implementing Sabbatical Programs

In this post-COVID-19 era of the Great Resignation and “quiet quitting,” one of the newest ideas for attracting and retaining employees is one that was usually limited to professors in higher education: the sabbatical.

A sabbatical is period of leave granted to a worker for study, travel, or engaging in professional development. Many employers, other than universities, are exploring this idea as a way to attract new employees, keep valued employees, or provide a phased route toward retirement.

Whether the goal is improving retention, increasing loyalty, reducing burnout, or facilitating increased work-life balance, there are some potential employee benefits issues for employers to anticipate and avoid as they consider how to design a sabbatical program to best achieve their goals.

Designing and Planning a Sabbatical Program

When designing a sabbatical program, there are several mechanical aspects for employers to consider.

Who will be eligible? How long must the employee have worked with the employer to become eligible? How long will the sabbatical be? For what purposes may the sabbatical be used? What are the expectations for returning to work? If an employee doesn’t return to work or returns for only a short period of time, what are the consequences, if any? Will the employee continue to be eligible for benefits during his or her sabbatical, and if so, what benefits? Some employees may be comfortable taking a sabbatical that’s unpaid or at reduced pay rate, but will these employees be comfortable giving up their employee benefits?

Although there are some available statistics, most sabbatical programs were historically only available to university professors. Consequently, data relevant to an employer’s workforce and industry may not exist, so it could be difficult for an employer to look to others in the industry for guidance.

Regardless of what other employers in the industry are doing, the answers to the above questions for any employer will turn on the employer’s goals (i.e., what will it take to achieve the incentive and other outcomes the employer desires?).

It may also depend upon the employer’s ability to backfill the employee’s position while the employee is out on sabbatical. Thus, employers will have to consider whether there’s another employee who can fill in for the employee taking a sabbatical, or whether another employee can be trained to take over the position.

Ultimately, the employer should keep in mind its goals and the logistical concerns that may arise from implementing a sabbatical program in order to design the most effective and suitable program for it.

Effects on Employee Benefits Plans

Beyond designing and planning, from a legal perspective, employers will want to consider how a sabbatical will affect its employee benefit plans. Many benefit plans base eligibility upon full-time employment status and have waiting periods and other benefits that are calculated based upon periods of service, and often, upon periods of continuous service.

Because of this, employers should examine the provisions of their plans and consider how time off on a sabbatical will be counted for each of these purposes. Presumably, employers won’t want employees on sabbatical to lose out on service for purposes of calculating a pension, determining vesting, earning credit toward eligibility for retiree medical insurance, determining a severance benefit, or other calculations that are based upon the length of employment.

The governing benefit plan’s documents are likely silent on the issue of sabbaticals, so it’s important for employers to consider how benefit plans will be affected by employees taking sabbaticals.

Importantly, sabbatical programs have the potential to affect employees’ ongoing health benefits. Since the Affordable Care Act (ACA) became effective, most employer group health plans have required employees to work an average of at least 30 hours per week to be eligible for health benefits.

Although eligibility policies often address continuing eligibility during leaves of absence, a sabbatical may not fit into the typical leaves of absence criteria. Depending on whether the employer decides to continue to treat an employee on sabbatical as a full-time employee for purposes of eligibility for health benefits, the employer may need to revise the eligibility criteria in their benefit plans, enrollment materials, summary plan descriptions, eligibility policies, and insurance contracts for consistency with that decision.

Furthermore, if an employer has a self-funded health benefit plan that’s reinsured through a stop-loss policy, an eligibility change may need the approval of the insurance carrier. If an employer decides not to continue this eligibility for benefits coverage during a sabbatical, the loss of health coverage due to a reduction in hours is a qualifying event under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), allowing the employee and other covered family members to continue health benefits at their own cost.

If the employer decides to either continue the coverage or make medical, dental, and/or vision coverage available during the sabbatical at the active employee premium rates, it may want to consider having the continued coverage during the sabbatical run concurrent with and be counted toward available COBRA coverage.

Final Thoughts

Employers considering offering sabbatical programs should confirm that any insurance carriers agree with increased eligibility for benefits. Employers should also confirm with their accountants that the projected costs of sabbaticals are properly accounted for.

Lastly, employers should check state laws to see if they treat sabbaticals as earned and deferred vacation time that may need to be paid out if the employee terminates employment prior to taking the leave.

Marcus D. Black is an attorney with Steptoe & Johnson PLLC in Charleston, West Virginia. You can reach him at marcus.black@steptoe-johnson.com