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 Mistakes in data entry or outdated records can easily lead to delivery issues.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
by admin | Apr 24, 2025 | Blog
Navigating the complexities of the Family and Medical Leave Act (FMLA) can be challenging, especially when it comes to maintaining health coverage for employees on unpaid leave. This guide will help you understand what to do when an employee on FMLA leave fails to pay their health insurance premiums on time, and how it affects Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs), and COBRA.
Employer Obligations
Under FMLA, employers must maintain health coverage for employees on leave as if they were still working. This obligation ends if the premium payment is over 30 days late, unless your company policy allows a longer grace period.
Steps Before Dropping Coverage
Before dropping an employee’s health coverage, provide written notice at least 15 days before coverage ends, specifying the termination date if payment isn’t received. Send the notice at least 15 days before the end of the grace period.
Termination of Coverage
Coverage can be terminated retroactively if your company policy allows, otherwise, it ends prospectively at the grace period’s end.
Impact on FSAs, HRAs, and HSAs
- FSAs: Employees can choose to continue or revoke their FSA coverage during unpaid FMLA leave. Payment options include pre-pay, pay-as-you-go, and catch-up contributions.
- HRAs: Employers must extend COBRA rights to HRAs. Employees can use their HRA balance during COBRA coverage, and employers should calculate a reasonable premium for the HRA.
- HSAs: Employees can continue contributing to their HSA during COBRA coverage and use HSA funds to pay for COBRA premiums.
COBRA and ACA Rules
A COBRA election notice isn’t required for coverage loss due to nonpayment. However, failure to return to work after FMLA leave is a COBRA qualifying event. ACA allows cancellation for nonpayment, but stricter state laws may apply.
Restoring Coverage
If an employee returns from FMLA leave after coverage was dropped, their health coverage must be restored.
Managing health coverage for employees on FMLA leave requires careful attention to legal requirements and company policies. By following these steps, you can ensure compliance and support your employees during their leave.
Source: Thomson Reuters
by admin | Mar 20, 2025 | Blog
Navigating the requirements for Summary Plan Descriptions (SPDs) under ERISA health and welfare plans can be complex. Ensuring compliance is crucial for plan administrators, especially for COBRA qualified beneficiaries. This guide will help you understand who must receive SPDs and the specific considerations for COBRA compliance.
Who Must Receive SPDs?
Plan administrators must automatically furnish SPDs to all participants covered under ERISA health and welfare plans. This includes current employees, former employees who are or may become eligible for benefits, and their beneficiaries.
COBRA Qualified Beneficiaries
COBRA qualified beneficiaries are a key group that must receive SPDs. These individuals have the right to continue their health coverage under the plan after certain qualifying events, such as termination of employment or reduction in hours. Here are the specific considerations:
- Automatic Provision of SPDs: COBRA qualified beneficiaries must receive SPDs automatically.
- Single SPD for Same Address: Separate SPDs are generally not required for qualified beneficiaries living at the same address.
Other Categories of Individuals Who Must Receive SPDs
In addition to COBRA qualified beneficiaries, the following categories must also receive SPDs:
- Employees or Former Employees Covered Under the Plan: Current plan participants and former employees, such as retirees, who remain covered under the plan.
- Alternate Recipients Under QMCSOs: Typically furnished to the child’s custodial parent or guardian.
- Spouses or Dependents of Deceased Participants: Those who continue to receive benefits under the plan.
- Representatives or Guardians of Incapacitated Persons: Sent to the individual’s representative or guardian.
Triggering Events for Automatic SPDs
ERISA specifies the events that trigger the requirement to automatically furnish SPDs. Additionally, SPDs must be provided to plan participants and beneficiaries who request them.
Understanding who must receive SPDs and the specific requirements for COBRA qualified beneficiaries is essential for compliance with ERISA health and welfare plans. By following these guidelines, plan administrators can ensure they meet their obligations and provide necessary information to all eligible participants.
Source: Thomson Reuters
by admin | Feb 27, 2025 | Blog
When managing group health insurance plans, employers often face the challenge of aligning COBRA premiums with midyear increases in insurance premiums. However, the IRS COBRA regulations generally do not permit midyear increases in COBRA premiums. Here’s what you need to know:
Understanding COBRA Premiums
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows qualified beneficiaries to continue their group health coverage after certain qualifying events, such as job loss. The premium for COBRA coverage is capped at 102% of the “applicable premium” for the coverage, which can increase to 150% during a disability extension.
Fixed Determination Period
The applicable premium must be computed and fixed before the start of a 12-month “determination period” and generally cannot be changed until the next determination period. This means that even if your insurer increases premiums midyear, you cannot pass this increase onto COBRA beneficiaries until the next determination period.
Exceptions to the Rule
There are three exceptions to this general rule:
- Disability Extension: If a qualified beneficiary’s maximum coverage period is extended due to disability, the premium can increase from 102% to 150%.
- Undercharging: If the plan is charging less than the maximum permissible amount (102%), it can increase the COBRA premium to that level.
- Coverage Changes: If a qualified beneficiary changes coverage from one benefit package or coverage unit to another, the premium can be adjusted to the new rate determined before the determination period began.
Strategic Planning for Employers
To avoid the complications of midyear premium increases, employers should:
- Align the insurer’s rate period with the plan’s 12-month COBRA determination period.
- Lock in the premium charged by the insurer for the entire determination period, at least for COBRA purposes.
By understanding and planning for these regulations, employers can better manage their COBRA premiums and ensure compliance with IRS rules.
Source: Thomson Reuters
