The next interaction is important for employers to know.  When any qualified beneficiary (including the employee) becomes entitled to Medicare BEFORE their qualifying event they may still elect COBRA and the minimum coverage period cannot be ended early due to Medicare entitlement.  COBRA must be offered in this situation. 

One interaction we’ve experienced with participants is Medicare entitlement as a second qualifying event for the spouse and dependents.  In this situation, the employee, spouse and dependents are on COBRA due to a termination or reduction of hours, and then sometime after electing COBRA, the employee becomes eligible for Medicare.  At this point, when the employee becomes covered by Medicare, the spouse and/or dependents coverage period may be extended to 36 months.   This information can be comforting knowing that the spouse and dependents will have access to comprehensive and continued healthcare coverage for an extended period.

What other questions do you have, or have you received about the effects of Medicare entitlement on COBRA?  Contact an Ally now at cobraallies.com, and we’d be happy to talk through it with you.

First and foremost, if an employer maintains several group health plans, they should consider sending one initial notice and one election notice that covers all the plans.  But each notice must clearly identify the group health plan to which it applies as well as any differences in the way COBRA is applied (ex. special limited COBRA for applicable health FSAs).   

For employers that offer health FSA carryovers, COBRA notices should inform participants that carryovers are not counted for purposes of determining COBRA premiums as the premium will be based on the sum of the employee’s salary reduction election for the year and any nonelective employer contribution.  Additional clarification is required to inform the beneficiary whether carryover amounts will be available until exhausted or until the COBRA period ends.

Employers have the option of taking advantage of the special limited COBRA obligations regarding health FSAs, whereby they will only offer COBRA coverage through the end of the current plan year or potentially through the end of the grace period and only to beneficiaries with underspent accounts.  In this situation, the initial notice and election notice should have additional clarification disclosing the limited duration of the health FSA COBRA coverage as well as the underspent account qualification requirement.

The special limited COBRA obligations also affect the Notice of Termination.  A Notice of Termination must be sent when the plan administrator terminates COBRA coverage before the end of the maximum coverage period which is typically 18 or 36 months.  But when COBRA coverage ends at the end of the plan year or grace period for a Health FSA, no such notice is required as long as the limited duration was explained in the initial and election notices. 

A Notice of Unavailability must be sent when a qualified beneficiary notifies the plan administrator of a qualifying event, but the plan administrator determines COBRA is not available (ex. a beneficiary does not notify the employer of a qualifying event in a timely manner).  Although there is a lack of guidance on the issue from the DOL, this could apply to an FSA group health plan if the beneficiary has overspent their FSA account.

Still unsure? Contact us at www.cobraallies.com for a FREE consultation.

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NOTICE: This is not legal advice and should be viewed for educational purposes.

In order to retain and attract employees, employers offer benefits.  Employee Assistance Programs (EAPs) can offer an array of benefits covering areas such as financial, legal, parenting, elder care, substance abuse, as well as physical and mental health issues.  

Never before has the issue of employees’ mental health been more universally recognized for its importance and impact on workers’ ability to maintain productivity and enjoy an appropriate work-life balance.  More and more, employers are offering mental health benefits through their EAP. 

COBRA’s continuation of benefits applies to “group health plans”.

Generally, a benefit is “a group health plan” if it satisfies two criteria:

• It provides medical care: and
• It is maintained by the employer, whether the employer contributes to the plan or not.

All EAP’s are not the same and the services that are offered need to be looked at carefully to determine if it will be subject to COBRA. For example, some EAP’s will offer referral-only services based on the employee’s situation and will only provide them a list of counselors.

In DOL Advisory Opinion 91-26A, the DOL concluded that a referral only EAP, staffed by persons who were not trained counselors, did not provide medical benefits and so was not an ERISA welfare benefit plan.

Other EAPs’ are staffed with a trained counselor(s) or psychologist(s) that can provide counseling.

The key to determining if your EAP is subject to COBRA is identifying whether or not your EAP is providing medical care. Under ERISA, a group plan must provide “medical care” within the meaning of IRS Code section 213d. “Medical care” includes the diagnosis, cure, mitigation, treatment or prevention of disease and any other undertaking affecting any structure or function of the body.

An EAP that simply provides a referral service would not be subject to COBRA, while an EAP that provides direct counseling and support by on-staff professionals clearly offers the diagnosis, treatment, and prevention of mental health issues and as such is providing medical care and thus would be subject to COBRA continuation of benefits.

Still unsure? Contact us at www.cobraallies.com for a FREE consultation.

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NOTICE: This is not legal advice and should be viewed for educational purposes.

COBRA compliance mistakes can be completely unintentional but could cost an employer large fines or lawsuits.  Choosing to administer COBRA on your own is a HIGH RISK, LOW REWARD decision.

Fines for COBRA non-compliance can be costly.

IRS and DOL penalties are applied to EACH instance of a compliance issue, which means they can quickly add up for every incorrect letter or missed deadline.  The IRS has a maximum penalty of $500,000 per year!   

In addition to the above fines, employers with compliance issues open themselves up to lawsuits from former employees and can be held liable for paying for a qualified beneficiaries medical claims.    

Most employers do not have the infrastructure or resources to keep up with and administer all the COBRA requirements such as required notices, election and payment deadlines, late and partial payments, different coverage periods, changes to plans options, address changes and terminations of coverage, as well as Open Enrollment for qualified beneficiaries.

Employers who choose to do their own COBRA often do so manually, with no administrative system to support them which further increases their risk of non-compliance.  Employers that recognize this risk CAN buy their own software but for most small businesses, the cost of best-in-class COBRA administration software costs more than the outsourcing model.   

COBRA law is not immutable.  It has and will change over time.  The additional burden on employers to keep up with these changing regulations normally falls exclusively to a company’s HR team.  Choosing an outsourcing partner to administer your COBRA will free up your internal resources to focus on the needs of YOUR business.

Many qualifying events such as reduction in hours, being laid off, or separation of an employment, whether voluntary or not, can lead to emotional, difficult situations. Third party administrators ensure fairness and compliance by strictly enforcing rules and regulations while supporting the participant throughout the process which helps avoid conflict and protects the employer.

Outsourcing your COBRA Administration and partnering with COBRA Allies is a LOW RISK, HIGH REWARD decision and you can rest easy that your compliance to the regulations is being handled by experts. We are in this business to help you focus on what YOU do best, while we do the same.  Ultimately, this decision will lower the burden on your HR team and reduce your costs.

You have found an Ally!