The discharge of an employee does not necessarily end the employer’s relationship with…or obligations to… the employee. Benefits provided by the employer as well as benefits mandated by law may in fact cause that relationship to continue.
Areas in which the former employee may have an ongoing connection to the employer include:
Federally mandated COBRA or state continuation of health care coverage
Providing a HIPAA certificate of creditable coverage through an employer-sponsored group health plan
Severance pay, if paid over a period of time and not as a single lump sum
Benefits to be paid through a qualified retirement plan
Federally mandated COBRA continuation of coverage is a key area that may extend the employer’s obligation. The federal COBRA statute requires employers with 20 or more employees who provide group health coverage to offer employees continued health coverage following termination and loss of coverage. Smaller employers may also have continuation of coverage responsibilities under their state laws. It’s important to learn which COBRA or state continuation of coverage laws apply to your company. You can learn more in the COBRA tab to the left or for state continuation of coverage, under the State Laws section in the top navigation bar.
Additionally, federal HIPAA statutes require group health plans to issue a Certificate of Creditable Coverage verifying an insured’s period of coverage. This may allow that individual to obtain new group coverage without having coverage for pre-existing conditions excluded. To learn more about HIPAA, please visit the Employee Benefits tab in the top navigation bar.
Another key area is severance, a cash payment given by employers to employees who have been discharged. Sometimes severance is given in consideration for a release of claims by the employee. Severance is also often given to employees in conjunction with a reduction in force. There is no federal law mandating severance pay, but employers should consult employment counsel to be certain they do not have other legal obligations to pay severance. Employers should note that some severance plans may be considered welfare benefit plans and therefore subject to ERISA.
Retirement plans also come into play when an employee is terminated. The most common of these are defined contribution programs, such as 401(k) plans. When an employee leaves an employer, he or she may wish to rollover qualified plan funds to another qualified plan with a new employer, or possibly to a self-directed IRA.
To learn more about employee ‘discipline and termination’ visit HR360.com.