Let’s Continue to Talk About COBRA

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Amber Posthauer: Good afternoon, everyone. Thank you for joining us today. We're going to get started in 60 seconds to allow for everyone to get connected. We'll get started shortly.

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Amber Posthauer: Welcome, everyone, to Let's Continue to Talk About Cobra. Thank you all so much for joining us.

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Amber Posthauer: The Benefits Compliance Team will be answering the questions you send through the Q&A.

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Amber Posthauer: We'll try our best to answer all of your questions, but if for whatever reason we're unable to get to your question today, please follow up with your advisor for further assistance.

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Amber Posthauer: Today's presentation is being recorded. We'll be sharing the recording in the follow-up email and on the NFP website. If there are any portions of this call that you missed, by Monday, you'll receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

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Amber Posthauer: At this time, I'd like to hand it over to Patrick Myers, Vice President and Counsel of NFP Benefits Compliance, and Kelly Ekman, Vice President of NFP Benefits Compliance. Patrick, the floor is yours.

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Patrick Myers: Thank you, Amber. Welcome, everyone, to our webinar today, where we will continue to talk about COBRA.

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Patrick Myers: My name is Patrick Myers, and my colleague Kelly Ekman and I will be walking you through an overview of this statute, as well as some

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Patrick Myers: common areas of interest and issues that we often encounter in our work as benefit compliance professionals here at NFP.

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Patrick Myers: Before we get started, let me go ahead and give our standard disclaimer, which is to say this is for general guidance purposes only. This is not intended to be legal advice, so if you have any specific legal questions, you should direct those to your lawyers or to your tax counsel.

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Patrick Myers: And the information that we're going to be providing you today is going to be current as of today, May 20th, 2026.

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Patrick Myers: Next slide.

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Patrick Myers: And, those are our lovely faces.

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Patrick Myers: And let's go to our agenda, and what we'll be doing first is we'll provide you with an overview of the law, and the high-level look at some of the more important aspects of that law.

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Patrick Myers: Then we'll spend some time talking about

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Patrick Myers: How to calculate the premiums that the, the persons covered by,

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Patrick Myers: coverage offered through COBRA, how much they'd be paying.

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Patrick Myers: Then we'll go over some of the notice requirements.

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Patrick Myers: And then we're going to start talking about how COBRA interacts with other laws, starting with a section devoted to FMLA. And then we'll move on to some other statutes, such as the ACA, Medicare, and retiree coverage. And then we'll wrap it up with some key takeaways.

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Patrick Myers: Before I get into that any further, let me go ahead and drop a link into the chat that should provide you a link to the slide deck that… so you can download and follow along as we… as we talk, if you'd like.

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Patrick Myers: And I'll also take this opportunity to reiterate that a recording of this presentation, as well as another copy of the slides, will be made available to you after our presentation today.

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Patrick Myers: So let's get started with an overview of COBRA, and I will pass this on over to Kelly, who'll provide you with an overview of the highlights of the law.

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Patrick Myers: Kelly?

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Kelly Eckman: Alright, thanks, Patrick.

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Kelly Eckman: Yeah, so we're just going to kind of take a really high-level look at COBRA. Hopefully most of you on the call today are, you know, pretty familiar with COBRA, but I think it's always a good idea to start with a refresher, because really everything that we're going to talk about today is going to build off of this information.

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Kelly Eckman: So, COBRA that we're talking today is federal COBRA, and so that's obviously the law. It's going to require employers in certain situations to offer continuation of coverage to participants once eligibility is lost.

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Kelly Eckman: As you can see on the left here, you know, many states also have state continuation laws, or what we call mini COBRA laws, which are separate from federal COBRA.

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Kelly Eckman: Now, we're not really going to dive into many COBRA laws today, but I just want to point out that each state handles its many COBRA laws differently.

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Kelly Eckman: Those are going to apply only to your fully insured plans within those states, so it's not going to apply to a self-insured plan.

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Kelly Eckman: And so it's really important to work with the insurance carrier if you do have a fully insured plan to see if your state has a mini COBRA law. Because sometimes mini COBRA laws

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Kelly Eckman: Will apply only to those employers that are not subject to federal COBRA, but in other states, it actually can apply to all plans, regardless of size.

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Kelly Eckman: And it can potentially extend upon federal COBRA. So, if you have a fully insured medical plan.

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Kelly Eckman: Or, you know, the other plans. Typically, the state mini COBRA is really just focused on medical, typically, but reach out to your carrier to make sure you understand any state Mini Cobra laws that may apply to your plan.

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Kelly Eckman: So, for federal COBRA, you know, which employers are subject to these rules? So, it's going to be both public and private employers.

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Kelly Eckman: Federal COBRA applies to both self-insured and fully insured plans.

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Kelly Eckman: But it is not going to apply to federal government plans or church plans.

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Kelly Eckman: Now, church plans can be a little, little bit of a gray area sometimes within the benefits law landscape, so if you do have a church plan and you're hoping to, you know, use an exemption to not be subject to COBRA or other laws, make sure you're working

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Kelly Eckman: With your own legal counsel for that determination.

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Kelly Eckman: Federal COBRA applies to plans that provide medical care.

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Kelly Eckman: And there is this small employer exception, so I think most of us are familiar with the idea that federal COBRA applies to employers with 20 or more employees. And so what's this look like? Well, it's,

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Kelly Eckman: employers that have fewer than 20 employees on 50% of their typical business days in the previous calendar year could qualify for the small employer exception, and thus not be subject to federal COBRA.

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Kelly Eckman: But what employees are we looking at? Well, we're looking at employees. So not just who's enrolled in the plan, but actually, you know, who the common law employees are.

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Kelly Eckman: If you are an employer that's part of a controlled group, you're going to aggregate all employees within the controlled group. So, just because you have one group with

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Kelly Eckman: you know, 10 employees, and another group in the control group has 30. The one with 10

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Kelly Eckman: they're not going to get this small employer exception, because we're going to add the 10 plus 30 and actually have 40. So make sure if you're part of a controlled group, you are aggregating those counts.

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Kelly Eckman: When making this determination, part-time employees are also considered on a prorated basis, depending on how many hours per week they work.

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Kelly Eckman: You also include employees who work outside of the U.S, so that may increase the employer headcount as well.

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Kelly Eckman: And then, again, we're looking at counts in the previous year, so, you know, even if an employer

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Kelly Eckman: Goes over 20 in the middle of the year.

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Kelly Eckman: they're gonna still have to apply or comply with the rules in the next year. So it's not just the immediate day, necessarily, it's gonna be looking at that, you know, 50% of its typical business days in that previous year.

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Kelly Eckman: So, you know, I mentioned what plans are subject to COBRA. COBRA. I kind of have 3 buckets here. Some are gonna be easier, and then…

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Kelly Eckman: our column on the right are going to be a little more difficult to determine. So, the ones that are included, I think most of us are going to be familiar with. So, it's your group health plan, or your medical plan, your dental and vision plans, health FSAs, but only if they are underspent.

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Kelly Eckman: So, if you have someone who has spent more out of their Health FSA than what they have contributed, they… the employer would not have to offer COBRA on that account. It's only if they have contributed more than they've been reimbursed for.

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Kelly Eckman: HRAs are also subject to COBRA, and that includes ICRAs, and I know Patrick's going to talk about that later, but just kind of keep that in the back of your mind. And then EAPs, point solution programs, that can be, like, your fertility or disease programs sometimes, wellness programs, if they provide medical care.

