COBRA Special Rules

Special COBRA rules apply to leaves of absence particularly leaves under the Family and Medical Leave Act (FMLA). Under IRS COBRA regulations, a COBRA qualifying event does not occur when an employee takes a leave under the FMLA. Rather, a qualifying event occurs when:

  • an employee (or dependent child or spouse of the employee) is covered on the day before the first day of FMLA leave under the employer’s group health plan;
  • the employee does not return to employment with the employer at the end of the FMLA leave; and,
  • the employee (or dependent child or spouse of the employee) would, in the absence of COBRA coverage, lose coverage under the group health plan prior to the end of the maximum coverage period.178

Essentially, an employee will experience a COBRA qualifying event when he or she fails to return from FMLA leave, or, if earlier, when he or she unequivocally informs the employer that he or she does not intend on returning to employment.179 The COBRA maximum coverage period is measured without regard to any state-required continuation coverage.180

An employer should consult with legal counsel for further advice in this area, as well as in other specialized instances, such as in the context of mergers and acquisitions.

Also, if an employer is offering a departing employee severance pay pursuant to a severance agreement, the severance agreement should specifically address COBRA and how the employer will handle it. Employers may agree to pay a departing employee’s COBRA premium for a short period (e.g., 3 months) of the COBRA coverage, so long as the employee elects such coverage. However, this approach may raise discrimination issues under the group health plan.181

CREDITS: This is an excerpt from An Employer’s Guide to Employment Issues in Minnesota, provided by the Minnesota Department of Employment and Economic Development & Linquist & Vennum P.L.L.P., Tenth Edition, 2009. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.

This post is also part of a series of posts covering the Continuation of Group Health and Life Insurance Coverage Law (COBRA). This information is not legal advice. You should consult with an experienced employment attorney before dealing with COBRA-related employment issues.

178 Treas. Reg. § 54.4980B-10, Q/A-1(a).
179 Treas. Reg. § 54.4980B-10, Q/A-2, Example 2.
180 Treas. Reg. § 54.4980B-10, Q/A-4.
181 See Pub. L. No. 111-148 § 1001, amending 42 U.S.C. § 300gg-16.