The Consolidated Omnibus Budget Reconciliation Act (“COBRA”) is a federal law incorporated by reference into three separate federal laws: 1) the Employee Retirement Income Security Act (“ERISA”); 2) the Internal Revenue Code (“IRC”); and 3) the Public Health Service Act (“PHSA”). The inclusion of COBRA into these three federal laws is important because that means COBRA applies to the plans governed by these laws. ERISA and the IRC govern private sector employers, as such COBRA applies to group health plans established by private employers. Similarly, the PHSA applies to state and local government group health plans. As such, COBRA is applicable to plans established by local and state governments.
While many employers are aware of the general COBRA requirements, there are special situations that require additional care. For example, aside from disability an employee may be entitled to an extension of COBRA to 36 months if the qualified beneficiary experiences a second qualifying event. A second qualifying event is an event that occurs during the initial 18-month coverage period, but after the initial qualifying event (either termination of employment or reduction in hours).
A second qualifying event includes: 1) death of an employee; 2) divorce or legal separation of an employee; 3) a covered employee’s child ceasing to be a dependent. The second qualifying event will extend coverage from the date of the initial qualifying event.
For example, take an employee that is terminated on January 1, 2015. The employee chooses COBRA. The employee is divorced on July 1, 2015.
- First Qualifying Event – January 1, 2015 (18 months from January 1, 2015 – June 30, 2015)
- Second Qualifying Event – July 1, 2015 (36 months from January 1, 2015 – December 30, 2018)
- COBRA lasts until December 30, 2018