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Kelly Eckman: Now, what's our kind of easy list of plans that are not subject to COBRA? Well, first one here, HSAs. HSAs are not group health insurance plans. HSAs are individual tax accounts. So, even though the high deductible health plan is going to be subject to COBRA, the HSA

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Kelly Eckman: That tax account is not. Long-term care plans are not. And then we have a list here, disability, life, accident… accidental death and dismemberment, fixed indemnity, and some disease-specific plans, if they do not provide medical care.

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Kelly Eckman: And so that's going to lead us into our next column, our list of plans that are a bit difficult to determine.

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Kelly Eckman: And so my first group here, I've actually talked to several groups recently about the application of COBRA to EAPs. But so an EAP, point solutions.

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Kelly Eckman: disease or cancer policies, it's going to depend on what is actually offered through these. So we can't just say, oh, EAPs for sure are subject to COBRA, or for sure are not. It's going to depend on, you know, what these programs offer.

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Kelly Eckman: So, if they include things like, you know.

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Kelly Eckman: diagnosis, of a condition. Maybe they even can treat it. They include counseling sessions, that kind of thing. It's generally going to be medical care.

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Kelly Eckman: If they are just providing information, maybe it's, you know, health coaching, or really just general well-being information someone can, you know, read or watch a video, then that's probably not going to be medical care. So it really comes down to what that type of program is actually offering.

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Kelly Eckman: Then our next bucket here, so again, I said those disability, life, AD&D type plans. Now, we said, generally, those aren't going to provide medical care.

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Kelly Eckman: But…

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Kelly Eckman: Sometimes, those plans are going to be designed that have some additional components that actually do provide medical care. So again, we really have to look at

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Kelly Eckman: you know, some of these gray area benefits to figure out what are they actually offering. We can't just go by the name of the coverage type. We need to look at what is actually being offered under your plan to determine if it is medical care or not.

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Kelly Eckman: So, if we determine I have to offer COBRA, what's that gonna look like? Well, we have to offer it to what are called qualified beneficiaries, or QBs, you'll see that sometimes. So, who are these QBs? Well, they're going to be anyone that was covered by the plan, so the plan that is subject to COBRA, immediately before the qualifying event.

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Kelly Eckman: So, these are gonna be, obviously, your employees that were enrolled, if they covered a spouse or a dependent child on that plan. But, importantly, domestic partners are not considered qualified beneficiaries. So even though they might be enrolled in the plan, they are not a qualified beneficiary under COBRA.

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Kelly Eckman: However, let's say I'm an employee and I also cover my domestic partner.

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Kelly Eckman: I terminate employment, and, you know, we get offered COBRA.

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Kelly Eckman: I can decide to enroll in COBRA as the former employee, and also include my domestic partner alongside that enrollment. So my domestic partner couldn't independently elect that coverage, but we could come as a packaged deal. So it works a little bit differently if you do cover domestic partners.

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Kelly Eckman: So, what are some of the basics here? Again, I mentioned each qualified beneficiary has an independent right to elect COBRA. So that means, let's say you have an employee and a spouse, employee terminates, we offer COBRA.

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Kelly Eckman: You could have a situation where only the employee elects COBRA, and not the spouse. Or maybe the spouse elects COBRA, and the employee does not. So each of those qualified beneficiaries has an independent right to elect. So just because I had family coverage.

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Kelly Eckman: while as an active employee does not mean that I have to elect, family coverage under COBRA.

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Kelly Eckman: Qualified beneficiaries, they have to be given the same opportunities, to elect coverage… the coverage that they're enrolled in. So, if I was enrolled in the PPO plan, and then I terminated employment.

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Kelly Eckman: the employer can't say, oh, you're gonna be on COBRA, you can only have the high deductible plan. No, I need to be able to elect the same coverage that I was in the day before my event occurred.

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Kelly Eckman: The coverage, again, it must be identical to what's provided to similarly situated beneficiaries under the plan. So the same coverages available to active employees should also be available to qualified beneficiaries.

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Kelly Eckman: Now, when can I change my elections? So, during open enrollment, so I'm going to get… if I enroll in COBRA during the employer's annual open enrollment, I need to be able to make a change to coverage the same as active employees can.

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Kelly Eckman: If I have a special enrollment situation, so let's say I elect only for myself, and then I have a baby, I can add my newborn under a HIPAA special enrollment right into my COBRA coverage.

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Kelly Eckman: Sometimes you'll have a situation with a region-specific plan, so let's say we have, you know, somebody's on an HMO-type plan, or a very narrow network that's geographically based. If somebody moves, then potentially, you know, that plan would no longer be of value to that person.

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Kelly Eckman: And then if there are situations where the employer changes the plan, they add a new plan option, or change it, again, the COBRA beneficiary should have that same right.

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Kelly Eckman: Got a note here, you know, mergers and acquisitions, they can really complicate things with Cobra.

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Kelly Eckman: And so, you know, we could spend 20 minutes talking about this, but I just want to, as a reminder that, you know, if you are engaging in M&A activity, make sure that COBRA and benefits in general are something that is being discussed well before the transaction closes.

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Kelly Eckman: Because we'll get questions sometimes, you know, after the fact, and it's a whole lot easier to figure out COBRA responsibility before the transaction actually…

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Kelly Eckman: Closes.

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Kelly Eckman: So, what are the events? When is COBRA going to be offered? Well, there is a prescriptive list of events.

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Kelly Eckman: that will lead to a COBRA offer, but we have to have a loss of coverage. So just because an event occurs, if it doesn't lead to a loss of coverage, we don't actually have a COBRA-qualifying event. You can see the list here, and the duration of coverage. You know, the common ones are going to be your first two, so termination of employment.

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Kelly Eckman: And that's voluntary or involuntary. So it doesn't matter if I resign or if I'm fired, my termination of employment would lead to a, you know, up to 18 months of COBRA. Reduction in hours, this is an important one, we'll talk about it later, too. But again, we have to lead to an actual loss in eligibility for coverage. So if I change from full-time to part-time.

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Kelly Eckman: But I don't… my eligibility doesn't change, it's not actually going to be a COBRA event.

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Kelly Eckman: And then we've got some other ones here that can lead to up to 36 months, and we're gonna hit some of these examples a little bit later on.

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Kelly Eckman: It's important to remember, this comes up, you know.

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Kelly Eckman: there may be a time where an employer doesn't have to offer COBRA if termination of employment is due to gross misconduct, but as I think most of us are aware, there's no definition of gross misconduct, so if you are thinking of withholding a COBRA offer based on that, definitely work with your employment counsel.

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Kelly Eckman: And then, a couple situations where coverage could either be extended or reduced for that maximum duration. So, the duration could increase.

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Kelly Eckman: if someone has a disability extension, or potentially multiple qualifying events, so a secondary one of these events occurs after they're already enrolled in COBRA, and then sometimes the duration can be reduced. So, if it's canceled due to non-payment of premiums.

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Kelly Eckman: Sometimes Medicare entitlement, so that means enrollment, can lead to COBRA ending early, or obviously if the employer no longer offers a plan. So there can be times where these 18- or 36-month

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Kelly Eckman: Times do change a little bit.

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Kelly Eckman: And then Patrick's gonna lead us through what it looks like in setting premiums for COBRA plans.

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Patrick Myers: Thank you, Kelly.

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Patrick Myers: So, once a qualified beneficiary has elected to have their coverage extended through COBRA,

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Patrick Myers: The question then becomes, how much are they going to pay for that coverage?

