COBRA - mandated grace period

[Benefits 101]

Upon electing COBRA and after sending in the first payment....is there a mandatory required grace period?

For example, in the COBRA notice, there is usually a line "your premiums are due on the first of the month. The is no grace period".

Is "no grace period" allowed? For instance, premiums are due on March 1st. It is March 2nd. We term the employee since we have not received COBRA premiums. We then get the check on the 3rd (i.e. it was in the mail). Employee is NOT allowed back on the plan.

This is OK, right?

[Guest Sieve]

Depends on what the coverage period is for the 3/1 payment. The regs say: " . . . timely payment for a period of COBRA continuation coverage . . . means payment that is made to the plan by the date that is 30 dyas after the first day of that period." If employees are allowed until a later date to pay, the COBRA continuee has until that same date. If payment is not made by the first day of the coverage period, the employer can either cancel coverage and then reinstate when timely payment is received, or can continue coverage and then retroactively cancel if timely payment is not made. (Treas Reg. Section 54.4980B-8, Q&A-5.)

So, if the coverage period is 3/1-3/31, timely payment is anytime on or before 3/31.

[oriecat]

We then get the check on the 3rd (i.e. it was in the mail).

Another important note is that you have to go by the postmark date, so you can't term someone if it was in the mail.

26CFR54.4980B-8 Q-5 (e) Payment is considered made on the date on which it is sent to the plan.

[Benefits 101]

Thanks, that answers my question.

So if payment for the coverage month of March (Mar 1 - Mar 31) is due on the first of the month (i.e. Mar 1)....then payment must be received by Mar. 31.

Also, the payment can be postmarked Mar. 31 and that qualifies as "timely payment".

[Guest Sieve]

Correct. And that's payment to the Plan (i.e., the employer as Plan Administrator of the group health plan)--not payment to the insurance co.