In 1985, Congress passed the Consolidated Omnibus Budget Reconciliation Act, known to employers as COBRA. COBRA requires most employers who sponsor group health plans to offer employees and their families the right to continue group health plan coverage if coverage is lost due to certain qualifying events. An employee pays for COBRA coverage at the employer's group health plan rate, and the coverage must be identical to that of similar current employees. As a result, if employee benefits change, COBRA coverage changes as well.

In-house COBRA administration can be a daunting task for employers of any size. The employer must record all COBRA-related dates for each participant, maintain proof of mailing for all required notifications and retain all COBRA records for seven years! Fortunately, eBenefits Administrators is here to help. We can relieve the burden of COBRA administration and ensure your business is compliant with the latest regulations.

Employers Subject to COBRA

Employers with 20 or more employees in the prior calendar year who maintain group health plans are subject to COBRA regulations. All employees count toward the 20 employee threshold whether or not they actually participate in the group health plan. Part-time employees must be partially included as well. For example, if an employer defines full-time employment as working at least 30 hours a week, an employee who works 15 hours a week is considered half an employee. In addition, if an employer is part of a related group of businesses referred to as a controlled group, it may be subject to COBRA regulations even if fewer than 20 people are employed. In that case, employees of the related companies are also counted. Small employers who employ fewer than 20 employees on 50% of typical business days during the prior calendar year are not subject to COBRA.

Health Plans Subject to COBRA

Generally, group medical, dental and vision care plans are covered by COBRA, as well as most Flexible Spending Accounts (FSAs), which enable employees to pay for medical expenses not covered by their health plan tax-free. The employer must send employees and their families an initial COBRA rights notification when they first become covered under a group health plan subject to COBRA. COBRA rights must also be contained in the summary plan description (SPD) which employees are given once they receive group health plan coverage. Pension plans and other welfare plans such as life insurance, Dependent Care Assistance Plans (DCAPs), disability, severance pay, profit sharing and 401(k) plans are not subject to COBRA.

Qualified Beneficiaries

Individuals qualified for COBRA coverage, known as qualified beneficiaries, include the employee, the employee's spouse and any dependent children covered under the employer's group health plan. In certain cases, retired employees and their families are also qualified beneficiaries. If an employee wants to add a new qualified beneficiary to COBRA coverage, they must notify the employer within 30 days after marriage, birth or adoption of any dependent they are seeking coverage for.

Qualifying Events

A qualifying event refers to a loss of health plan coverage for any of the following reasons: Voluntary or involuntary termination of employment for reasons other than gross misconduct Reduction in working hours due to strike, layoff or leave of absence (non-Family Medical Leave Act*) Change in dependency status including divorce or legal separation or a child ceasing to be a dependent under group health plan rules Loss of coverage due to Medicare election Chapter 11 bankruptcy of the employer (applies only to retired employees covered under the employer's group health plan) Death of employee An employee must notify their employer within 60 days of qualifying events such as death, change in dependency status or Medicare entitlement. If the employer isn't notified within that time frame, the employer does not have to offer COBRA coverage providing the employee received timely notice of his or her COBRA rights. As soon as an employer is made aware of an employee experiencing a qualifying event, they are required to inform the COBRA administrator within 30 days. The administrator must then provide the employee with a second COBRA rights notice and election form within 14 days. If the employer is the COBRA administrator, the employer has the entire 44 day period to issue the second rights notice and election form. The rights notice and election form should be sent via first class mail and must also be given to other qualified beneficiaries. * FMLA leave is only a qualifying event if an employee informs the employer that they will not return to work after FMLA leave or, in fact, does not return after FMLA leave. A COBRA notice should be issued when the employee first informs the employer that they will not return or on the date the FMLA leave period expires if the employee does not return to work.

Coverage

Election After an employee (and other qualified beneficiaries, if applicable) receives their second notice of COBRA rights and election form, they have a 60 day election period to choose whether or not to elect COBRA coverage. Qualified beneficiaries may elect COBRA coverage independently, and the employee or employee's spouse may elect coverage on behalf of a minor child. Duration COBRA coverage is typically available for periods of 18, 29 or 36 months as determined by the Department of Labor. In most situations, qualified beneficiaries are eligible for COBRA coverage for a maximum of 18 months, and the coverage is retroactive to the date coverage was lost. Certain qualifying events including the death of a covered employee, divorce or legal separation, Medicare entitlement or loss of dependent status may permit a qualified beneficiary to receive coverage for a maximum of 36 months. Extension Coverage for disabled qualified beneficiaries may be extended to 29 months. The disabled beneficiary must notify the employer of Social Security disability determination within 60 days of the determination and prior to the 18 month coverage period expiration in order to receive the Social Security disability extension. The beneficiary is also required to notify the employer within 30 days of a final determination that they are no longer disabled, if applicable. If a qualified beneficiary receives an 18 or 29 month coverage period and experiences a second qualifying event during that time frame, the coverage period may also be extended to 36 months. Termination COBRA coverage may be terminated early for any the following reasons: Premiums are not paid on a timely basis by the participant The employer ceases to maintain any group health plan The participant obtains coverage under another employer's group health plan which does not contain any pre-existing condition limitations which impact the participant The participant elects Medicare benefits Conversion Depending on the group health plan the employer offers, state law may require the insurance carrier to offer COBRA participants individual health plan policies, known as conversion coverage, if they exhaust the maximum COBRA coverage period. The employer must make this information available to employees in the initial COBRA rights notice if it applies to their group health plan. Conversion coverage is generally not available in situations where the participant terminates COBRA coverage before reaching the maximum coverage period.

Non-Compliance Penalties

Individuals can bring a civil action lawsuit against employers who failed to enforce COBRA rights or give the required notice of COBRA rights. The court can award a penalty of up to $110 per day for notice violations, although smaller penalties are typically given. The Department of Labor (DOL) also investigates COBRA violations and can sue employers to enforce the statute in appropriate cases. In addition, the IRS can impose excise taxes on employers with certain COBRA violations.

Comprehensive Administration

eBenefits Administrators can relieve the burden of COBRA administration and ensure your business, no matter how small or large, is compliant with the latest regulations. We'll take care off all the required COBRA notifications by first class mail and premium collection and remittance. In addition, we provide employers with helpful information on legislative updates and on-demand activity reports, as well as payment coupon books for COBRA participants. Employers can also handle administrative tasks in a paperless, time-saving environment with myRSC®. myRSC provides secure data storage, online qualifying event notification and report generation. You may test myRSC's capabilities by going to www.myrsc.com and clicking the "Login as Demo" link. Most importantly, we provide our customers with the personalized support they need to fully-understand COBRA. Employers and COBRA participants can simply pick up the phone or email us any time they have a question or concern. Contact us today to learn more.