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Patrick Myers: And under federal COBRA, the qualified beneficiary is going to be… could be responsible for up to 102% of the applicable premium

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Patrick Myers: For that coverage.

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Patrick Myers: And that will include both the employer and employee paid portions of that premium. When they were active employees, when they had their coverage while they were active, they were probably only responsible for a percentage of that premium, the employee portion.

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Patrick Myers: But once they get that coverage through Cobra, they're pretty much responsible for the whole thing, plus 2%.

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Patrick Myers: Now, there is an exception here, and that is if

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Patrick Myers: As Kelly had mentioned just a slide before, if they get an extension to their COBRA coverage period through disability.

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Patrick Myers: then they may be responsible for up to 150% of that applicable premium, but that will only apply to those extra months that they have received because of the extension. So, for instance.

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Patrick Myers: If they were, if they had a coverage period of 18 months because they had a employment, but they get an additional 11 months on top of that because they… the disability extension, that 150% applicable premium

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Patrick Myers: Would only apply to those extra 11 months.

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Patrick Myers: Now, this premium is determined at the beginning of a fixed 12-month period, which is also called the determination period.

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Patrick Myers: And once that value is fixed, or established at the beginning of that period, it pretty much is locked in for that whole 12 months.

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Patrick Myers: So, even if, for instance, the plan sponsors experience some sort of a rate change during that determination period, they will be unable to pass that along to COBRA participants during that 12-month determination period.

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Patrick Myers: There are really only a few exceptions to this. For instance, if they get that 150% additional premium from that disability extension, that can apply, even if they're in the middle of a determination period.

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Patrick Myers: If for some reason the plan had not been charging the maximum allowable a month amount, that is, they weren't charging that 102%, they could bump it up to 102% during the termination period, even if it was locked in at a lower rate.

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Patrick Myers: Or, if a qualified beneficiary elects a different benefit package during the determination period, such as the adding somebody to the coverage due to a HIPAA special enrollment right.

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Patrick Myers: The plan can use the applicable premium for the different benefit package as determined at the beginning of the termination period. So, if they're paying 102% of, like, employee-only coverage when they started, but they added their spouse or family as a result of a HIPAA special enrollment right.

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Patrick Myers: Then they would be paying the, applicable permium for that family coverage, even if they made that switch during that determination period.

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Patrick Myers: Next slide, please

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Patrick Myers: So, how do you set the premium? Well, it really depends, generally speaking, as to whether or not the coverage is fully insured or self-insured.

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Patrick Myers: If it's fully insured, it's fairly straightforward. The COBRA applicable premium is going to be the insurance premium that's paid to the insurer.

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Patrick Myers: So it's set by the carrier, and that's pretty much the long and short of it.

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Patrick Myers: But if you've got a self-insured plan, the applicable premium is calculated using either the actuarial period method or the past cost method.

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Patrick Myers: While fully insured plans are subject to the specific premium that is imposed by the carrier.

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Patrick Myers: Self-insured plan claims are paid out of the plan sponsor's general assets. So, there isn't… there's not a specific premium for special… for self-insured plans.

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Patrick Myers: Instead, those plan sponsors need to calculate the applicable premium.

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Patrick Myers: And the IRS allows sponsors of those plans to use those two methods.

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Patrick Myers: To determine what that premium is going to be.

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Patrick Myers: Now, the past cost method… Is…

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Patrick Myers: Only available if there has been no significant change in either the coverage offered or the number of employees on the plan in the current plan year.

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Patrick Myers: Under the past cost method, the applicable premium equals the cost to the plan for the immediately preceding plan year, and that would include claims costs, administrative expenses, stop-loss premiums if applicable.

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Patrick Myers: In stop-loss reimbursements as adjusted by the percentage increase or decrease in a cost of living index.

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Patrick Myers: In general, the past cost equals the total cost of the employer divided by the number of participants.

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Patrick Myers: The actuarial method, on the other hand.

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Patrick Myers: The plan's gonna have to identify which similarly situated beneficiaries are most closely related to the particular qualified beneficiary, and then charge that qualified beneficiary an amount equal to the reasonable estimate of the cost of providing coverage to an individual in that group.

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Patrick Myers: So, as you can imagine, this method really requires an actuary to actually come up with these premiums for the plan.

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Patrick Myers: And when the actuary does this, they usually consider a couple of elements, when they're coming up with their analysis. The first is.

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Patrick Myers: You know, the 12-month determination period that we just discussed, they need to take that into account.

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Patrick Myers: They need to take into account, plan claims data for that prior period, with respect to all individuals covered by the plan.

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Patrick Myers: And they also take into account information about those administrative costs, those stop-loss premiums, and those stop-loss reimbursements.

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Patrick Myers: And they also take into account an estimate of the average number of covered lives, and that will include your participants, their spouses, their dependents, as well as COBRA qualified beneficiaries for each month of the determination period.

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Patrick Myers: So there's an awful lot that the actuary method has to take into account, so it's a good idea if you have a self-insured plan and you're trying to determine what the premium is going to be, to get that actuary involved soon and quickly, so they can come up with those premiums for you.

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Patrick Myers: And another thing to keep in mind when you're setting the premium is that you have to offer, or have the option.

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Patrick Myers: To pay that premium in monthly installments.

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Patrick Myers: Next slide, please.

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Patrick Myers: So here's a little chart that,

00:25:10.510 - 00:25:19.310
Patrick Myers: covers and… provides an overview of what we've just discussed. So, if you've got a fully insured plan, premium set by the carrier, that's pretty much done.

00:25:19.310 - 00:25:34.100
Patrick Myers: But if it's self-insured, then it becomes a little more involved. You can either use the past cost method under specific circumstances, that is to say, if there's not a lot of change in the costs or the number of people who are going to be covered, then you can use the past cost method.

00:25:34.150 - 00:25:43.900
Patrick Myers: And then there is the actuarial method, which, as I mentioned, takes into account a lot of extra data, that's usually handled by an actuary to determine what that premium is going to be.

00:25:44.930 - 00:25:49.400
Patrick Myers: Then, of course, you'll also need to offer that, or be able to offer that in monthly installments.

00:25:49.660 - 00:26:07.529
Patrick Myers: Now, another thing that comes up every once in a while, at least that's what we see in our day-to-day, is whether or not you can pass along credit card fees. So, if somebody is, for instance, a qualified beneficiary, and they're going to pay their premium on a monthly basis, can they do that through their credit card?

00:26:07.650 - 00:26:21.750
Patrick Myers: Well, unfortunately, COBRA is silent on this, and so we can't necessarily bless that. That is, we can't necessarily bless that you add that credit card fees to that 102% maximum that COBRA allows.

00:26:22.020 - 00:26:35.550
Patrick Myers: But we can say that if you do offer that option, that payment method, that you also offer other lower-cost methods, such as checks, money orders, or the like, at that 102%.

00:26:35.910 - 00:26:43.149
Patrick Myers: If you have questions about whether or not you can add those credit card fees, then you may want to talk to

00:26:43.270 - 00:26:50.929
Patrick Myers: an attorney or the COBRA specialist on that before you institute that if you have questions.

00:26:51.180 - 00:26:52.620
Patrick Myers: Next slide, please.

00:26:56.330 - 00:27:15.570
Patrick Myers: So, a question that we've gotten quite a bit lately, relates to ICRAs, which, at least judging by the number of questions that we receive about it, is a topic of growing interest among the people we work with. And one of the questions that we get that's related to COBRA is, how do we calculate the COBRA premiums for an ICRA?

