The smallest employers might
think that they are not covered by COBRA. They’re not. COBRA requires employers
with 20 or more employees to offer a continuation of health benefits after a
“qualifying event.” The most common qualifying event is termination including
layoff, resignation or discharge. So if you employ 5 people, and lay one employee
off it looks like you don’t have to worry about offering continuation of
benefits and the extensive, complicated paperwork that goes along with the
process. Sorry, in most states even the smallest employers are required to
offer COBRA coverage.
Every state, with the
COBRA coverage beyond federal requirements. These commonly expand the scope to
all employers, regardless of size, or add types of plans to the list of those
that need to be offered.
Within the past week I have
been gathering information for COBRA administration for two of the smallest
employers. At the first after the layoff of 2 employees the employer wanted to
offer the coverage, whether or not the law required them to do so. Applicable
state law extended coverage to all employees. The notifications are being
At a start up the company was
not enthusiastic about offering COBRA to an individual who was terminated for
poor performance and figured they were exempt because they had fewer than ten
people on payroll. Once again state legislation extended COBRA eligibility to
all employees regardless of the size of the employer.
When you are making difficult
decisions about staff cuts it’s a good idea to understand the COBRA
requirements before the layoff conversation. The easiest way to find out if
your state requires COBRA for small employers is to contact the state
department of labor. Double check even if your broker or provider tells you not
to worry about COBRA. In the above mentioned situations one employer was told by
a provider that they did not have to offer COBRA. It takes a lot less time to
find out the correct information than to respond to a complaint made by a
former employee who contacts the department of labor.
COBRA administration with its
long list of deadlines and required notices can be a nightmare. Employers of all sizes will avoid headaches
by outsourcing the process. Payroll providers, brokers or knowledgeable
consultants can all help with this administrative burden. Even though former
employees pay the premium, plus an additional 2% fee, sloppy administration can
result in significant employer costs.
In this brief post I can only
begin to cover the ins and outs of COBRA continuation of benefits coverage.
What COBRA questions do you have?