Last reviewed or revised: December 18, 2011

October 9, 2003
Santa Rosa, CA

At first glance, the rule looks simple: The COBRA coverage period runs from the date of the qualifying event that caused a loss of coverage under the group health plan. But like most rules, this one has exceptions. This COBRA tip will explore the specific situations that cause COBRA coverage to begin on dates other than the qualifying event date.

The Extended Employer Notice Rule. As an alternative to the general rule,you are permitted to begin COBRA coverage on the date health plan coverage is actually lost, rather than on the qualifying event date, but only if your Summary Plan Description or plan documents clearly state that:

1. The maximum COBRA coverage period will begin on the date plan coverage is lost; and
   
2. The employer has 30 days from the date group health plan coverage is lost in which to notify the plan administrator that a qualifying event has occurred.

• Newly adopted and newly born dependents: A child who is born to, adopted by, or placed for adoption with a covered employee while she is on COBRA coverage is a qualified beneficiary who may elect COBRA coverage. However, COBRA regulations provide that the child's maximum COBRA coverage period is measured from the employee's start date, not the date of the birth or adoption. That child will be entitled to COBRA only for the duration of the employee's maximum COBRA coverage period.

Dependents of Medicare recipients. If an employee who is covered under the group health plan terminates employment or suffers a reduction in hours within 18 months of being entitled to Medicare, he must be offered 18 months of COBRA coverage, starting from the date of termination. However, the spouse and dependent children of that employee will be entitled to 36 months of COBRA coverage, beginning on the date of the employee's entitlement to Medicare, not the date of the qualifying event.

Example: David became entitled to Medicare on January 1, 2002 and remains covered under the plan. On July 1, he was fired. David must be offered 18 months of COBRA coverage starting July 1, the date of the qualifying event. His spouse will be offered 36 months of coverage. However, her maximum COBRA coverage period will be measured from January 1, the date on which David became entitled to Medicare, not from the qualifying event date.

• FMLA leave of absence. You are required by law to maintain group health plan coverage for employees who take leaves of absence under the Family and Medical Leave Act (FMLA). Therefore, the taking of FMLA leave cannot be a COBRA qualifying event because no loss of coverage occurs. A COBRA qualifying event does occur, however, for employees and their spouses and dependents who are covered under the group plan on the day prior to the first day of FMLA leave, if the employee fails to return to work at the end of the leave period. The maximum COBRA coverage period begins on the last day of the FMLA leave. Similarly, a COBRA qualifying event occurs if an employee on FMLA leave informs you prior to the end of the leave period that she won't be returning to work. In that case, the qualifying event is the date on which the employee notifies you that she won't be returning. COBRA coverage begins on the date of that notification, not at the end of the leave period.
   
• Non-FMLA leave of absence. A non-FMLA leave is the same as a reduction in the employee's work hours, but it will be a COBRA qualifying event only if the leave results in a loss of health coverage under the group plan. The start of the maximum COBRA coverage period for an employee who goes out on non-FMLA leave will depend upon how each employer treats leaves of absence. Some will end group coverage at the start of the leave and so the first day of the leave is the beginning of the COBRA coverage period. Others may continue to carry the employee on the group plan during the entire period of the leave or some portion of it. In such cases, if the employee does not return to work, COBRA coverage begins on the day after plan coverage ends. Your plan documents must clearly state your policy regarding leaves of absence and loss of plan coverage so COBRA rights will be uniformly applied.
   
• Waiver of COBRA coverage. Qualified beneficiaries must elect COBRA coverage within 60 days from the date they lose coverage under the plan as a result of a qualifying event, or the from the date the election notice is provided, whichever is later. It is not necessary for a beneficiary to decline or "waive" the offer of continuation coverage. In most cases, persons who don't want COBRA coverage will just allow the 60-day election period to expire. But sometimes a beneficiary affirmatively waives coverage. Even so, an election may be made after a waiver so long as it is made within the original 60-day election period. But when a waiver of COBRA is revoked, coverage need not be provided retroactively to the date of the qualifying event or the date coverage was lost; you are permitted to restore coverage beginning on the waiver revocation date.

Example: David is terminated on September 1, 2002; loses coverage under the plan on September 30; receives the COBRA election notice on September 15; and notifies his employer in writing on October 1 that he does not want continuation coverage. However, on October 29, he changes his mind and elects COBRA. You are permitted under the IRS regulations to have his coverage begin on October 29, rather than on September 30, the date on which he lost plan coverage.

• Employer's bankruptcy. When an employer files a petition under Chapter 11 of the federal bankruptcy code, special COBRA rules apply to retirees who lose coverage under the plan as a result of the bankruptcy. The filing of the bankruptcy petition is a COBRA qualifying event. A retiree is entitled to coverage for life, and as long as the retiree is alive, his covered spouse and covered dependent children are entitled to coverage. But when the retiree dies, the surviving spouse or dependent children are entitled to only 36 months of coverage beginning from the date of the retiree's death, not the date of the bankruptcy filing.
   
• TAA special election. The 2002 Trade Act (TAA) amended COBRA regulations for certain employees who lost their jobs as a direct result of foreign competition. If TAA-certified employees failed to elect COBRA coverage during their first 60-day election period, they are entitled to a second election period. During this special election period, the employee may elect COBRA coverage for himself and for his spouse and dependent children. (Spouses and dependents cannot elect for themselves during the TAA second election period). If elected, continuation coverage begins on the first day of the special TAA election period, not on the earlier loss of coverage date.
   
• Anticipation of Divorce. Divorce or legal separation is a COBRA qualifying event that results in 36 months of COBRA coverage for the spouse of an employee if she loses coverage as a result of the divorce. The COBRA start date is the date of the divorce decree, which is the qualifying event. But, if an employee drops coverage for a spouse in anticipation of a divorce, then the spouse's COBRA coverage begins on the date of the divorce, not on the earlier loss of coverage date.