00:27:16.030 - 00:27:33.789
Patrick Myers: Well, the first thing you want to remember is, as Kelly mentioned earlier, an ICRA is a type of HRA. And so, when the employer offers COBRA on an ICRA, they're actually offering COBRA only for the HRA portion, not the individual plan that the HRA is helping to pay for.

00:27:34.150 - 00:27:45.509
Patrick Myers: But that said, the employers have to ensure that a COBRA-qualified beneficiary has individual health insurance coverage during any period they're also enjoying that COBRA coverage.

00:27:45.730 - 00:27:50.920
Patrick Myers: If the individual coverage is lost, then the COBRA coverage part has to terminate, too.

00:27:51.300 - 00:28:06.450
Patrick Myers: Now, again, as Kelly mentioned earlier, HRAs are considered self-insured benefits. So, like I mentioned earlier, you've got your options of either the past cost method, which only applies under certain circumstances, or the actuarial method.

00:28:06.800 - 00:28:11.449
Patrick Myers: Now, new ICRAs, that is, that are just newly instituted.

00:28:11.640 - 00:28:17.759
Patrick Myers: With the insufficient past cost history must rely on the actuaria method, so…

00:28:17.890 - 00:28:22.139
Patrick Myers: Pretty much your actuary method is going to be your default under most circumstances.

00:28:22.650 - 00:28:30.719
Patrick Myers: But in general, employers with ICRAs should calculate those COBRA premiums in consultation with an actuary.

00:28:31.780 - 00:28:33.140
Patrick Myers: Next slide, please.

00:28:33.330 - 00:28:46.020
Patrick Myers: So I wanted to take a moment also to talk about subsidies. Now, we've been talking… when we talk about COBRA premiums up to this point, we've been talking about the possibility that the employee, or sorry, the qualified beneficiary.

00:28:46.020 - 00:28:57.310
Patrick Myers: is paying the entire thing. But it is possible that the former employer or employer could subsidize that, usually through, say, a severance package or a severance agreement.

00:28:57.600 - 00:29:13.769
Patrick Myers: Now, of course, severance agreements are legal agreements, and so you should consult with your attorneys about the details about severance agreements, but there are some high-level points to keep in mind when you're talking about or considering offering a COBRA subsidy as part of that severance.

00:29:16.040 - 00:29:26.929
Patrick Myers: one of the things that you need to keep in mind are the potential non-discrimination issues that might occur when you're offering or providing a COBRA subsidy on a tax-advantaged basis.

00:29:27.460 - 00:29:40.470
Patrick Myers: If the employer continues salary payments under our severance agreement and allows for pre-tax premium deductions, those former employees would still be included in any Section 125 non-discrimination test.

00:29:40.650 - 00:29:58.809
Patrick Myers: If any of those former employees are highly compensated employees, then that could raise nondiscrimination concerns, because as you may recall, Section 125, as well as Section 105 non-discrimination rules, Section 105 applies to, specifically to self-insured plans.

00:29:59.080 - 00:30:13.250
Patrick Myers: If the variance in benefits disproportionately favors highly compensated employees, then that could cause a failure in non-discrimination testing. It could cause other problems later on.

00:30:13.250 - 00:30:24.659
Patrick Myers: So, if you are subsidizing former employees who are considered highly compensated employees, they could still create non-discrimination problems, even though they're former employees.

00:30:25.640 - 00:30:32.179
Patrick Myers: Similarly, issues can arise under that Section 105, non-discrimination rules.

00:30:32.330 - 00:30:43.969
Patrick Myers: if a self-insured plan only pays for COBRA coverage, or subsidizes that coverage for select individuals, as opposed to bona fide classifications of employees.

00:30:44.270 - 00:31:01.820
Patrick Myers: or if the subsidy favors highly compensated employees, which are generally those who are going to be in the top paid 25% of all employees. So, if you've got a self-insured plan, and you're subsidizing only for a few former employees, that could still cause problems in your non-discrimination testing.

00:31:02.630 - 00:31:17.559
Patrick Myers: Another thing to keep in mind is that although termination of employment and the exhaustion of COBRA coverage, that is to say, for example, at the end of 18 months, if you've been terminated due… if you've gotten COBRA coverage as a result of termination of employment.

00:31:18.050 - 00:31:21.709
Patrick Myers: If… if you exhaust the entire,

00:31:21.860 - 00:31:41.709
Patrick Myers: period, coverage period, that will allow those employees or former employees to enroll mid-year in other employer-sponsored coverage, such as their spouse's coverage, or under a new employer's plan. However, that's not the case if that former employee drops COBRA coverage because their subsidy ran out.

00:31:41.940 - 00:31:45.830
Patrick Myers: So, if, for instance, they had an 18-month COBRA,

00:31:46.070 - 00:31:52.159
Patrick Myers: coverage period, but the subsidy only covered the first, say, 6 months. If

00:31:52.230 - 00:32:03.339
Patrick Myers: they dropped COBRA coverage because they're no longer getting the subsidy, they would not be able to take advantage of a HIPAA special enrollment right to enroll in other coverage.

00:32:03.340 - 00:32:13.709
Patrick Myers: mid-year, just because they dropped it because they lost the subsidy. They would only be able to do that if they've gone through the whole 18-month period and they exhausted the coverage then.

00:32:14.940 - 00:32:28.840
Patrick Myers: So employees who elect the COBRA coverage to receive an employer-provided subsidy should be aware of the possible restrictions of gaining other group health coverage if the subsidy ends before the COBRA maximum coverage period ends.

00:32:30.600 - 00:32:38.170
Patrick Myers: Next slide, please. So now I'm going to pass it on to Kelly again to talk a little bit more about notice requirements.

00:32:40.260 - 00:32:42.839
Kelly Eckman: Alright, thanks, Patrick. Yeah, so I think…

00:32:42.920 - 00:33:02.049
Kelly Eckman: most are probably aware that there are several notices that come up, and even if, you outsource COBRA administration, like I think a lot of employers do, it's still important that you at least have a working understanding of the notices that are required, because ultimately, as the plan sponsor, the obligation for compliance is yours.

00:33:02.610 - 00:33:16.119
Kelly Eckman: And we're going to kind of just hit on a couple of the most common ones here, just so you have a little more awareness. Obviously, if you have questions about notices that are going out, work with your COBRA administrator on these.

00:33:16.490 - 00:33:29.710
Kelly Eckman: But the two big ones here, so the initial notice and the election notice. So the initial notice, sometimes called the general notice, so that's the first COBRA notice that's gonna go out. And that's given to the employee and spouse when they

00:33:29.850 - 00:33:45.690
Kelly Eckman: are initially enrolled in a COBRA-eligible benefit. So it should be distributed within 90 days, and just kind of gives the basics of COBRA and events that, you know, may lead to someone being offered COBRA at some point in the future.

00:33:45.840 - 00:34:04.169
Kelly Eckman: So the initial notice, the big thing here is that it should only go to covered participants. So don't put this in your benefit guide or your other open enrollment documents, because you don't want it to seem like you are, you know, giving someone rights that they may not actually have. Make sure it's only going to those

00:34:04.170 - 00:34:09.569
Kelly Eckman: who are actually covered participants under the COBRA-eligible benefits.

00:34:10.080 - 00:34:23.019
Kelly Eckman: The next one here, this is probably one of the biggest things that gets missed with COBRA, and that's if you have a situation where the spouse enrolls at a later date than employees. Let's say I enroll as a new hire.

