When a reduction event takes place, HR understandably has their hands full with numerous tasks. From helping with employee selection to conducting layoff meetings, it's easy to see how RIFs and layoffs can be overwhelming. But there's one thing that HR cannot afford to forget: COBRA notices.
In order to fully apply with regulations, organizations need to follow a strict COBRA notice timeline, which dictates when and how you send COBRA notices to employees.
But, first, what is COBRA? Why is it important? And what does the COBRA notice timeline look like?
What Is COBRA?
COBRA refers to the Consolidated Omnibus Budget Reconciliation Act of 1985, which is a federal law that requires organizations to allow workers to continue their healthcare coverage after an event that would usually cancel it. COBRA applies to organizations that offer healthcare plans and have over 20 employees.
In other words, when an employee who has a health plan through an organization is terminated (or goes through a similar 'qualifying event' - more on this later), COBRA allows them to keep their healthcare plan if they pay their premium. This allows continuous healthcare coverage for individuals and their dependents even in the event of job loss.
The length of time employees can continue their coverage period after the qualifying event takes place is largely dependent on what type of event you're dealing with.
"If the qualifying event is the termination of the employee (other than for gross misconduct) or a reduction in hours, the maximum coverage period is 18 months. There are a few exceptions to this," explains The Motley Fool.
"For example, if a disability occurs to a COBRA beneficiary, all beneficiaries receiving coverage can be eligible for an extension to 29 months."
They go on to say that employees who qualify for Medicare benefits before the qualifying event can have their COBRA period last for 36 months.
Always make sure to chat with your legal team to ensure you are following all local, state, and federal laws when dealing with a reduction event. COBRA is just one part of a much larger legal puzzle.
To fully understand COBRA, head over to the US Department of Labor's site here.
COBRA Notice Timeline: Understanding Qualifying Events
Now that the we have discussed what COBRA is in general terms. You might be wondering what a qualified event is. Understanding qualified events in the first step in understanding how to follow the proper COBRA notice timeline. After all, if you don't know when COBRA regulations kick in, how are you supposed to know when to send the notice?
In short, a qualified event occurs when an employee goes through a transition that would, normally, cancel the healthcare plan their receive from their employer.
Here is a list of a few qualified events:
- A reduction in working hours
- An employee's voluntary or involuntary termination (unless they are being terminated for gross misconduct)
- An employee's death
- Legal separation of a spouse who was also covered by the employee's plan
- Active military duty
- If a healthcare plan is lost during family/medical leave where the employee does not return to work
- Company bankruptcy
For our use in this blog, we will be taking a look primarily at the first two on this list: reduction in work hours (from, say, full-time to part-time) and RIFs and layoffs, which cover voluntary and involuntary terminations.
However, just because we will not cover them here doesn't mean that you can ignore COBRA regulations for the other events on the list. Always make sure to do your due diligence when dealing with regulations, following everything set forth by the DOL.
Another thing you need to consider: in order for individuals to be covered under COBRA, the organizations plan must first be covered by COBRA (check with your healthcare provider). Then, a qualifying event must occur like the ones listed above. Finally, the person has to have been covered by the healthcare plan at least one day before the qualifying event occurs.
COBRA Notice Timeline: How and When to Notify
To ensure you are following the COBRA notice timeline, you need to examine the qualifying event that is taking place.
For a layoff or RIF, which is typically a planned out process that HR is heavily involved in, the qualifying event shouldn't come as a surprise, allowing you to properly plan a COBRA notice timeline to ensure you are complying with regulations.
When a qualifying event takes place, you have 30 days to notify the plan (the healthcare provider) of the event. Then, the provider has 14 days to send a COBRA election notice to those impacted.
"You have 30 days to notify the plan administrator (usually the insurance company) when a loss occurs for any of the reasons listed above, except for divorce and change of status by a dependent," reports BizFilings.
"In those two instances, you have 60 days to notify the administrator. The administrator has 14 days after notice from you to notify the person who is entitled to COBRA coverage."
Once that is completed, the employee has 60 days from the time of the notice or the event to come back and notify you that they want coverage. This response can come in the form of a letter, phone call, in person notification, etc. Either way, if they fail to notify you that they want coverage within that 60-day window, they will become ineligible.
Besides reporting to the provider who will reach out with coverage details to those impacted, you must also alert impacted employees of their rights under COBRA when the qualifying event takes place.
You also have to do the same with the person's election rights after the qualifying event. To learn the details of these notification letters, see the DOL regulations here.
Here's a brief recap to shed more light on the COBRA notice timeline:
- Qualifying event occurs
- You need to alert those impacted of their COBRA and election rights.
- You have 30 days to alert your provider.
- The provider has 14 days to then reach out to the impacted staff member(s) with election notices.
- Employees have 60 days to accept or decline COBRA. This 60-day window starts either when the event takes place or when the notice is given to the staff members. Whatever date is later is the one that is used.
- Employees can notify you that they want coverage via email, phone, in person confirmation, or any other communication
- If employees do not notify you within 60 days, they are no longer eligible for COBRA.
- Depending on the qualifying event, coverage can last different amounts of times.
This is a brief overview of the COBRA notice timeline and what HR's role in the whole thing is. Remember, we are not lawyers, always consult your legal team when conducting a qualifying event to ensure you are complying with all local, state, and federal laws. We cannot say this enough.
The COBRA Notice Timeline: Takeaways
COBRA, as a whole, can be very confusing, especially for those going through the process for the first time. Understanding the COBRA notice timeline will help you better prepare for the future.
To learn more about COBRA, always go straight to the source: the US Department of Labor, who has exhaustively covered all COBRA regulations on their site here.