Introduction to COBRA, FMLA, and Other Federal Mandates

[0:00] Amber:

Welcome, everyone to the Introduction to COBRA, FMLA, and Other Federal Mandates.

Thank you so much for joining us. The Benefits Compliance team will be answering the questions you send through the Q&A today. We'll try our best to answer all of your questions, but if for whatever reason we're unable to get to your question today, please follow up with your adviser for further assistance.

Today's presentation is being recorded. We'll be sharing the recording in the follow-up email and on the NFP website. If there are any portions of this call that you missed, by Monday you'll receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

At this time, I'll hand it over to Kelly Ecman, Vice President of Benefits Compliance at NFP, and Patrick Myers, Vice President and Counsel of Benefits Compliance at NFP.

Kelly, the floor is yours.

[0:43] Kelly:

All right, thanks Amber, and thank you everyone for joining us for our June Get Wise Wednesday webinar series.

As you'll see by the title, this is another in our introductory series. We've been taking many months this year so far to take a closer look at some of the basic topics that affect our employers on a day-to-day basis, and hitting these from a high level.

Again today, we're going to look at COBRA, FMLA, and other federal mandates.

Here are Patrick’s and my lovely faces.

As a reminder, we have this for all of our webinars: the information we’re talking about today is for general guidance purposes only. It is not tax advice, it is not legal advice. If you do have questions of that nature, please consult with your own legal counsel. The information we're talking about is current as of today.

Our Agenda:

This is kind of a catch-all or a kitchen sink.

We're going to look at:

• Basics on COBRA
• Medicare
• FMLA
• Miscellaneous topics — TRICARE, USERRA, Medical Child Support Orders, Transparency Rules
• Key takeaways and resources for the future

And with that, Patrick’s going to go ahead and get us started with COBRA.

[2:11] Patrick:

Thank you Kelly. Hello everyone.

COBRA

COBRA is the abbreviation for the Consolidated Omnibus Budget Reconciliation Act of 1985.

You can all see why we decided to call it COBRA instead!

This is the act that requires employers that sponsor group health plans to offer continuation coverage to employees, their spouses, and their dependents in certain circumstances under which they would otherwise lose that coverage.

So one of the things we want to ask is: which plans, healthcare plans, are actually subject to this requirement?

COBRA applies to all public and private employers. But it doesn’t apply to governmental plans or church plans.

Employers with 20 or more employees are going to be subject to COBRA. There is an exception for those employers that have fewer than 20 common law employees.

You count those as 50% of your total employee workforce. If that number is fewer than 20 employees on typical business days in the previous calendar year, then you're exempt.

When counting employees, you need to count everyone — not just plan participants. You also want to count employees of all related employers. If you're in a controlled group, all employees of those other employers are counted.

You also need to count part-time employees on a pro rata basis, and employees outside the U.S. So this is a pretty inclusive group you must count to determine whether you meet that small employer exception.

If you meet that minimum employee requirement in the middle of the year, the employer must comply with COBRA the following calendar year — even if the number dips below 20 afterward.

If an employer’s workforce count newly falls below that 20-employee threshold such that they are not subject to COBRA in the following calendar year, employees whose trigger events occurred when the employer was still subject to COBRA retain those COBRA rights.

If they’ve got COBRA coverage, they don’t automatically lose it just because the employer falls below 20 employees. This is true even if their COBRA commencement date falls in the following calendar year.

Next slide, please.

[5:01] Patrick:

This is a snapshot from our publication that covers COBRA basics.

This snapshot is a chart that highlights some of the more common coverage types that we find in benefit plans and whether they are actually subject to COBRA.

The usual suspects — medical, dental, vision — are subject to COBRA. There are exceptions: disability, group term life, and some others. There are also some that are kind of on the fence. On the next slide, we’ll talk more about some of those exceptions.

[5:33] Patrick:

FSAs

COBRA coverage rights apply only to those FSAs that are underspent. An underspent FSA means the participant's remaining balance (annual election minus any reimbursed claims) exceeds the maximum health FSA COBRA premium that can be charged through the end of the plan year. If so, that person is entitled to FSA through COBRA.

Point solution programs:

These can also be subject to COBRA, ERISA, HIPAA, and ACA if the program provides medical care.

The analysis boils down to whether the program provides individualized diagnosis, treatment, or prescription services — vs. just behavioral coaching, education, broad-based exercise, or other general health recommendations.

We have a publication that covers point solution programs in more depth — this is something to keep in mind when evaluating if your program is subject to COBRA.