00:34:23.159 - 00:34:35.040
Kelly Eckman: In May, but I don't enroll my spouse. And then at open enrollment, you know, at the end of the year, I enroll my spouse in medical that will begin next January.

00:34:35.159 - 00:34:46.650
Kelly Eckman: So, my spouse, because they didn't enroll at the same time I did initially, they must receive their own initial notice within 90 days of that coverage beginning.

00:34:46.949 - 00:35:00.929
Kelly Eckman: And this gets missed quite a bit. So make sure that, you know, you have a good process in place with your COBRA administrator to make sure that you're capturing situations where the spouse enrolls in a COBRA benefit

00:35:01.300 - 00:35:05.189
Kelly Eckman: At a later date than, you know, when the employee does.

00:35:05.390 - 00:35:09.650
Kelly Eckman: Now, the notice doesn't have to go to, dependent children.

00:35:09.860 - 00:35:23.430
Kelly Eckman: And if you're not sure, maybe you've had a lot of turnover, and you want to make sure that, you know, the notices have gone out properly, it is possible to redistribute those notices to all covered participants, so sort of cover your bases again.

00:35:24.000 - 00:35:31.440
Kelly Eckman: And then the second one here, the election notice. So again, this is when somebody has a COBRA qualifying event, and they can actually elect

00:35:31.860 - 00:35:46.540
Kelly Eckman: COBRA, so it's gonna outline, you know, the coverage that's available, the duration, it's gonna include things like premium and payment information, so kind of the nuts and bolts that someone needs to know if they are going to elect COBRA.

00:35:46.670 - 00:35:54.749
Kelly Eckman: And basically, that goes out within 44 days. The participant has, you know, 30 days to make their notification, and then there are 14 days

00:35:54.750 - 00:36:07.789
Kelly Eckman: Beyond that, to get that letter out, but practically speaking, you know, this really needs to go out as soon as possible to prevent a gap in coverage. Even though COBRA's gonna be retroactive back to, you know, that day of loss.

00:36:07.970 - 00:36:20.739
Kelly Eckman: it just helps someone, because usually, you know, the person electing COBRA, they really need that coverage, and so the quicker the employer can get that election notice out, you know, the better experience for that individual.

00:36:21.720 - 00:36:31.529
Kelly Eckman: The election notice can be sent to, you know, the family unit as opposed to each person, as long as it states, you know, it's to the covered employee and spouse.

00:36:32.600 - 00:36:51.749
Kelly Eckman: And then for distribution, again, mail is typically what you're going to use. Sometimes an employer could do hand delivery, but mail makes the most sense. And make sure that you're documenting it. You want to know, you know, we sent this notice to this address on this date, just in case you need to be able to prove that it went out.

00:36:52.600 - 00:37:10.280
Kelly Eckman: And so the additional notices, we won't spend a lot of time here, but sometimes there are situations where, you know, continuation isn't available, and so the, you know, you or the vendor would send the notice of unavailability. If there's one of those extensions that we talked about earlier, there is a notice that would be used for that.

00:37:10.610 - 00:37:16.290
Kelly Eckman: Open enrollment, again, we mentioned this. Someone on COBRA needs to be able to elect open…

00:37:16.360 - 00:37:30.889
Kelly Eckman: elect at open enrollment, just like other employees, and so make sure that they are getting that. And then, in the examples where coverage could terminate early, there's going to be a notice of early termination that could go out. Big thing, though, again, working with your

00:37:30.970 - 00:37:32.220
Kelly Eckman: a vendor.

00:37:32.390 - 00:37:37.709
Kelly Eckman: So, here's a situation that comes up. We've answered this a ton, and we actually…

00:37:38.060 - 00:37:45.179
Kelly Eckman: you know, covered this in a recent FAQ. So we terminated an employee in January and realized COBRA wasn't offered. What do we do now?

00:37:45.840 - 00:37:59.829
Kelly Eckman: So, the general concept here is, you know, you want to restore the qualified beneficiary back to the position they would have been in had the error had not occurred, right? That's our best place. But what's that going to look like?

00:37:59.830 - 00:38:14.520
Kelly Eckman: Typically, there are two different ways this can be done, either retroactive coverage or prospective coverage. So, let's say we're doing retroactive coverage, so we want to have that COBRA retroactive back to January as if, you know, the mistake hadn't occurred.

00:38:14.810 - 00:38:28.259
Kelly Eckman: Well, since we're outside of our COBRA timelines, we need the carrier or, you know, the TPA and the stop loss to agree to this, because we missed our, you know, windows of… for sending out the election notice and that kind of thing.

00:38:28.590 - 00:38:40.680
Kelly Eckman: Sometimes the employer, let's say they agree to go back to January, the employer may have to cover those premium amounts. The Department of Labor, you know, they're generally not going to like it if the employer says.

00:38:40.680 - 00:38:49.780
Kelly Eckman: Hey, sorry we forgot to offer you Cobra for 5 months, or, you know, a year, and now you owe us thousands and thousands of dollars. That usually doesn't sit well.

00:38:49.780 - 00:38:52.530
Kelly Eckman: So employers may have to consider that.

00:38:52.610 - 00:38:59.570
Kelly Eckman: And then, obviously, if you do retroactive coverage, that 18 or 36 months would be going back to that day of loss.

00:39:00.030 - 00:39:02.609
Kelly Eckman: The other option is a prospective.

00:39:03.030 - 00:39:09.469
Kelly Eckman: offer of COBRA. Again, we still need that carrier stop-loss TPA to agree.

00:39:09.750 - 00:39:21.970
Kelly Eckman: This can help out in the situations where, you know, you're not going to have someone who says, well, I would have elected COBRA if you offered it to me, and now I didn't, you know, get that procedure done like I should have.

00:39:21.970 - 00:39:30.570
Kelly Eckman: And so that is definitely a possibility. The downside here is it's going to extend your, you know, your duration or your liability

00:39:30.670 - 00:39:38.720
Kelly Eckman: As the employer, because now our 18 or 36 months is going to start from now, as opposed to the actual date of loss.

00:39:39.860 - 00:39:43.470
Kelly Eckman: So, either of those can be possible. We definitely…

00:39:43.600 - 00:39:55.679
Kelly Eckman: want employers to work closely with legal counsel in making that determination, because it's not going to be a perfect answer either way. So you need to understand, you know, the risks and liabilities of either option.

00:39:55.690 - 00:40:07.099
Kelly Eckman: And then, obviously, make sure that, you know, if you've had this happen, look at your internal procedures. Why did this happen? Was it a strange one-off situation, or is there a breakdown

00:40:07.100 - 00:40:17.509
Kelly Eckman: in, you know, a process, or getting the information to the vendor, and that's why it occurred. So make sure you understand why it happened, and put things in place to prevent it from happening again.

00:40:18.890 - 00:40:24.700
Kelly Eckman: And now Patrick's gonna walk us through COBRA and how it works with FMLA and Leaves of absence.

00:40:32.530 - 00:40:33.550
Patrick Myers: Thank you, Kelly.

00:40:33.990 - 00:40:41.329
Patrick Myers: Before we get too much into the weeds about COBRA and FMLA, let's take a moment to go over some FMLA basics.

00:40:41.480 - 00:40:50.799
Patrick Myers: FMLA, which is the Family Medical Leave Act, is a federal statute that applies to private employers who have 50 or more employees.

00:40:50.930 - 00:40:56.079
Patrick Myers: It also applies to governmental and school employers of any size.

