Compliance Corner: Is Your Plan Subject to COBRA Continuation of Coverage?

Consolidated Omnibus Budget Reconciliation Act (COBRA) applies to group health plans maintained by employers that had at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. Both full- and part-time employees are counted with part-time employees counting as a fraction of a full-time employee. With COBRA laws, you can use 40 hours as full-time. Here are some other facts about counting employees for determining if your company must comply with COBRA:

• Count all employees, not just those on your plan.
• Count only common-law employees. You don’t need to include self-employed individuals, independent contractors (aka, 1099 employees), or members of a corporate board of directors unless they are also common-law employees.
• Count employees of related entities. If there are multiple companies and they are part of an IRS controlled group, all employees of the entities must be counted.
• Count international employees. Employees of a foreign entity must be counted if the entity qualifies as a member of the controlled group. Likewise, employees working outside the United States must be counted.

Employer groups of all types must comply with COBRA if they meet the size requirements except for the federal government, church plans and certain church-related organizations. Many church plans opt to abide by COBRA rules even though they aren’t required to do so in order to ease transitions for former employees or dependents.

These are the types of benefits that are COBRA-able:

• Group Medical, Dental and Vision
• Health FSAs and HRAs
• Disease-specific policies providing medical care

In many cases, your insurer or administrator can perform COBRA administration; however, they will charge a service fee for policies that they don’t administer and some carriers can’t accommodate other vendors at all. When the insurer isn’t able to provide the service, ARC has negotiated competitive rates with a firm who can administer COBRA for all policies if clients choose to outsource.

Free COBRA Overview Guide: This overview is a great refresher on COBRA rules and requirements.

What happens when COVID-19 emergency declarations end? Implications for COBRA compliance

The national emergency is set to end on May 11, 2023, and the outbreak period will end July 10, 2023, (60 days after the national emergency ends). Health plans would then go back to their regular deadlines.

If you believe you are subject to COBRA and would like a review, please contact your ARC Client Advisor for assistance. We’re happy to help you with set up and answer any questions you many have.

Resources

An Employer’s Guide to COBRA from the Department of Labor