[7:06] Patrick:

Disability and Fixed Indemnity Plans

These generally don't provide medical care, and thus aren't subject to COBRA.

However, some disability and indemnity plans may have a rider or embedded component that provides medical care (such as disease-specific plans, EAPs, and wellness programs).

Employers should review these specific plan designs with an attorney to determine COBRA applicability.

Who must be offered COBRA?

People who are offered COBRA are called qualified beneficiaries (QBs).

A qualified beneficiary is anyone covered by the plan immediately before a qualifying event:

• Employee
• Spouse
• Dependent children
• Children born to or adopted by a covered employee during COBRA enrollment

Domestic partners and tax dependents (not dependent children) do not have independent rights to elect COBRA.

However, a domestic partner covered by the plan prior to a COBRA event can enroll along with a qualified beneficiary, but they do not have an independent right to elect COBRA themselves.

If a QB is offered COBRA but does not elect, they will not be a qualified beneficiary after the election period expires.

Each qualified beneficiary has an independent election right — the spouse or dependent child can elect COBRA independently of the employee.

Employers may offer COBRA more broadly, but need carrier or stop-loss approval.

[9:50] Patrick:

Coverage that must be offered:

Qualified beneficiaries must be offered the same coverage they had just before the qualifying event.

Coverage must be identical to what similarly situated active employees are offered.

Changes can occur under certain circumstances:

• Open enrollment
• HIPAA special enrollment
• If region-specific plans fail or become unavailable
• If the employer modifies the plan mid-year

Qualifying events and coverage durations:

• Termination of employment: 18 months
• Reduction of hours: 18 months
• Divorce/legal separation: 36 months
• Death of employee: 36 months
• Child ceases dependent status: 36 months
• Medicare entitlement: 36 months (rare, see next point)
• Employer bankruptcy: applies to retirees

[15:04] Patrick:

Gross misconduct terminations:

Do NOT trigger COBRA rights.

Gross misconduct is not defined in COBRA — consult with employment counsel if necessary.

[15:43] Patrick:

Extensions:

Two ways to extend COBRA coverage:

1. Disability extension — up to 29 months
2. Multiple qualifying events extension — up to 36 months

Specific conditions must be met to qualify for these extensions.

[18:10] Patrick

Measurement period considerations:

Employers using the ACA look-back measurement period must remember that a reduction in hours during the stability period doesn’t necessarily trigger COBRA.

COBRA Costs:

Employers can charge:

• Up to 102% of the applicable premium
• Up to 150% during the disability extension

Premium must remain fixed for 12 months.

[20:34] Patrick:

Notices required:

• Initial Notice — within 90 days of coverage start
• Election Notice — within 44 days of qualifying event notification

Employers should verify that vendors are properly handling notices.

[22:42] Patrick:

State Mini-COBRA laws:

Many states have continuation laws that may:

• Apply to small employers
• Provide more generous durations
• Impose additional notice requirements

Examples: CA, NY, TX, VT, LA.

Work with carriers to ensure compliance with applicable state requirements.

[24:53] Kelly:

Thank you Patrick.

We'll now begin our Medicare overview...

Section 2: Medicare

[24:53] Kelly:

All right, thanks Patrick.

We’ll start our Medicare overview with a quick look at what is Medicare.

Sometimes people get confused between Medicare and Medicaid. But Medicare is what we’re talking about — it’s the federal health insurance program for those who are 65 and older or if they are considered disabled by Social Security.

The big thing to remember here is just because someone is 65, it doesn’t always mean that they have to enroll in Medicare. It’s going to depend on the specific circumstances of that person and whether or not they have access to employer coverage.

And here’s a little chart if you want to look at it later — just going over the different parts of Medicare in case you’re not familiar.

[25:44] Kelly:

We’re going to take some time to cover something called Medicare Secondary Payer Rules.

These are really important for employers offering group health coverage.
The purpose of these rules is to prohibit employers from offering financial incentives to anyone who is Medicare eligible — trying to entice them to enroll in Medicare instead of the group health plan.

That’s kind of the main point of these rules.

[26:11] Kelly:

Medicare Secondary Payer rules apply to employers with:

• 20 or more employees on each working day in at least 20 weeks in the current or preceding calendar year.

Patrick talked about COBRA, which also has a 20-employee threshold — this applies the rule a little differently.

[26:36] Kelly:

If Medicare is due to disability instead of age, the threshold is actually 100 or more employees — based on having 100+ employees on at least 50% of regular business days in the previous calendar year.

If Medicare coverage is due to end-stage renal disease (ESRD), the rules are different again — no size restriction — all plans have to comply with coordination of benefit rules for the first 30 months of that diagnosis.

