Tag: cobra

  • Does Enrolling in Medicare Trigger an Offer of COBRA?

    September 1, 2021

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    Enrolling in Medicare does not cause COBRA to start. Under the federal rules, COBRA must be offered to persons enrolled in the employer’s health plan only if they lose coverage because of certain specific events. Termination of employment is an example of a COBRA qualifying event. Becoming eligible for Medicare, or enrolling in Medicare, is not a COBRA qualifying event.

    On the other hand, if someone is already on COBRA due to a prior event, and then they enroll in Medicare, COBRA will end. Early termination of COBRA due to Medicare enrollment only affects that person. If other family members also are on COBRA, they may continue for the remainder of the COBRA period assuming their premiums are paid when due and they do not enroll in Medicare or another group health plan.

    Let’s look at another scenario: An employee enrolls in Medicare while continuing as an active employee covered under the employer’s health plan. Then the employee leaves the company. This will trigger a COBRA offer since loss of coverage due to termination of employment is a COBRA qualifying event. Can the former employee elect COBRA despite being enrolled in Medicare? Yes, because they were already enrolled in Medicare before they elected COBRA. They probably will choose not to elect COBRA due to the cost, and since Medicare will be the primary claims payer, but they have the choice.

    There is one other rule about COBRA and Medicare that can be confusing. As we said, the employee who enrolled in Medicare while still working and covered under the employer’s plan later had a COBRA event. When loss of coverage is due to termination of employment, the COBRA continuation period is 18 months. Due to a special provision in the COBRA rules, the maximum COBRA period for the spouse or child (if also enrolled in the employer’s health plan when the COBRA event occurred) might be longer than 18 months. If the employee had first enrolled in Medicare no more than 18 months before the COBRA event, the maximum period for the spouse and children is 36 months counting from the employee’s Medicare enrollment.

    For instance, let’s call the active employee Mary and say she enrolled in Medicare in January 2021 and then lost her group coverage when she terminated employment in May 2021. So, she enrolled in Medicare fewer than 18 months before her COBRA event. Her maximum COBRA period will be 18 months counting from May 2021, but COBRA for her spouse and children (if enrolled) could run for up to 36 months counting from January 2021.

    Lastly, employers sometimes ask whether they can automatically terminate an employee’s (or spouse’s) group health coverage at age 65. Due to the federal Medicare as Secondary Payer (MSP) rules, employers with 20 or more workers cannot take into account anyone’s potential Medicare status in administering the group health plan. An employer with fewer than 20 workers also may be prohibited from basing health plan eligibility on the employee’s age due to the federal Age Discrimination in Employment Act (ADEA). We recommend employers review these matters with legal counsel.

    By Kathleen A. Berger, CEBS

    Originally posted on Mineral

  • COBRA Subsidy Clarification| by Jordan Shields, Partner

    July 20, 2021

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    No the initial information was insufficient, as with any hastily contrived rules.  Fortunately, the IRS issued Notice 2021-31, which clarifies in a brisk 86 questions what everyone has been wondering, but which most of us had surmised.  Highlights are:

    • The new Forms 941 (quarterly wage report, along with Schedule R) and 7200
    • The tax credit taken on the quarterly wage report is against the Medicare amount due
    • Employer may rely on individual attestation that they are not eligible for other coverage
    • Availability of other coverage does not preclude extension if they cannot yet enroll in it
    • Second qualifying events merely continue coverage and thus the subsidy – no break
    • All basic coverage is eligible for a subsidy EXCEPT a health FSA (HRA IS included)
    • Retiree coverage is included for purposes of the subsidy
    • Reduction in hours is definitely seen as an involuntary termination

    Most importantly, the notice makes clear what constitutes Involuntary Termination which, along with reduction in hours, are the two qualifying events that allow for receipt of the subsidy:

    The Notice defines an involuntary termination of employment as a severance from employment due to the independent exercise of the employer’s unilateral authority to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services.  An employee initiated termination of employment constitutes an involuntary termination of employment for purposes of the Subsidy if the termination of employment constitutes a termination for a good reason.

    The notice is specific about some termination scenarios that qualify as involuntary termination

    1. Non renewal of an employee’s contract if the employee was otherwise willing to enter into a new contract or continue employment without a contract, assuming the employee knows that the contract would only be for a limited amount of time
    2. Participation in a window program that meets appropriate Treasury requirements
    3. Employer initiated action to end an individual’s employment while the individuals is absent from work due to illness or disability if, before the action, there is a reasonable expectation that the employee will return to work after the illness or disability subsides.
    4. Involuntary termination for cause, provided, however, if the termination is due to gross misconduct of the employee, the loss of coverage due to a termination of employment for gross misconduct will not result in an individual becoming eligible for the subsidy

    The notice is equally specific about what is NOT involuntary termination – and thus employees in these situations are NOT eligible for the subsidy

    1. An employee initiated termination of employment due to the employee’s child being unable to attend school or childcare facility due to COVID. If, however, the employer maintains the ability to return to work so that the event is a temporary leave of absence, then the employee could qualify for the premium subsidy as a voluntary reduction in hours
    2. An employee initiated termination of employment due to general concerns about workplace safety (unless employee can demonstrate that the employer’s actions resulted in a change to the employment relationship analogous to a constructive discharge)
    3. Termination due to gross misconduct (note – be careful here, as the definition of what constitutes gross misconduct is extremely narrow)
    4. Retirement, unless the facts indicate that the employee was willing to work and knew the employer was planning on terminating the employee
    5. Death of the employee

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