Today, we’re going to talk about COBRA. First, a little history. COBRA is an acronym for the federal Consolidated Omnibus Budget Reconciliation Act of 1985…this law gives certain employees and their family members the right to continue group health benefits provided by an employer when the employee's job loss, death, or other specified events would cause coverage to end.
COBRA sets rules for how and when continuation coverage must be offered, how employees and their families may elect COBRA, and what circumstances justify terminating coverage. It also requires employers to provide specific notices in connection with administering COBRA.With so many requirements under COBRA, it’s easy to make a mistake that could result in pricey penalties. That’s why it’s so important that you understand your COBRA compliance responsibilities. The following do’s and don’ts are a great way to get started and avoid potential missteps and fines. First, the do’s.
DO count part-time employees to figure out whether your company’s plan is subject to COBRA. Remember, COBRA typically applies to employer maintained group health plans with at least 20 employees on more than 50 percent of typical business days in the prior year. Each part-time employee counts as a fraction of a full-time employee, equal to the number of hours the part-time employee worked divided by the hours an employee must work to be considered full-time.
Also, DO stay on top of required notices. The U.S. Department of Labor provides a Model General Notice and Model Election Notice on its website. Keep track of when and to whom notices are sent and provide a separate notice to the spouse or dependent child, if necessary.
Now, on to the “don’ts.” First, don’t overlook qualifying events. The type of qualifying event determines who the qualified beneficiaries are and the amount of time the plan must offer health coverage to them under COBRA. Keep in mind that if a plan measures eligibility for coverage by the number of hours worked in a given time period, an employee's failure to work the minimum number of required hours may be considered a reduction in hours that gives rise to COBRA rights.
Next, don’t end COBRA coverage too early. There are very specific rules explaining when COBRA may terminate prior to the end of the maximum coverage period…for example, if premiums are not paid. Qualified beneficiaries must be provided an early termination notice if coverage is terminated early. In some circumstances, the maximum period may be extended due to disability or a second qualifying event.
Also, don’t forget about state laws. Many states have enacted what are commonly known as 'mini-COBRA' laws, which may require continuation of group health plan coverage provided by employers with fewer than 20 employees. You should check to see if a mini-COBRA law applies to your plan and, if so, how it differs from federal COBRA.
Finally, one last “Do.” Make sure you DO consult with a trusted employment law attorney or benefits advisor if you have any questions as to how COBRA applies or your obligations under the law. You can also get more information at HR360.com, where we review COBRA in detail and offer more hints and strategies for avoiding COBRA mistakes.