by admin | Nov 24, 2025 | Blog
If your business has fewer than 20 employees, you may qualify for COBRA’s small employer exception—but only if you count employees correctly. Missteps can lead to penalties and unexpected COBRA obligations.
Who Should You Count?
- All Employees, Not Just Plan Participants
Include everyone working for all employers maintaining the plan.
- Only Common-Law Employees
Exclude independent contractors and board members unless they meet IRS common-law criteria.
- Part-Time Employees as Fractions
Count based on hours worked compared to full-time status.
- Employees of Related Entities
Controlled group rules require counting employees of related companies and successors.
- Employees Outside the U.S.
Foreign entities and overseas employees count if part of the controlled group.
Why It Matters
Incorrectly applying the exception can result in lawsuits, penalties, and COBRA coverage obligations. When in doubt, consult a benefits expert.
Tip: Use a consistent counting method for the entire year and verify controlled group relationships.
Source: Thomson Reuters
by admin | Oct 30, 2025 | Blog
Under COBRA rules, group health plans may terminate coverage early if a qualified beneficiary becomes entitled to Medicare after electing COBRA. But it’s important to understand what “entitled” really means.
Entitlement vs. Eligibility:
- Eligible means the person qualifies for Medicare (e.g., due to age or disability).
- Entitled means they’ve enrolled in Medicare and are receiving benefits.
Someone who is eligible but hasn’t enrolled yet is not considered entitled—and their COBRA coverage should continue.
When Does Entitlement Begin?
- For Medicare Part A, entitlement is automatic if the person is already receiving Social Security or Railroad Retirement benefits. Otherwise, they must apply.
- Medicare Part B entitlement typically begins when Part A does, or during a later enrollment period.
Important:
Only the individual who becomes entitled to Medicare can have their COBRA coverage terminated early. Other family members on COBRA—like a spouse or dependents—can continue their coverage.
Before ending COBRA early, confirm that the individual is enrolled in Medicare—not just eligible.
Source: Thomson Reuters
by admin | Sep 16, 2025 | Blog
When a former employee receiving COBRA coverage is called to active military duty, employers may wonder how COBRA and USERRA apply. Here’s a quick breakdown of your obligations.
What is COBRA?
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows employees and their families to continue group health coverage for a limited time after job loss or other qualifying events.
What is USERRA?
USERRA (Uniformed Services Employment and Reemployment Rights Act) protects the job and benefit rights of employees who leave work for military service. It includes health coverage continuation—but only for active employees, not those already separated and on COBRA.
Does USERRA Apply in This Case?
No. If the individual is no longer employed and is receiving COBRA, USERRA does not provide additional rights.
Can COBRA Be Terminated Due to TRICARE?
This is a gray area:
- IRS rules suggest COBRA may end if the person gains other group coverage (like TRICARE).
- DOL guidance says COBRA should not be terminated just because TRICARE is in place.
What Should Employers Do?
- Don’t automatically terminate COBRA due to TRICARE.
- Check with your insurer or stop-loss carrier to avoid coverage gaps.
- Document your decisions and stay updated on federal guidance.
USERRA doesn’t apply to former employees, but COBRA coverage should generally continue—even if TRICARE is now active. When unsure, consult legal or benefits experts to stay compliant.
Source: Thomson Reuters
by admin | Jul 31, 2025 | Blog
When a COBRA election notice is returned as undeliverable, it can create uncertainty and potential legal risk for employers and plan administrators. While COBRA regulations require that notices be sent to the qualified beneficiary’s last-known address, a returned notice may signal that further action is needed.
Confirm the Address Used
Start by verifying that the notice was sent to the correct last-known address on file. Mistakes in data entry or outdated records can easily lead to delivery issues.
Cross-Check with Other Sources
If the address appears correct, consider checking with:
- Your insurer or third-party administrator (TPA): They may have a more recent address from recent claims or correspondence.
- Other internal departments: Payroll, HR, or pension administrators may have updated contact information.
- Phone records: Try calling the last known home or mobile number provided by the qualified beneficiary.
- Former coworkers: If the qualifying event was a termination, colleagues may know if the individual has moved.
Attempt to Re-Send the Notice
If you obtain a new address, promptly resend the COBRA election notice. If the qualified beneficiary contacts you directly, use that opportunity to update their contact information and reissue the notice.
Document Every Step
To protect your organization from potential COBRA-related lawsuits:
- Keep a written record of all actions taken.
- Save copies of returned mail, emails, and internal memos.
- Note any phone calls or inquiries made in pursuit of updated contact information.
Proactively Communicate Address Update Policies
Ensure your Summary Plan Description (SPD), COBRA initial notices, and termination letters clearly instruct beneficiaries to notify you of any address changes. Include easy-to-follow steps for updating contact information.
Why This Matters
Courts have occasionally held plan administrators to a higher standard under fiduciary duty or inquiry notice principles. If you know—or should know—that a notice wasn’t received, taking no further action could expose your company to legal risk.
While COBRA only requires that notices be mailed to the last-known address, taking reasonable steps to ensure delivery demonstrates good faith and can help mitigate legal exposure. When in doubt, document your efforts and seek legal counsel if necessary.
by admin | Jul 3, 2025 | Blog
When employees or their dependents lose group health coverage due to a qualifying event, COBRA ensures they can continue their health benefits. But what happens when a qualified beneficiary under COBRA relocates outside the service area of their HMO (Health Maintenance Organization) plan?
This scenario is more common than you might think—and it’s essential for employers and HR professionals to understand their obligations under COBRA in such cases.
COBRA Basics: Same Coverage Rule
Generally, COBRA requires employers to offer the same health coverage the qualified beneficiary had before the qualifying event. However, there’s a key exception for region-specific plans like HMOs.
The HMO Relocation Exception
If a qualified beneficiary moves out of their HMO’s service area, the employer must offer alternative coverage—but only if certain conditions are met.
✅ When Must Alternative Coverage Be Offered?
- Upon Request: The employer must offer other coverage options within a reasonable time after the qualified beneficiary requests it.
- Timing: The new coverage must begin no later than the date of relocation or the first day of the following month after the request.
✅ What Coverage Must Be Offered?
- If the employer offers other plans (e.g., PPO or indemnity plans) to similarly situated active employees that can be extended to the new location without extraordinary cost, those plans must be offered.
- If no such plan exists for similarly situated employees, the employer must offer any available plan that can be extended to the new location.
❌ What If No Coverage Is Available in the New Area?
- If no plan can be extended to the new location without extraordinary cost, the employer is not required to offer alternative coverage.
- However, if another controlled group member (e.g., a parent or subsidiary company) offers coverage in that area, it may be obligated to provide COBRA coverage.
Extraordinary Costs Are Not Required
Employers are not required to:
- Establish new provider networks.
- Create new reimbursement schedules.
- Offer preferred provider rates in areas without existing employee presence.
If a COBRA participant moves out of their HMO’s service area, you must be prepared to offer alternative coverage options—but only if they are already available to active employees and can be extended without significant cost.
Source: Thomson Reuters
