Closing a business or dropping coverage still leaves obligations behind.
When an employer ends its group health plan, the last claims still have to be paid, participants still have to be told, and the final filings still have to be made. COBRA ends only if the employer stops maintaining any group health plan, which is a different question from ending one plan.
The test is whether any plan remains.
The DOL’s COBRA guide for employers explains the early termination rule.
Coverage Ends Early
COBRA coverage can end early if the employer ceases to maintain any group health plan. When that happens, the plan sends the qualified beneficiary an early termination notice.
Switching Plans Is Different
Replacing one plan with another, or dropping one benefit while keeping another group health plan, does not by itself end COBRA. Qualified beneficiaries may be offered the same choices as active employees.
Related Plans
A health flexible spending account is also a group health plan, which has its own COBRA rules for underspent accounts.
Notices, claims and filings.
Plan termination is not a single event. These pieces are easy to miss.
Tell Participants
Employees and COBRA beneficiaries need written notice, and the plan documents and the carrier contract may set earlier deadlines than the law does. Give them time to find replacement coverage.
Run-Out Claims
Claims incurred before termination still get paid. Self-funded plans keep funds for run-out and have stop-loss run-out terms to check. FSA claims have their own reimbursement deadlines.
The Final Filings
A plan that files Form 5500 files a last return for the plan year in which it ends. Keep plan records for the periods the law requires.
Replacement coverage and what employees ask.
A termination date creates a deadline for everyone.
Special Enrollment
Employees who lose coverage when the employer ends the plan generally have a special enrollment right in a spouse’s plan or in the Marketplace, with a deadline that starts at the loss of coverage.
State Continuation
Insured plans may have state continuation rights that end when the group policy ends, and a conversion option may be available. Ask the carrier what applies.
Mergers and Closings
A sale or merger changes who maintains the plan. The agreement should say who handles COBRA and run-out.
What employers ask about ending a group health plan.
If we close the business, does COBRA end?
If the company and everyone in its controlled group stops maintaining any group health plan, COBRA can end early. If a successor or related employer keeps a plan, the answer may differ.
Who pays the final claims?
The plan does, to the extent of its terms. For insured plans the carrier pays claims incurred while the policy was in force. Self-funded plans need funds set aside.
What do we owe participants?
Written notice of the termination and of any COBRA early termination. Check the plan documents and carrier contract for earlier deadlines.
Related guides.
COBRA Rules for Employers
Periods, premiums and notice deadlines.
Layoffs and Reductions in Force
What happens to benefits.
Michigan Compliance Calendar
Annual deadlines in one place.
Tell us what is changing.
We’ll walk through who has to be told, what claims remain, what filings are left, and how to move employees to other coverage. No cost, and no obligation.
The planned end date
Insured or self-funded
Employees and COBRA participants
Your carrier contract
Rough answers are fine. We build the numbers from there.
Laws and rules referenced
DOL: An Employer’s Guide to Group Health Continuation Coverage Under COBRA — Duration of continuation coverage and early termination when an employer ceases to maintain any group health plan.
26 CFR 54.4980B-7 — Duration of COBRA continuation coverage.
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