COBRA and US employee living abraod

A US based employer has an employee who is working abroad; the employee quits and is remaining in that foreign country to live.  

1. What are our client's obligations in terms of offering coverage to this employee, considering their current international residence?
2. Does the issuance of a COBRA rights letter in this scenario entail any legal or compliance risks for our client, given the employee's non-U.S. residency?
3. Are there any specific steps our client should take to rectify this situation and ensure compliance with both U.S. and international regulations?

Thank you!

Without the details on the actual coverage at issue here, I'm assuming this is some type of expat group health plan maintained by a U.S. company for the benefit of employees working abroad.  In that case, all the standard COBRA rights and obligations apply.  This will be handled in the same manner as a U.S. employee who experiences a COBRA qualifying event under the domestic GHP.

The only way you would avoid COBRA obligations would be if “such plan is maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens.”  For example, if the employee were covered under a plan primarily designed for residents/citizens of that foreign country to which the employee is assigned.  In that case, the plan would not be subject to ERISA/COBRA.  But based on the way you're approaching this, I doubt that's the situation here.

ERISA §4:
(b) The provisions of this title shall not apply to any employee benefit plan if—
(1) such plan is a governmental plan (as defined in section 3(32) [29 USC §1002(32)]);
(2) such plan is a church plan (as defined in section 3(33) [29 USC §1002(33)]) with respect to which no election has been made undersection 410(d) of the Internal Revenue Code of 1986 [26 USC §410(d)];
(3) such plan is maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation or disability insurance laws;
(4) such plan is maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens; or
(5) such plan is an excess benefit plan (as defined in section 3(36) [29 USC §1002(36)]) and is unfunded.

No, the employer offers a self funded medical plan through UHC.  The employee in question opted was allowed, by the supervisor, to move to the Netherlands last year and has worked remotely - and unbeknownst to HR was left on the UHC medical plan.  The employer is starting to call folks back into the office and this employee just quit. The employer sent him a termination letter and mentioned COBRA availability.  So the plan is a US plan.  

Well then it's a GHP subject to COBRA, and the employee has experienced a loss of coverage triggered by termination of employment.  That's a COBRA qualifying event whereby all the usual COBRA rights apply.

Thanks for the confirmation.  Appreciate it. 

Is a US employee living abroad who recently localized off ex patriate assignment to local contract eligible for COBRA to maintain their US health insurance coverage?  The employee had to terminate their employment with the US entity in order to localize and is eligible for the foreign health coverage which does not offer any coverage for the US home country.  

I think you're saying an expat is moving from an international assignment back to the U.S., and the expat plan is maintained in the U.S. so it's subject to ERISA/COBRA.  

If that's right, the loss of coverage caused by the termination of employment will be a COBRA QE for the expat plan.  The employee still needs to be offered COBRA for that expat plan even if it doesn't provide any coverage in the U.S.  The employee will likely not elect to enroll, but you still need to make the offer with the standard COBRA election notice/rights.

However, if any entity in the controlled group offers a plan that does provide coverage in the U.S. the employee could elect COBRA and rely on the region-specific coverage rule to request that other U.S. coverage.  The plan would have to make that U.S. coverage available through COBRA.  Normally that rule is for local regional HMOs, but it would also apply here.

• Quick summary: https://www.newfront.com/blog/which-plan-options-must-be-offered-under-cobra-2

Cite:

Treas. Reg. §54.4980B-5:

Q-4. Can a qualified beneficiary who elects COBRA continuation coverage ever change from the coverage received by that individual immediately before the qualifying event?

...

(b) If a qualified beneficiary participates in a region-specific benefit package (such as an HMO or an on-site clinic) that will not service her or his health needs in the area to which she or he is relocating (regardless of the reason for the relocation), the qualified beneficiary must be given, within a reasonable period after requesting other coverage, an opportunity to elect alternative coverage that the employer or employee organization makes available to active employees. If the employer or employee organization makes group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating, then that coverage is the alternative coverage that must be made available to the relocating qualified beneficiary. If the employer or employee organization does not make group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating but makes coverage available to other employees that can be extended in that area, then the coverage made available to those other employees must be made available to the relocating qualified beneficiary. The effective date of the alternative coverage must be not later than the date of the qualified beneficiary's relocation, or, if later, the first day of the month following the month in which the qualified beneficiary requests the alternative coverage. However, the employer or employee organization is not required to make any other coverage available to the relocating qualified beneficiary if the only coverage the employer or employee organization makes available to active employees is not available in the area to which the qualified beneficiary relocates (because all such coverage is region-specific and does not service individuals in that area).

Slide summary:

2024 Newfront COBRA for Employers Guide

The situation is that the employee has relocated to the international office and so their US contract was terminated. The employee was covered by an expat plan maintained in the US and was undergoing medical treatment in the US likewise covered under the plan. Now that the US contract has been terminated, the employee receives a health plan in their new country which only covers treatment in that country.  In this instance does COBRA apply ? And naturally if yes, they could then maintain medical treatment in the US with the same level of coverage. 

It's not clear to me whether there was a termination of employment associated with the move and contract termination.  If so, you have a COBRA qualifying event.  If not, it's just a loss of eligibility without a triggering event to create a COBRA qualifying event.  Enrollment in another group health plan only cuts off COBRA rights if that other enrollment occurs after electing COBRA.

• More details: https://www.newfront.com/blog/early-termination-of-cobra-upon-enrollment-in-other-group-health-plan-or-medicare

Slide summary:

2024 Newfront COBRA for Employers Guide

Thank you very much. Indeed there was a contract termination associated with the employee localizing to the foreign country.