00:40:56.620 - 00:41:06.600
Patrick Myers: If you are an employee of one of these employers, you can… you are eligible for FMLA leave if you have worked for the employer for 12 months.

00:41:06.820 - 00:41:16.819
Patrick Myers: And if you've worked 1,250 hours in the last 12 months, and you worked within 75 miles of 49 other employees.

00:41:17.520 - 00:41:34.600
Patrick Myers: Eligible employees can take FMLA for any of a number of specifically enumerated reasons, as listed in the statute. That would include birth, adoption, the serious health condition of either the employee or a family member.

00:41:34.690 - 00:41:41.320
Patrick Myers: For military, leave, or to, take care of a military service person.

00:41:41.890 - 00:41:46.220
Patrick Myers: It will… it's not going to be paid leave, at least not under the federal statute.

00:41:46.640 - 00:41:53.539
Patrick Myers: And it can be… the employee can take up to 12 weeks a year of this sort of leave.

00:41:53.940 - 00:42:07.629
Patrick Myers: One of the important things about FMLA that's relevant to our discussion here is that an employee that is on FMLA leave is entitled to have their health benefits continue while they are on leave.

00:42:07.890 - 00:42:09.320
Patrick Myers: Next slide, please.

00:42:13.310 - 00:42:22.170
Patrick Myers: So, because employers must maintain health group benefits for an employee on FMLA leave on the same terms as if an employee had continued work.

00:42:22.380 - 00:42:29.560
Patrick Myers: Then COBRA would not apply once the FMLA… once the employee goes on FMLA leave.

00:42:29.900 - 00:42:38.660
Patrick Myers: But even if the employee had opted at the beginning of the leave not to, continue their coverage while they're on the FMLA leave.

00:42:39.640 - 00:42:44.100
Patrick Myers: And when the employee returns back to work after they finish their leave.

00:42:44.380 - 00:42:47.039
Patrick Myers: Then the group health coverage would be restored.

00:42:47.300 - 00:42:57.750
Patrick Myers: Now, if the employee does not return to work after FMLA leave, then the employer must determine their rights to continue group coverage under COBRA.

00:42:58.610 - 00:43:10.620
Patrick Myers: But so, just wanted to stress that taking the FML leave by itself is not a COBRA qualifying event, because they are still entitled to that… to their health benefits as if they were active employees.

00:43:11.410 - 00:43:12.790
Patrick Myers: Next slide, please.

00:43:14.520 - 00:43:19.489
Patrick Myers: So, what happens when… how does COBRA and FMLA actually work, then?

00:43:19.650 - 00:43:25.190
Patrick Myers: Well, a qualifying event, which would trigger the offer of COBRA would occur

00:43:25.330 - 00:43:30.049
Patrick Myers: If the employee was covered on the day before the start of the FMLA leave.

00:43:30.420 - 00:43:34.809
Patrick Myers: The employee does not return to employment at the end of the FMLA leave.

00:43:34.950 - 00:43:43.409
Patrick Myers: and the employee would, in the absence of COBRA, lose coverage under the plan before the end of the maximum coverage period.

00:43:43.650 - 00:43:48.569
Patrick Myers: So, if the employee has exhausted their FMLA leave.

00:43:48.640 - 00:44:07.749
Patrick Myers: They have not yet come to work, but they are still eligible under the terms of the plan, or possibly under the terms of the ACA employer mandate. If they're still eligible for coverage, then they would not be offered COBRA, even though their FMLA leave has expired and they have not yet returned to work.

00:44:08.140 - 00:44:15.249
Patrick Myers: But in those circumstances where they would lose eligibility because they have not returned to work after the end of FMLA,

00:44:15.450 - 00:44:22.510
Patrick Myers: then, they would be offered, or should be offered, a COBRA, coverage.

00:44:24.590 - 00:44:32.530
Patrick Myers: So, if they offer the COBRA coverage, the triggering date would be the last day of the FMLA leave.

00:44:33.370 - 00:44:34.610
Patrick Myers: Next slide, please.

00:44:36.790 - 00:44:39.810
Patrick Myers: So, how does COBRA interact with extended leaves?

00:44:40.090 - 00:44:51.990
Patrick Myers: And as I mentioned earlier, there may be circumstances under which an employee may exhaust their FMLA leave, but they may still be eligible, or they may still be on another extended leave.

00:44:52.390 - 00:44:57.209
Patrick Myers: In which they may still have, enjoy, active coverage.

00:44:58.890 - 00:45:05.679
Patrick Myers: So, there are circumstances where employers may wish to allow employees to remain eligible for benefits while they're on extended leave.

00:45:06.340 - 00:45:16.470
Patrick Myers: So, although employers must maintain benefits while their employees are on FMLA leave, there may be a question concerning extending those benefits once that leave is exhausted.

00:45:17.080 - 00:45:35.880
Patrick Myers: So, in order to determine… first thing they need to do to determine whether or not they can extend that eligibility is they should review the eligibility terms of their plan. Often, plans will require employees to be actively at work, so employees would not be eligible once FMLA ends and they don't return to work.

00:45:36.430 - 00:45:46.609
Patrick Myers: Another thing to consider are the ACA mandate rules. For medical coverage, applicable large employers, that is to say, employers who have 50 or more employees.

00:45:46.890 - 00:45:57.240
Patrick Myers: must contend with the ACA's employer mandate, which requires applicable large employers to offer coverage, or affordable coverage, to their employees.

00:45:57.470 - 00:46:02.329
Patrick Myers: So they have to consider that mandate to determine whether eligibility is lost.

00:46:02.950 - 00:46:13.759
Patrick Myers: That depends on the measurement period type that the employer uses to determine whether or not an employee is a full-time employee and thus eligible or entitled to that offer of coverage.

00:46:14.140 - 00:46:31.269
Patrick Myers: and whether that employee is ongoing versus a new employee. So it may be possible for medical coverage to have to continue when someone is on leave. That is to say, an employee may be on leave during a stability period when they are still covered by their active coverage.

00:46:32.500 - 00:46:40.449
Patrick Myers: Employers should also follow their leave policy, which should in turn indicate when eligibility is lost for benefits while on leave.

00:46:40.670 - 00:46:48.190
Patrick Myers: So if benefits continue under the leave policy, then it should outline payment parameters and what happens if payment is not received.

00:46:48.400 - 00:47:02.289
Patrick Myers: Often, employers will follow similar steps to FMLA regarding the timing of premiums, grace periods, notifications, prior determination of coverage, and so on. So the client should follow their policy and what has been communicated to employees.

00:47:02.560 - 00:47:12.330
Patrick Myers: If the client does not have such policies, or if the client allowed this employee to continue benefits in contravention of their policies, they should consult an employment lawyer.

00:47:12.860 - 00:47:17.549
Patrick Myers: But all this is to say that, in cases where

00:47:17.860 - 00:47:27.190
Patrick Myers: the employee may consider… continue to be eligible for active employee coverage, even when they have not returned from FMLA leave.

00:47:27.360 - 00:47:39.799
Patrick Myers: So COBRA itself may not necessarily be offered until much later, that is, until their eligibility actually ends as a result of the fact that they have not returned to work at the end of their leave.

00:47:40.010 - 00:47:48.019
Patrick Myers: Because as Kelly mentioned earlier, even though they may still be employed by the employer, even though they're on leave.

00:47:48.110 - 00:48:00.759
Patrick Myers: They may have experienced a reduction of hours, which, in turn, would cause them to lose eligibility for the active employer, coverage, and there, in turn, would trigger an offer of COBRA coverage.

