Should We Provide a COBRA Notice to a Spouse or Child Who Isn’t Covered?

Posted on Monday, February 11, 2019

Question: We received notice from an employee that his daughter turned age 26 and is no longer an eligible dependent under our company's group health plan. According to our insurer, however, the daughter isn't covered under our plan because her coverage was dropped at open enrollment. Do we still need to send a notice of unavailability letting the employee's daughter know she isn't entitled to elect coverage under the Comprehensive Omnibus Budget Reconciliation Act (COBRA)?

More COBRA Facts

• COBRA was passed in 1986 to provide continuation of group health coverage that otherwise might be terminated.
• Employers with 20 or more employees are generally required to offer COBRA coverage and notify employees of its availability.
• COBRA gives certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. This is only available when coverage is lost due to specific "qualifying events."
• Qualifying events include voluntary or involuntary termination for reasons other than gross misconduct, reduction in hours, divorce, death of the covered employee and other situations.
• Group health coverage for COBRA participants is usually more expensive than coverage for active employees. However, it's generally less expensive than individual health coverage.

— Source: The U.S. Department of Labor

Answer: Yes. U.S. Department of Labor regulations require a plan administrator to provide notices to inform covered individuals of their rights and obligations under COBRA. Many employers are familiar with the notices they must send to inform employees, spouses and dependents that they are covered or that a "qualifying event" has occurred (see right-hand box for examples of qualifying events). A notice of unavailability is also required to be sent to certain individuals who may expect to receive COBRA coverage (or an extension of COBRA coverage). 

Who Must Receive a Notice?

The notice is required for any covered employee, qualified beneficiary, or "other individual" for whom the administrator has received any of the following notices and has determined that COBRA coverage (or an extension of COBRA coverage) isn't available:

1. A notice that a qualifying event has occurred;
2. A notice that a second qualifying event has occurred; or
3. A notice that a qualified beneficiary has been determined by the Social Security Administration to be disabled.

Even though the employee's daughter in your case is no longer covered under your plan, the notice from your employee that his daughter has ceased to be a dependent under the plan is a notice of a qualifying event. Furthermore, even though your employee's daughter isn't a COBRA qualified beneficiary (because she wasn't covered by the plan at the time she lost eligibility), she is still considered an "other individual" to whom you must provide a notice of unavailability.

Notice Must Be Understandable

A notice of unavailability must be written in a manner calculated to be understood by the average plan participant and must explain why the individual isn't entitled to COBRA (or an extension of COBRA). It must be furnished within the time period that would otherwise apply for providing a COBRA election notice — generally 14 days after the plan administrator receives notice of a qualifying event, second qualifying event, or disability. 

The individual entitled to receive a notice of unavailability is the person who was expecting to receive COBRA (or an extension of COBRA). This won't necessarily be the person who provided notice to the plan administrator. In this case, your employee's daughter should receive the notice.

How to Send

Like other COBRA-required notices, a notice of unavailability must be furnished using measures reasonably calculated to ensure actual receipt of the material. While the methods approved by the DOL include mail, hand-delivery, and electronic transmission, it's a good idea to use first-class mail.

Do you have questions about your responsibilities under COBRA? Consult with your employee benefits advisor or attorney.

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.