[27:19] Kelly:

Why are these rules important?

They determine whether the group health plan pays primary or secondary.

If someone has both Medicare and group health plan coverage — these rules determine who pays first.

For employers with 20 or more employees — they CANNOT reimburse or pay for Medicare coverage unless they use an ICRA.

[27:55] Kelly:

You may be familiar with ICRAs — but key here is that an ICRA would have to be offered to all employees in a specific class. You still can’t single out those who are Medicare eligible.

Bottom line — treat Medicare-eligible employees the same as employees under 65.

Opt-out or cash-in-lieu arrangements:

These are OK as long as they are available to all eligible employees — you can’t just offer opt-out cash to those eligible for Medicare.

Retiree plans:

These can offer Medicare-related benefits — because retirees aren’t active employees, Medicare Secondary Payer rules don’t apply.

There are significant penalties for employers who violate Medicare Secondary Payer rules — so if you have 20 or more employees, make sure you aren’t influencing, forcing, or incentivizing Medicare enrollment.

Part D Requirements (D is for "drugs") — this relates to prescription drug coverage under Medicare.

Employers have two obligations:

1. Annual notice to eligible employees — due by October 14th each year.
2. Disclosure to CMS — an online disclosure due 60 days after start of plan year.

If you’re a non-calendar year plan, timing is a little different — typically notice is provided at open enrollment and again close to that October 14th deadline.

That notice informs employees whether the plan is considered creditable or non-creditable.

This is important because people enrolled in Medicare need creditable drug coverage — either from their employer plan or by purchasing a Part D plan.

Often your carrier or TPA will provide that creditable/non-creditable status. If they don’t — you’ll need an actuarial determination.

CMS Disclosure:

This is due 60 days after start of plan year (for calendar year plans, do this by end of February).

You’re reporting whether the plan is creditable or non-creditable, and the number of individuals expected to be covered.

If the plan’s status changes mid-year — you’ll need to file an updated disclosure.

Medicare + Other Laws

HSAs

Once an individual is enrolled in Medicare, they can no longer contribute to an HSA. Neither can their employer.

Because Medicare is considered impermissible coverage for HSA eligibility. HSA eligibility is based on an individual’s status as of the first day of each month.

Part A is retroactive up to 6 months (but no sooner than the month you turn 65).

So if someone delays Medicare until age 67 and enrolls, Part A goes retroactive 6 months — and they’ll be ineligible for HSA contributions during that time.

If only the spouse is enrolled in Medicare — that does not affect the employee’s HSA eligibility.

HSAs are individual tax accounts — the covered tier doesn’t matter; what matters is the account holder’s eligibility.

Existing HSA funds:

Can be used to pay spouse’s eligible medical expenses — even if spouse is enrolled in Medicare.

You can also use HSA funds to pay for:

• Parts B, D, or C (Medicare Advantage) premiums
• Normal medical expenses (Medicare doesn’t cover dental or vision — but you can use HSA funds for those).

You cannot use HSA funds to pay for Medicare supplement (Medigap) premiums.

Midyear election change rules:

Enrollment in Medicare can trigger a midyear election change — but only for the person who enrolls in Medicare.

Changes must comply with Section 125 consistency rules

Example:

If a spouse enrolls in Medicare but the employee does not — the employee cannot drop their own coverage.

They can drop the spouse’s coverage if the spouse is moving to Medicare.

Adding dependents:

You cannot add an adult dependent simply because a spouse moves to Medicare — that would not meet consistency rules.

Medicare + COBRA

Patrick covered this earlier — I’ll just hit the high points.

If an employee enrolls in Medicare while still an active employee, that does not trigger a COBRA event for covered spouse or dependents — because of Medicare Secondary Payer rules.

If an employee drops group health in favor of Medicare — even if the spouse/dependent are still on the plan — it doesn’t create a COBRA event for them.

Because the employee could have remained covered and chosen to keep spouse/dependent on the plan.

We have a Compliance Corner FAQ linked here that explains this in more detail.

Also — our COBRA guide for employers goes deeper on this topic.

How long COBRA is offered depends on when Medicare enrollment occurs.

If the employee enrolls in Medicare prior to the COBRA event (termination/retirement), the max COBRA period is 36 months — measured from the month they enrolled in Medicare.

If the employee terminates employment before enrolling in Medicare — the spouse/dependent would only get 18 months of COBRA — not 36.

Now Patrick will take us through an overview of FMLA.

