Cobra required when retiree plan terminated?

[Guest sidalee1]

We have a separate plan for our active employees and retirees. If we terminate coverage for certain groups under the retiree plan, would we be required to offer COBRA for those recent retirees (e.g. those who became retirees less than 18 months ago)? I realize the retiree plan ceasing to provide coverage is not a qualifying event, but am a little concerned whether the failure to return the COBRA election forms is an effective waiver? The COBRA election forms do state that if you fail to return the form, you lose your right to elect COBRA. Any thoughts?

[J Simmons]

So you basically have the retirees in question having had a COBRA qualifying event when they retired, they were given COBRA notices, they did not timely return them electing COBRA, they have had retiree coverage and now you are terminating that retiree coverage before they have been retired 18 months.

I don't know that the retirees failure to timely elect COBRA is 'an effective waiver', but it looks like they are outside their COBRA election window.

[Guest sidalee1]

Yes, these individuals were timely provided a COBRA election upon retirement (to continue active benefits), took retiree coverage instead, have been retired for less than 18 months. You are right, the answer is soo simple - they are simply outside their election window...

[Guest arasalin]

I'd check either the COBRA Handbook by Ira Golub or the regs, but I think that if the retirement coverage is terminated, and the retirees have been covered for less than 18 months, they may be entitled to coverage for the remainder of the 18 month period. I can't find the cite, but as I recall, the retirement would not be a qualifying event if it didn't result in a loss of coverage (because of the existence of the retiree benefits), but once the retiree benefits are cut, the retirement may become a qualifying event retroactively.

[Guest Sieve]

If the retiree coverage is identical to that offered to the retirees before they retired, and if there is no increase in cost to them as a result of their transfer into the retiree plan upon termination of employment, then there was no qualifying event when they retired--the qualifying event occurs when their retiree health coverage ends, and they must then be offered COBRA coverage for the remainder of the 18-month period following their termination of employment. (See Treas. Reg. Section 54.4980B-4, Q&A-1(g), Ex. 5.) If this is your situation, then the COBRA election forms provided upon termination of employment were inappropriate at that time (because there was no qualifying event), and must be provided now. If, on the other hand, coverage was more expensive in the retiree plan, then the qualifying event occurred at their termination of employment.

In either event, the election is given--and the election period commences to run--after the qualifying event, and when the election period expires it is then too late to elect COBRA coverage--even if some of the original 18 months remain after the retiree health care coverage is terminated. (See examples in Treas. Reg. Section 54.4980B-6, Q&A-1©, especially -1©(iv), and Treas. Reg. Section 54.4980B-7, Q&A-4(b)(1).)

[Guest sidalee1]

The retiree coverage is provided through a separate plan, plus it is not as generous as the active coverage (co-pays and premiums higher, etc.)

[Guest Sieve]

Therefore, since the qualifying event occurred when the retirees terminated employment, and since they received a COBRA election form and declined COBRA coverage, they have lost the potential for COBRA coverage as a result of their termination of employment. And, they are not entitled to COBRA continuation coverage as a result of the cessation of their coverage in the retiree plan.