The Consolidated Omnibus Budget Reconciliation Act of 1986, commonly known as COBRA, requires certain employers to offer individuals continuation of health coverage, at their own expense, when that coverage would otherwise cease. The COBRA rules are found in the Internal Revenue Code, the Employee Retirement Income Security Act (ERISA) and the Public Health Service Act (PHSA). Church plans and small employer plans are excepted from COBRA requirements.
Almost all employers are required to comply with COBRA based on ERISA’s reach. ERISA applies to any group health plan that is established or maintained by an employer engaged in commerce or in any industry or activity affecting commerce and to any employee organization representing employees engaged in commerce or in any industry or activity affecting commerce. Obviously, this has a far reach, as almost all private employers that have health plans for their employees meet this definition.
Government Plans.
The COBRA provisions in ERISA and the Internal Revenue Code do not apply to governmental plans. However, COBRA was also added to the Public Health Service Act to reach health plans offered by non-federal government employers. Health plans offered to employees of the federal government do not have to comply with COBRA.
Church Plans.
Some church plans are excepted from COBRA compliance. A church plan is a plan established and maintained for its employees by a church or by a convention or association of churches that is exempt from tax under Code Section 501. Whether a plan affiliated with a church is truly a church plan under applicable law is not a simple determination and typically requires a specific IRS determination letter. In addition, if the group health plan provided to church employees is offered by a non-church organization (and therefor not established by the church), it will not be eligible for the COBRA exception.
Small Plans.
A group health plan is excepted from COBRA compliance if all employers maintaining the plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year. All employees are counted in the determination, not just plan participants.
An employer should have processes and procedures in place for COBRA compliance, unless the employer is eligible for one of the limited exceptions to COBRA. Benefit Allocation Systems’ Cobra Control Services offers easy and affordable COBRA administration. For more information, contact your account manager or info@cobracontrol.com.