00:48:02.410 - 00:48:03.800
Patrick Myers: Next slide, please.

00:48:04.850 - 00:48:12.540
Patrick Myers: So now that we've tackled FMLA, let's look at some other laws and how COBRA interacts with them, and I'll give this back to Kelly.

00:48:13.730 - 00:48:15.210
Kelly Eckman: Alright, thanks, Patrick.

00:48:15.210 - 00:48:34.989
Kelly Eckman: Yeah, and so this is a really good lead-in, because the rules that he was just talking about with the leave of absence, and how the ACA's employer mandate, that leads right into where we are here. So he gave us a really good background about the fact that, you know, measurement periods are going to impact when eligibility is lost, which then impacts when

00:48:34.990 - 00:48:37.220
Kelly Eckman: Coverage is lost.

00:48:37.220 - 00:48:47.860
Kelly Eckman: So I'll kind of just dig into the scenario here, since he already gave us a great background. So let's say we have an employer, they have a 1-1 plan year, and they use the look-back.

00:48:48.270 - 00:49:04.009
Kelly Eckman: So, I've got an ongoing employee, and Anna was determined to be full-time during the most recent look-back, and she was offered coverage for this year. But, she changed positions, she changed to a part-time job, and back in February, and is only working 20 hours a week.

00:49:04.250 - 00:49:23.259
Kelly Eckman: when do we offer her COBRA? When does she lose eligibility? Well, because they're using that look-back, she's in the stability period for the entirety of this 2026 plan year. So that means she can keep her eligibility for medical coverage, even though her hours reduced below 30 hours per week.

00:49:23.400 - 00:49:28.429
Kelly Eckman: And that actually goes through the end of the plan year, because that matches the stability period.

00:49:28.970 - 00:49:33.619
Kelly Eckman: And then in this fall, when the employer's running their next look-back period.

00:49:34.070 - 00:49:53.419
Kelly Eckman: they're going to look at her average hours again. And so, when they do this calculation, because she's been working, let's say, 20 hours a week, it was determined her average was below 30 hours per week during that look-back. So she's not going to be considered full-time or offered coverage for the 2027 plan year.

00:49:53.550 - 00:50:12.449
Kelly Eckman: So, when did she become eligible for COBRA? Well, she was eligible for coverage through the end of this year, so her COBRA qualifying event doesn't actually occur until the end of 2026. So it's not when the hours reduced back in February, it's when her actual eligibility ended.

00:50:12.530 - 00:50:21.509
Kelly Eckman: 1231, and that's when she's going to be offered COBRA. So it definitely can be kind of confusing, as, you know, Patrick mentioned earlier.

00:50:21.780 - 00:50:27.710
Kelly Eckman: Another confusing one's gonna be Medicare and COBRA. There's a lot of tricky rules here.

00:50:28.270 - 00:50:42.919
Kelly Eckman: So one of the common questions we get is, you know, if an employee enrolls in Medicare, so they remain employed, but they want to enroll in Medicare instead and just drop the group plan.

00:50:43.320 - 00:50:54.009
Kelly Eckman: That does not create a COBRA event, even if they're covering a spouse and child, and that's because you can be enrolled in both the employer plan and Medicare.

00:50:54.130 - 00:51:08.010
Kelly Eckman: So, the employee could be enrolled in both of those coverages, and that way, their spouse or child still has access. So, if they voluntarily drop that coverage, it's a voluntary drop and does not create a COBRA event.

00:51:08.540 - 00:51:17.510
Kelly Eckman: Now, every once in a while with smaller groups, there might be a situation where eligibility is lost if someone enrolls in Medicare, but that's pretty uncommon.

00:51:18.910 - 00:51:22.289
Kelly Eckman: And again, that's because you can't have both coverages.

00:51:22.540 - 00:51:27.720
Kelly Eckman: So, let's look at a retirement situation. Again, same as termination of employment.

00:51:27.820 - 00:51:38.450
Kelly Eckman: So, for the employee that… on their own, so if… if I'm retiring, and I enroll in Medicare before retiring.

00:51:38.730 - 00:51:43.949
Kelly Eckman: I would still be offered COBRA for a maximum of 18 months.

00:51:44.710 - 00:51:45.560
Kelly Eckman: But…

00:51:45.680 - 00:51:57.129
Kelly Eckman: if I enrolled in Medicare after COBRA, so let's say I wasn't 65 yet, so I'm obviously not on Medicare, I retire at 64 and a half. So I enroll.

00:51:57.180 - 00:52:12.069
Kelly Eckman: I enroll in COBRA, and then once I turn 65, I go to enroll in Medicare. My COBRA could actually terminate early, if that's how the plan is designed, because my Medicare enrollment was after COBRA.

00:52:12.910 - 00:52:16.430
Kelly Eckman: Now, for spouse and child, this is where it gets really tricky.

00:52:17.910 - 00:52:33.039
Kelly Eckman: So, again, it's going to depend on when the employee enrolls in Medicare, or what we call entitlement. Entitlement means eligible for and enrolled in. And does that occur before or after the COBRA event?

00:52:33.730 - 00:52:38.590
Kelly Eckman: And so that's either gonna be 30… or, excuse me, 18 or 36 months. So…

00:52:38.710 - 00:52:41.340
Kelly Eckman: It's gonna be a maximum duration.

00:52:41.410 - 00:52:51.849
Kelly Eckman: of 18 months if my Medicare entitlement date was after COBRA. So, I enrolled in COBRA first, and then I enrolled in Medicare after.

00:52:51.850 - 00:53:06.629
Kelly Eckman: But, if I enrolled in Medicare first, so my entitlement date, the date my Medicare begins, if that happens before my COBRA qualifying event, it's going to be 36 months.

00:53:06.650 - 00:53:11.429
Kelly Eckman: for that spouse or child, but it's measured based on my Medicare entitlement date.

00:53:11.570 - 00:53:22.199
Kelly Eckman: And this is where it gets even more tricky. If someone delays Medicare enrollment past age 65, their Part A is actually retroactive up to 6 months.

00:53:22.410 - 00:53:26.000
Kelly Eckman: So that can push that Medicare entitlement date

00:53:26.260 - 00:53:33.609
Kelly Eckman: earlier than the, you know, the date in which that person enrolls. So it's really important

00:53:33.610 - 00:53:48.750
Kelly Eckman: That if you have someone who's right around Medicare age, they're retiring, they need to make sure that, you know, you are confirming that entitlement date with them, so that the COBRA administrator can offer coverage appropriately if they covered a spouse or a dependent.

00:53:49.590 - 00:53:56.689
Kelly Eckman: So in my example here, so Steve turned 65 in February of this year, and he enrolled in Medicare at that time.

00:53:57.130 - 00:54:11.409
Kelly Eckman: His spouse… both he and his spouse were enrolled in the group health plan, and then he retired in May. So, for his spouse, how long can she remain on COBRA, and will my answer change if his age was different at retirement?

00:54:11.570 - 00:54:18.829
Kelly Eckman: So, he enrolled in Medicare right when he was eligible, therefore his entitlement date is February 1st. There's no retroactive coverage.

00:54:18.900 - 00:54:33.019
Kelly Eckman: Since he was entitled to Medicare before his retirement, Julie is offered 36 months of COBRA measured from that February 1st date. So not his May 1st retirement date, but it's going to be that February 1st entitlement date.

