No matter how long you work with COBRA, questions still arise. Here are four COBRA administration questions that caught our attention this month. Ready for a pop quiz? See if your team can answer these four questions correctly!
Question #1: A case of he said, they said …
A former employee calls 65 days after you mailed his COBRA election notice. He says he never received the election notice. Should you resend the notice?
The decision to resend a COBRA election notice depends on two things:
- First, can the plan administrator prove that the election notice was sent to the last known address?
- Second, is the qualified beneficiary still within the COBRA election period?
COBRA does not require the plan administrator to prove actual receipt of the election notice. Instead, the COBRA regulations require the election notice to be furnished in a manner “reasonably calculated to ensure actual receipt of the material.”1 For example, a plan sponsor need only show that the election notice was mailed to the qualified beneficiary’s last known address but does not need delivery confirmation.
In this situation, the plan administrator should have a written policy for mailing COBRA election notices, a copy of the actual notice sent showing the name of the qualified beneficiary along with the address to where the notice was sent, and most importantly proof from the U.S. Postal Service that the notice was actually mailed.
A qualified beneficiary has 60 days to elect COBRA measured from the later of the loss of coverage date or the date the COBRA election notice is provided. If a qualified beneficiary is still within these 60 days and the plan administrator learns that he or she did not actually receive the election notice, the plan administrator should resend the notice. However, if more than 60 days have passed and the plan administrator can prove that it properly sent the election notice to the qualified beneficiary’s last known address, the plan administrator does not have to resend the election notice and reopen the COBRA election period.
Of course, there are exceptions to the rule such as situations involving incapacitation. In every case, you should review the facts, your processes and your proof before deciding to resend or not to resend.
Question #2: New coverage for old participants?
You are switching health plan insurers at the new plan year. What should you do with your COBRA participants?
As kids, we all learned the golden rule, “Do unto others as you would have them do unto you.” The COBRA golden rule is very similar, “Do unto COBRA qualified beneficiaries as you would do unto active participants.”
The COBRA regulations provide that, “If coverage is modified for similarly situated non COBRA (active) beneficiaries, then the coverage made available to qualified beneficiaries is modified in the same way.”2 Therefore, your COBRA participants should receive coverage under the new insurance contract and should receive the same open enrollment communications that active participants receive.
Question #3: A case of COBRA for three generations …
An employee’s daughter turned 26 and elected to continue her health coverage via COBRA. During the 14th month of her COBRA coverage, she had a baby. Does the grandchild get COBRA? If so, for how long?
The employee’s daughter is entitled to 36 months of COBRA after she ages off the plan and no longer qualifies as a dependent. The daughter is a qualified beneficiary and qualified beneficiaries have the same rights as active participants (remember that COBRA golden rule). Because an active employee can enroll her new baby under the plan, the qualified beneficiary can also enroll her new baby. The grandchild is entitled to coverage as a dependent of the qualified beneficiary. However, the new baby does not have independent COBRA rights. Thus, the baby’s coverage would end at the expiration of the mother’s COBRA term.
Question #4: Can COBRA drop during a flip-flop?
Two years ago, you employed 30 FTEs. Last year you only employed 18 and you are now under the 20-employee COBRA threshold. Can you terminate the coverage of existing COBRA participants early because you are no longer subject to COBRA?
The simple answer is, no, you cannot terminate COBRA early because you fall below 20 full time employees. COBRA contains a small employer exception. Employers with fewer than 20 full time or full time equivalent employees on a typical business day in the prior year are not subject to federal COBRA.
Employers who regularly flip flop over and above the 20-employee threshold must consider when the COBRA triggering event that caused the loss of coverage occurred. Did it occur in a year when the plan was subject to COBRA or a year when the plan was exempt from COBRA?
If the triggering event occurs during a year when the employer is under the small employer exception, no federal COBRA rights exist. However, if a qualified beneficiary experiences a qualifying event during a year when the employer is subject to COBRA, the qualified beneficiary has a right to the maximum COBRA period regardless of the employer’s size in subsequent years.
For example, Paul’s employer falls under the small employer exception to COBRA for the 2017 year. Paul terminates his employment and loses health coverage on December 31, 2017. His termination is not a qualifying event and he has no federal COBRA rights. This remains true even if Paul’s employer ceases to be a small employer as of January 1, 2018.
What happens if Paul terminates employment on December 31, 2017, during a year where the small employer exception applies but is granted severance so that his group health coverage does not end until March 31, 2018, during a year when COBRA applies? Paul still does not have a right to federal COBRA because his triggering event (termination of employment) occurred during a year when the plan was not subject to federal COBRA.
The COBRA regulations take this a step further. Suppose Paul’s wife is covered for the three months of severance, but she divorces Paul before the end of the three months and loses coverage as a result of the divorce? The divorce will constitute a qualifying event during 2018 (a year when the plan is subject to federal COBRA) and Paul’s ex-wife will be entitled to elect COBRA.3
As you can see from these questions, COBRA is never dull or routine. Always keep learning!
This article was reprinted from the April 2018 issue of America’s Benefit Specialist Magazine featuring our very own Robert Meyers.
1 DOL Reg. §2520.104b-1.
2 Treas. Reg. §54.4980B-5, Q/A-1(a).
3 Treas. Reg. §54.4980B-4, Q/A-1(d).