Squad health regen is still working when squad leader is dead. Reproduction step: 1: get an Engi squad leader 2: Squad leader die 3: Approach his corpse and squad health regen is still healing you.
I'm pretty sure that "squad aura" box pops up despite the class of the squad lead, so take from that what you will.
as he breathes his last dying breaths your squad leader bestows upon you his blessing and raises your morale