Sandra Pearce

We operate a self-insured health plan for approximately 1,300 employees. Our lifetime maximum is $1,000,000. In the eight years the plan has operated we have never had anyone come close to the maximum.

If the plan is fully insured, you must meet any State regulations - contact the TX Commission of Insurance. Federal COBRA requirements are limited to 18 months for a termination of employment.

Termination of employment ends active employee status in our health plan. COBRA is always offered as of that date. If we were to agree (not part of our current severance plan) to pay for COBRA coverage for a period of time, we would have the employee enroll for the COBRA coverage and we would pay for the period agreed to.

The fully insured LTD contract our company has for it's employees is offset by other income benefits. One of the other income benefits named is "any portion of a settlement or judgment, minus associates costs, of a lawsuit that represents or compensates for your loss of income."

I believe this falls under the allowed automatic cost changes found in the permitted election changes of the final regulations issued in March 2001.

I can't see any reason for asking for a spouse's birth certificate.

If both plans have a 30 day notice requirement, nothing can be done until open enrollment for the 125 plan. The employee is locked in to the coverage and the deduction.

Just need to be sure I understand. The health plan will not allow him to drop coverage unless notification is given within 30 days of the qualifying event, but your 125 plan is written with no stipulation as to notice requirement?

In case #1 if your section 125 plan states that the request be made within 30 days of the qualifying event - no change until 125 open enrollment. In case # 2 I see the same result. No change because request was not made within the 125 plan rules. I always look at the rules of the underlying plan first. If the request passes that test, then I look at the rules of our 125 plan.

I would allow the change beginning the date of notification that the spouse was not looking for employment. Which is I guess what the employee is now telling you. The fact that the spouse lost a job does not mean that the spouse was not actively looking for employment (and the day care was still a valid 125 benefit). Our plan, right or wrong, does not have a 30 or 31 day notice requirement. So I would be letting the employee out of the election due to the termination of the spouse's employment.

I agree with papogi that HR often could be more proactive and we absolutely think of the underlying benefit plans first and the 125 plan second. If a spouse terminates employment that does not mean that the spouse doesn't have other employment on the horizon or is not actively looking for employment. So in that case I don't know if I would have asked about a dependent day care account. I would allow the change prospectively after notification. I would not consider this an administrative error. Employees are given SPD's which they have some obligation to read and understand or question. I've had employees try to tell me that since they didn't read the SPD (were given one but didn't read it) they shouldn't be held to the filing requirements.

I agree with Kirk that there is no IRS rule which requires notices within a certain period of time; however, most plans have their own specified time periods for notification. All changes must be made prospectively. Also, when the situation changed and the spouse was no longer in school full time didn't the ability to tax a tax deduction, either on a 1040 or in a 125 plan, cease?

Regarding the request for proof of marriage and birth certificates, health plans have specific eligibility requirements. Some plans allow for domestic partners and/or for common-law partners. If the plan defines an eligible spouse as a legally married spouse, it may request supporting proof. Because we have employees in states which recognize common-law marriages we have had an on-going problem in our health plan since we, as of yet, have not required proof of the legal marriage (and this is a requirement of eligibility in the plan). Same thing with birth certificates. Eligibility in the plan may have requirements that make it prudent for the plan to see that the children listed do in fact meet those requirement (such as a requirement that the child be a natural child of the employee.) There is nothing wrong in requiring proof of eligibility; however, if required it should be required of all.

mroberts, I've been looking forward to a little vacation! Great! kjohnson, I believe a separate notice is required for the spouse and I send it to the home address, addressed to the spouse with a letter explaining why they are getting the notice. When I first started sending the notices (years ago) I had many spouses call and tell me that the employee hadn't been terminated and they didn't know why I was sending the notice to them.

I probably would hold fast. However, that decision would not change the fact that the spouse lost coverage when the spouse lost eligibility in the plan. This was as of the date of the divorce. I do not believe that the average employee in the US in 2002 does not understand that a divorce severs benefits and I do believe that an average employee in the US knows what COBRA is. I do have some employees who have spent the majority of their lives in countries with socialized medicine. A spouse with little understanding of our medical system might be given a concession based on that.

An employer/plan has an obligation to send a notice to each covered employee and a separate notice to the covered spouse at the time the coverage is elected, stating the rights and obligations of the employee and the dependent regarding possible future COBRA qualifying events. The spouse should have been sent such a notice which would have stated that the spouse had an obligation to notify the plan of a divorce. If this notice was sent out as required, the plan has no obligation to retroactively instate the COBRA continuation coverage for this dependent.

In this case the employee and the ex-spouse both had an obligation to notify the plan within 60 days of the COBRA qualifying event. If they were both provided with the required 1st COBRA notice which gave them this information, then the plan has no obligation to retroactively offer COBRA continuation.

As stated by the previous poster, only taxable if the employee is paying for the life insurance pre-tax in a 125 plan.

I don't believe something that is strictly educational and does not treat the disease would qualify. I asked about the coding because sometimes employees tell you one thing, or understand one thing, when the service is something entirely different.

Does a physician file this with a diagnosis code and CPT code for the service? If so what is the CPT code? You've already stated the diagnosis.

A health plan may require that the loss of the alternative coverage was 1) COBRA coverage that was exhausted, or 2) other coverage lost due to legal separation, divorce, death, termination of employment, reduction of hours of employment, or that 3) all employer contributions toward the coverage ended. Our plan requires the proof of loss and will accept it after the 30 day period as long as the request from our employee was made timely (within the 30 days) and the proof is submitted within a reasonable period of time after that request. In many cases a brief letter from the former employer is more expedient. Be aware that a HIPAA certificate from a prior carrier does not indicate a statement regarding whether coverage was lost due to eligibility for coverage or end of COBRA coverage so we do require more than a HIPAA certificate for loss of coverage. A person losing coverage due to a COBRA qualifying event has 60 days from the date of the COBRA notice to elect continued coverage and that continuation is retroactive to the date of the qualifying event or loss of coverage. In this case there is no gap in coverage. If a HIPAA event happens to a family member of the COBRA QB and the request to add the family member is made within the 30 day period then, as you have determined, the family member may have a small gap in coverage but it does not constitute a significant break in coverage, 63 days, and would not cause the family member to lose credit for the prior coverage toward any pre-existing exclusions in the COBRA plan.

My take is that your plan is written as non-contributory, meaning that everyone who meets eligibility is whether or not "signed up" covered. This person has the benefit available and the company will pay the premium whether or not the employee ever signs anything. From the insurance companies perspective, based on the contract, they have a potential claim whether or not the person signs anything. However, with that said, I have always required insurance carriers to agree to allow employees to waive any benefit greater than 50,000 (since that benefit does have tax implications for the employee).

If the company is large enough and the employee qualifies for Family Medical Leave (FMLA) then the employer should have notified the employee of the need to pay the employee portion of the premium while out and the employer is obligated to give the employee a 15 day notice prior to terminating coverage for non-payment. Under the provisions of FMLA you cannot terminate coverage retroactively unless the employer has an established policy regarding other forms of unpaid leave that allow the employer to terminate coverage retroactively to the date premium was due; however, the employee must still be given the 15 day notice.

I believe the final regulations addressed this. A third party can pay premium on behalf of a COBRA QB.

As I interpret the permitted election changes for significant curtailment or loss of coverage, the only option the employee would have would be to drop the coverage.