Ques­tion: Our com­pa­ny offers group med­ical and den­tal plans for all employ­ees. We also have an exec­u­tive-only med­ical plan that cov­ers out-of-pock­et expens­es that the reg­u­lar group plan does not pay. Does COBRA apply to the exec­u­tive-only plan? Do we have to include it in our sum­ma­ry plan descrip­tion (SPD)?

Answer: The cov­er­age con­tin­u­a­tion require­ments of the Con­sol­i­dat­ed Omnibus Bud­get Rec­on­cil­i­a­tion Act of 1985 (COBRA) per­tain to group health plans spon­sored by employ­ers with 20 or more work­ers (except cer­tain church plans). This is referred to as fed­er­al COBRA, which is enforced and reg­u­lat­ed by the Inter­nal Rev­enue Ser­vice (IRS) and the Depart­ment of Labor (DOL).

Any employ­er-spon­sored plan or pro­gram pro­vid­ing health ben­e­fits (med­ical, den­tal, vision, etc.) is a group health plan under COBRA. Briefly, if the employee’s access to the pro­gram or ben­e­fits is based on the person’s cur­rent or past rela­tion­ship with an employ­er, it is a group plan. An exec­u­tive-only med­ical plan is a group health plan – and sub­ject to COBRA – since eli­gi­bil­i­ty for the plan is con­nect­ed to employ­ment. (Ref­er­ence: 26 CFR § 54.4980B‑2 )

Next, the Employ­ee Retire­ment Income Secu­ri­ty Act (ERISA) impos­es numer­ous report­ing and dis­clo­sure require­ments on employ­ee ben­e­fits plans, includ­ing rules for plan doc­u­ments and sum­ma­ry plan descrip­tions (SPDs). Plans spon­sored by gov­ern­men­tal employ­ers and cer­tain church plans are exempt from ERISA, but plans spon­sored by pri­vate-sec­tor employ­ers must com­ply with ERISA’s plan doc­u­ment and SPD rules. There is an excep­tion, how­ev­er, for an exec­u­tive plan that meets the fol­low­ing conditions:

  • The plan pri­mar­i­ly pro­vides wel­fare (e.g., health) ben­e­fits for a select group of man­age­ment or high­ly-com­pen­sat­ed employ­ees; and
  • No part of the plan is fund­ed through employ­ee con­tri­bu­tions or a trust.

The most com­mon exam­ple is an exec­u­tive-only med­ical insur­ance plan for which the employ­er pays 100 per­cent of pre­mi­ums. In that case, an SPD is not required and Form 5500 report­ing does not apply. A plan doc­u­ment is required but it does not have to be made avail­able to employ­ees. The plan doc­u­ment does have to be pro­vid­ed to the Depart­ment of Labor (DOL) if request­ed. (Ref­er­ence: 29 CFR § 2520.104–24)

By Kath­leen A. Berger

Orig­i­nal­ly post­ed on thinkhr.com