00:54:33.230 - 00:54:39.270
Kelly Eckman: But, let's say Steve wasn't 65 yet, so he wasn't on Medicare when he retired.

00:54:40.170 - 00:54:52.210
Kelly Eckman: it's going to be a different situation. In that case, he wasn't entitled to Medicare yet, and so Julie is only offered 18 months of COBRA, just the same as any other employment termination.

00:54:52.300 - 00:55:08.879
Kelly Eckman: When Steve enrolls in Medicare, once he does turn 65, it doesn't create a second qualifying event. And that's because that Medicare enrollment wouldn't have caused a loss of coverage for an active employee, and therefore it doesn't create a second qualifying event.

00:55:09.120 - 00:55:13.830
Kelly Eckman: Now, Steve's COBRA might end early, because again, he enrolled in Medicare afterwards.

00:55:13.970 - 00:55:30.799
Kelly Eckman: So these can get really nuanced, so it's important if you have, you know, employees retiring around these ages to make sure that, you know, you're working closely together to make sure they understand how long COBRA can be offered, especially if they have a younger spouse that they're wanting to cover.

00:55:31.880 - 00:55:39.560
Kelly Eckman: And then retiree coverage, I know this doesn't apply to everyone, but these are also some pretty confusing rules.

00:55:39.830 - 00:55:56.849
Kelly Eckman: So we really always give the disclaimer that if you offer retiree coverage, you have to work closely with your legal counsel to make sure that, you know, your plan design is COBRA compliant, because the rules get kind of different with retiree coverage.

00:55:56.980 - 00:56:14.299
Kelly Eckman: And, you know, how COBRA is offered depends on the type of retiree plan, whether it's called… what we say is identical to the active plan, or it's an alternative to COBRA. So if it's identical, it means, you know, they're on the same plan as active employees, paying the same premiums, that kind of thing.

00:56:14.390 - 00:56:25.709
Kelly Eckman: And so, when that coverage ends, whether or not COBRA is available is going to depend on how long that person was on this retiree coverage.

00:56:25.850 - 00:56:34.550
Kelly Eckman: Was it greater than 18 months or fewer? If it was greater than 18 months, no additional COBRA. If it was fewer, then they might get some COBRA.

00:56:34.860 - 00:56:45.809
Kelly Eckman: The other option is, oops, when retiree coverage is an alternative to COBRA. So that's where the plan is different, the cost is different, that kind of thing. Essentially, your retiree

00:56:45.940 - 00:57:00.749
Kelly Eckman: is still being offered COBRA when they retire, but they're also offered retiree coverage at the same time. Basically, the employer has them waive their regular COBRA coverage in exchange for enrolling in that alternative coverage.

00:57:00.910 - 00:57:09.540
Kelly Eckman: So that's kind of how it works. And then spouses or dependents that are enrolled, sometimes they may be offered COBRA in the event.

00:57:09.590 - 00:57:24.529
Kelly Eckman: that there's an additional, you know, event, but sometimes they're not. Plan design really comes into play with, you know, the option if it's… if retiree coverage is an alternative to COBRA. So that's where working with that legal counsel is really important.

00:57:24.530 - 00:57:31.920
Kelly Eckman: Because plan design is going to impact if COBRA is offered, and if so, how long it takes.

00:57:32.990 - 00:57:37.830
Kelly Eckman: And so Patrick is going to close this out with some key takeaways.

00:57:38.670 - 00:57:39.700
Patrick Myers: Thank you, Kelly.

00:57:40.530 - 00:57:52.130
Patrick Myers: So, things to take away from our talk today is to make sure that coverage offered to COBRA qualified beneficiaries is the same as their coverage immediately before the qualifying event.

00:57:52.310 - 00:57:59.770
Patrick Myers: Don't forget to provide the covered spouse with that COBRA initial notice, and check state continuation laws for additional obligations.

00:57:59.830 - 00:58:12.440
Patrick Myers: Now, if you're using the look-back measurement method, be sure that active employees remain covered during the entire stability period, even if they incur a reduction of hours that causes them to lose eligibility and triggers a delayed loss of coverage under the plan.

00:58:12.760 - 00:58:14.149
Patrick Myers: Next slide, please.

00:58:16.800 - 00:58:23.460
Patrick Myers: And also, confirm initial notices are sent at the right time, to the right people, and via an acceptable method.

00:58:23.730 - 00:58:28.809
Patrick Myers: Confirm election notices are sent at the right time to the right people and via an acceptable method.

00:58:29.110 - 00:58:41.910
Patrick Myers: Confirm COBRA premiums are calculated and charged correctly for each fixed 12-month determination period. Confirm that same special enrollment and open enrollment rights are offered to COBRA participants as active employees.

00:58:42.160 - 00:58:56.570
Patrick Myers: Confirm COBRA participants receive required group health plan notices. Confirm that those COBRA compliance along with retiree coverage offers. Review COBRA obligations ahead of any mergers and acquisitions.

00:58:58.190 - 00:58:59.190
Patrick Myers: Next slide.

00:59:00.760 - 00:59:15.569
Patrick Myers: We also wanted to touch briefly on what the consequences could be of COBRA failures. Again, if you experience a COBRA failure, the first thing, the best thing to do is to go talk to your lawyer and have them help you work out a way to fix the problem.

00:59:15.900 - 00:59:21.649
Patrick Myers: But failures can lead to costly litigation, which could include attorney's fees.

00:59:21.810 - 00:59:28.479
Patrick Myers: There can be a statutory penalty of $110 per day for failure to provide certain notices.

00:59:29.050 - 00:59:35.019
Patrick Myers: If you fail to provide the initial notice, that could result in COBRA time limits not applying.

00:59:35.530 - 00:59:43.549
Patrick Myers: If you fail to provide an election notice, that could be up to $110 per day per person, as well as a continued COBRA obligation.

00:59:43.720 - 00:59:53.680
Patrick Myers: And then there could be potential liability for any medical costs incurred by a participant during a period that a qualified beneficiary should have been offered COBRA continuation coverage, but was not.

00:59:53.850 - 01:00:00.179
Patrick Myers: That could be a potential concern if the plan incorrectly informs or represents continued coverage to an ineligible individual.

01:00:01.570 - 01:00:12.489
Patrick Myers: Well, with that, we are out of time, so let's go ahead and point out that we have a publication that covers everything that we covered today in our presentation in depth.

01:00:12.740 - 01:00:21.090
Patrick Myers: So if you would like a copy of that, of that publication, just reach out to your NFP representative, and they'll get a copy out to you.

01:00:21.510 - 01:00:30.950
Patrick Myers: So, that wraps it up for us. I hope you got something out of this. We enjoyed giving this presentation. Thank you so much for joining us, and I'll hand it back to Amber.

01:00:31.610 - 01:00:37.219
Amber Posthauer: All right. Well, thank you, Patrick and Kelly, for sharing your valuable time and expertise with us today.

01:00:37.280 - 01:00:52.619
Amber Posthauer: To reiterate, today's presentation was recorded. We'll be sharing the recording in the follow-up email and on the NFP website. If there are any portions of this call that you missed, by Monday, you'll receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

01:00:53.010 - 01:01:04.490
Amber Posthauer: At the end of this call, a survey will populate in a new window. Please take a brief moment to complete the survey, as it lets us know what topics are important to our listeners, and helps make our education program as current and relevant as possible.

01:01:04.730 - 01:01:09.610
Amber Posthauer: That concludes our webinar for today. Thank you, everyone, for joining us, and have a great day!