COBRA Consequences of a Dependent Turning 26

When a dependent child reaches age 26, HR may view the change primarily as an eligibility issue. The child is no longer eligible for coverage under the employer’s health plan, coverage ends according to the terms of the plan, and the employee’s coverage tier may need to change.

But there is another important consideration: COBRA.

Aging Out Can Be a COBRA Qualifying Event

Under the Affordable Care Act, group health plans that offer dependent coverage generally must make that coverage available to an employee’s child until age 26. When coverage actually terminates depends on the terms of the plan. For example, a plan may provide that coverage ends on the child’s 26th birthday or at the end of the month in which the child turns 26.

When a child loses coverage because the child no longer satisfies the plan’s eligibility requirements, the loss of dependent-child status is a COBRA qualifying event. If the plan is subject to COBRA and the other requirements are satisfied, the child generally has the right to continue the coverage for up to 36 months.

This is different from the 18-month COBRA period that generally applies following an employee’s termination of employment or reduction in hours.

Who Has to Report the Qualifying Event?

Aging out also differs from an employee’s termination of employment in an important administrative respect.

For a termination of employment or reduction in hours, the employer generally has responsibility for notifying the plan administrator of the qualifying event. When a child loses dependent status, however, COBRA generally places the responsibility on the employee or qualified beneficiary to notify the plan administrator.

Plans must establish reasonable procedures for providing this notice, and the employee and dependents should be told about those procedures through the plan’s COBRA General Notice and Summary Plan Description. The plan must generally allow at least 60 days for the employee or dependent to provide notice of the loss of dependent status.

Employers should therefore make sure their COBRA procedures clearly explain how these events are reported, even when the employer already has the dependent’s date of birth in its benefits system.

The Dependent Has an Independent COBRA Right

The child who ages out is a qualified beneficiary with an independent COBRA election right. The child does not have to remain on the same coverage as the employee, and the employee does not have to elect COBRA on the child’s behalf.

Once the COBRA administrator receives proper notice of the qualifying event, the normal COBRA election process applies. The dependent should receive the required election notice and an opportunity to elect continuation coverage.

What If the Dependent Is Already on COBRA?

Aging out can also matter when the family is already receiving COBRA.

For example, assume an employee terminates employment when the employee’s child is 25. The employee and child elect COBRA based on the termination of employment, which ordinarily provides a maximum continuation period of 18 months.

If the child turns 26 and loses dependent status during that initial COBRA period, the loss of dependent status may constitute a second qualifying event. If the applicable COBRA requirements are satisfied, the child’s maximum COBRA period may be extended to 36 months, measured from the date of the original qualifying event.

This is another reason it is important for employees and dependents to understand their obligation to timely report changes in dependent status.

What HR Should Review

Employers should not treat a dependent’s 26th birthday as simply an enrollment termination. HR should make sure its processes address both the eligibility and COBRA consequences of the event.

Employers should know when their plan terminates coverage for a child reaching the limiting age, confirm that their COBRA notices clearly explain the procedures for reporting a loss of dependent status, and make sure reported events are promptly communicated to their COBRA administrator.

A dependent aging out of active coverage may look like a routine eligibility change, but properly handling the corresponding COBRA rights is an important part of benefits administration.