The Layoff List Is Also The Start Of The COBRA Clock.
When a layoff ends health plan eligibility, federal law requires a chain of notices to the people who lose coverage. The employer, the plan administrator and any outside COBRA vendor each have a deadline, and missing one creates penalty and claim exposure.
The Notice Chain After A Qualifying Event.
A general guide, not legal counsel. Text and deadlines can change.
Employer Notice Within 30 Days
When the plan administrator is a separate party, the employer must notify it of a termination or reduction in hours within 30 days after the qualifying event or the date coverage is lost, if the plan so provides.
Election Notice Within 14 Days
After that, the plan administrator has 14 days to deliver the election notice. If the employer also serves as administrator, the whole process generally runs 44 days from the qualifying event.
Election And Payment Windows
Qualified beneficiaries have at least 60 days to elect, measured from the later of the loss of coverage or the date of the notice, and 45 days after electing to make the first premium payment.
How The Notices Fit Into A Layoff.
The federal continuation rules reach group health plans of employers that normally employed 20 or more people in the prior year. Termination for reasons other than gross misconduct, and a cut in hours, both qualify. Coverage can last up to 18 months at a charge of as much as 102 percent of the premium.
The practical difficulty in a layoff is volume. Dozens of notices can be due at once, often to former employees who are spread across households and addresses. The employer should send the administrator a clean list that shows each person, the date coverage ends, the plan and the dependents covered.
Notices have to be written to be understood and must contain the content the regulations require, including the plan name, contact information, the election procedure and the cost. Federal law provides statutory penalties for administrators who fail to send required notices, and the tax code imposes an excise tax for COBRA failures.
Where this shows up in your plan.
Who Is The Administrator
Plan documents should say who sends the notice. If it is a third-party vendor, the employer duty is to give it accurate data on time.
Coverage End Date Rules
Plans end coverage on the date of termination or at month end. The date drives when COBRA starts, so it needs to match the plan document and the carrier.
Dependents And Late Changes
Spouses and dependent children are separate qualified beneficiaries. Address changes and waived coverage should be tracked in the same list.
Setting it up.
Build the layoff list with the termination date, plan elections and covered dependents for each person.
Confirm who the plan administrator is and when its notice clock begins.
Send the list to the administrator or COBRA vendor well inside the 30-day employer window.
Confirm that election notices were mailed and keep proof of mailing.
Track elections, premium payments and the end dates of continuation coverage.
Mistakes to avoid.
Assuming the carrier sends COBRA notices on its own for a self-funded plan.
Using the termination date instead of the plan coverage end date for the clock.
Skipping notices for people who waived coverage but still have covered dependents.
Failing to notify the vendor of employees who lose coverage through a reduction in hours.
Other rules employers work with.
Benefits Continuation After a Reduction in Force
Back to the central layoff-and-coverage guide.
Michigan Employer COBRA Guide
Deadlines, notices and common errors.
Summary Plan Descriptions and Benefits Guides
The content a plan document is required to state.
Laws and Rules Referenced
Continuation rule, 29 U.S.C. 1161 (COBRA) — Which plans and employers are covered.
Qualifying events and coverage period, 29 U.S.C. 1163 — Termination and reduction in hours as qualifying events.
Notice requirements, 29 U.S.C. 1166 — Employer, administrator and election notice duties.
Employer notice of qualifying event, 29 CFR 2590.606-2 — The 30-day employer notice to the administrator.
Quick answers.
Fast replies about COBRA timing after a layoff, with links to the full guide.
How long does the employer have to notify the administrator?
Thirty days after the qualifying event or the loss of coverage, where the plan provides that coverage is lost later, when the administrator is someone other than the employer.
How long is the COBRA election window?
At least 60 days from the later of the date coverage is lost or the date the election notice is sent.
Is a layoff always a qualifying event?
Termination of employment other than for gross misconduct, or a reduction in hours that causes loss of coverage, is a qualifying event for a covered plan.
What happens if a notice is late?
The administrator can face statutory penalties and the employer can face an excise tax and claims for medical expenses the person incurred without coverage.
More guides in this series.
WARN Act Notice Requirements for Michigan Employers
A companion guide in the same series.
Older Workers Benefit Protection Act Releases for Group Layoffs
A companion guide in the same series.
Why Michigan Has No State WARN Law and What Applies Instead
A companion guide in the same series.
Stop-Loss and Claims Run-Out After a Reduction in Force
A companion guide in the same series.
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