long time employee, never an owner...
if the person is on Medical Leave, and I could afford it, I would give them the benefits.
I am on med leave and received Team Bonus, the full one, even tho I did not work the full year in which it was earned. I also got 401k match whenever I was paid.
Personally, if it were my business, I would go with the specific case. What impact did this employee have on your business, how long were they there, etc. I would be generous with long time employees or those who really helped the effort even if short time there.
I did not make 5 years on the job but no vesting so can't say what would have occurred when they termed me after a year of FMLA. If at all possible, make yourself a rule that will apply to the next case. I do not know what you would base it on, but some combo of length of service, level in the company, performance reviews, and possibly reason for leaving. Critical illness presents many problems, which I know very well now, and I would have been grateful had my employee been a bit kinder in their treatment of me. As it is, I will never again patronize their business and have nothing nice to say about them. Your reputation enters into this!