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As The COBRA Experts for 33 years, we receive many COBRA related questions from employers, insurance brokers, TPA’s and plan participants.
While many of the daily questions we field are rudimentary COBRA Law questions, we encounter a great many unusual, complex COBRA situations which require less straightforward responses.
With that in mind, we thought it would be useful for subscribers to have access to some of the quirkier questions and answers related to COBRA compliance. We’ve compiled some of these Q/A scenarios directly from customers and we will be providing the answers for public consumption right here on the CobraHelp blog.
So, without further ado, welcome to our Mailbag, where we periodically tackle odd scenarios and answer the hard-hitting COBRA questions that employers and brokers are likely to be faced with if they work with groups of twenty or more employees.
COBRA Scenario #1….
Nancy Q., a 25 life group Employer writes:
“My company offered COBRA benefits all of last year and this year so far. Someone recently mentioned to me that we may not have to offer COBRA any longer because we reduced staff. How do I know if we should comply with COBRA and how do we address those who are currently on COBRA coverage?”
To answer Nancy’s questions, we’ve broken them down as follows:
Are there any organizations that don’t need to offer COBRA?
Generally speaking, COBRA is applicable to the group plan(s) of any employer that employs 20 or more individuals on more than 50% of its typical business days in the preceding year. However, there are a few exceptions:
A church plan is a plan that is established for its employees by a church or by a convention or association of churches which is a tax-exempt entity under Internal Revenue Code Sec. 501. A church plan does not include: (1) a plan which is established or maintained primarily for the benefit of employees of a church or convention or association of churches who are employed in connection with one or more unrelated trade or businesses, or (2) a plan that includes less than substantially all individuals who are employees of the church or convention or association of churches.
First Year Plans
Not surprisingly, if the requirements of COBRA are dependent on the preceding year, it makes sense that plans in their first calendar year of existence do not need to offer COBRA.
Employees that have a qualifying event on a government plan are not subject to COBRA, but they have their own special versions of continued coverage. For Local and State plans, that would be the Public Health Service Act, or PHS. For Federal employees, they are subject to the Federal Employee’s Health Benefit Amendments.
We happen to know that Nancy’s company was not a church plan, first year plan, nor a government plan. We also happen to know that while she did have 25 employees last year, she only has 19 this year.
Based on our knowledge of plans subject to COBRA in the aforementioned paragraphs, Nancy must continue to comply with Federal COBRA for the remainder of this year, because she had more than 20 employees for the majority of last year.
That brings us to how she should proceed in the future
Nancy’s company must pay attention to its’ number of employees for the remainder of the current calendar year. If they remain under 20 lives for 50% or more of the typical business days this year, then next year the Employer will no longer be required to comply with Federal COBRA. (This may result in state continuation coverage compliance requirements).
What happens to the existing COBRA participants or Qualified Beneficiaries when an Employer is no longer required to comply with Federal COBRA rules?
Any participant currently on COBRA or any QB still within their 60 days to elect COBRA at the beginning of a new year in which the Employer is no longer required to offer COBRA is still entitled to their full COBRA timeline. The plan cannot cut someone’s COBRA eligibility short or deny an election if it was already offered. The number of employees requirement determines whether a company needs to offer COBRA going forward, but it does not terminate any existing COBRA eligibility.
What should the Plan Administrator do to determine whether or not state law requires the Employer to comply with state continuation or conversion rules?
The Plan Administrator should check the plan details to see if state continuation or conversion rules is explicitly mentioned in the subtext. If not, they should check with their legal counsel or contact their state’s Labor Office to determine whether state continuation or conversion rights apply.
That concludes this edition of the Mailbag. There is an abundance of unusual scenarios and situations that can arise in the COBRA sphere, but hey, that’s what we’re here for.
If there’s any questions you want answered, or even better, if you think that you can stump us with a question or scenario, we encourage you to write in!