Section 3: FMLA

[38:57] Patrick:

The Family Medical Leave Act (FMLA) is a federal requirement.
It applies to:

•    Private employers with 50+ employees
•    Governmental employers
•    Public and private schools of all sizes

Employee eligibility:

•    Worked 12 months for the employer
•    At least 1,250 hours in prior year
•    Work location where employer has 50 employees within 75 miles

FMLA leave is job protected and health benefits continue under the same conditions as if the employee were working.

Reasons for FMLA leave:

Up to 12 weeks in a 12-month period for:

• Birth/adoption/foster care
• Care for spouse, son, daughter, or parent with a serious health condition
• Own serious health condition
• Military family exigency leave

Up to 26 weeks:

To care for a covered servicemember with serious injury/illness when the employee is spouse, child, parent, or next of kin.

Required FMLA notices:

• General notice (poster)
• Eligibility and rights/responsibilities notice
• Designation notice
• Non-payment of premiums notice
• Open enrollment notice during leave

During FMLA, health benefits continue under the same conditions.

Employees are still responsible for their premium share.

If benefits change during leave — employees are entitled to those changes.

Coverage can end if:

• Employee voluntarily drops coverage
• Employee fails to pay premiums
• Employee does not return from leave (then COBRA applies).

Premium payment methods:

1. Pre-pay (rare)
2. Pay as you go (if using paid time off)
3. Pay upon return to work

Employers must provide advance notice of payment options.

If an employee misses payment deadlines:

• Coverage ends if premium is more than 30 days late.
• Must send 15-day non-payment notice before termination.

State Family and Medical Leave laws:

Many states offer broader leave rights than federal FMLA.

Examples:

• Safe leave for domestic violence, assault, stalking
• Expanded family definitions (domestic partners, siblings, grandparents, grandchildren)
• Partial wage replacement (not provided by federal law)

Section 4: Other Federal Mandates

[46:36] Patrick:

At this point, I’ll pass this back over to Kelly to cover other federal mandates.

[46:42] Kelly:

All right, thanks Patrick.

This is kind of just the catch-all part — and don’t worry, these aren’t all of the mandates that an employer needs to be aware of!

We just wanted to pick and choose a few that maybe don’t get talked about quite as much, but are still important things to have on your radar.

As I mentioned earlier, we’re going to talk about:

• USERRA
• TRICARE
• Medical Child Support Orders
• Transparency Rules (hopefully top of mind for many of you today)

First up: USERRA — the Uniformed Services Employment and Reemployment Rights Act.

This relates to active military service.

USERRA rules apply to all employers, regardless of size — unlike some of the other laws we’ve talked about today.

The DOL has a model notice about USERRA leave (we’ve linked it here).

[48:00] Kelly:

What does USERRA provide?

Protections for employees absent from work due to uniformed military service.

Employers must:

• Offer option to continue group health coverage at employee expense for up to 24 months (similar to COBRA)
• Guarantee reemployment rights upon return from service
• Reinstate healthcare coverage upon return

USERRA applies to leaves of 31 days or longer.

If military leave is 30 days or less, coverage continues as normal — employee pays normal premiums.

Next — TRICARE.

Another military healthcare program — provides benefits for active duty or retired service members and their families.

TRICARE protections are similar to Medicare Secondary Payer rules — applies to employers with 20 or more employees.

Employers:

• Cannot incentivize someone to choose TRICARE over group health
• Cannot force employees to enroll in TRICARE
• Cannot impose stricter eligibility or different costs

Golden Rule: Treat all active employees the same — even if they are TRICARE-eligible.

Plan documents should disclose TRICARE info — and coordination of benefits rules.

Next up — QMCSOs (Qualified Medical Child Support Orders).

These are court orders requiring an employee to enroll a dependent child who isn’t already enrolled.

Each state has its own rules for QMCSOs — and financial limitations (like percentage of wages).

If you receive a QMCSO, check with the issuing court if you have questions about whether the child should be enrolled.

Expiration of a QMCSO doesn’t automatically create a right to disenroll the child.

If the order ends when the child turns 18 — in the middle of a plan year — the child doesn’t just get dropped.

They remain a dependent under plan terms and can stay enrolled until open enrollment.

Next — CAA Transparency Rules (you’ve likely heard about these).

We just passed the RxDC reporting deadline (June 1st).

RxDC requires reporting info on prescription drug claims and spending to CMS.

For fully-insured plans — usually the carrier files.

For self-insured — often the TPA files — but employers should confirm.

Hopefully everyone got this done by June 1st!

Next — Gag Clause Attestation.

Plans can’t enter contracts that restrict access to:

• Provider-specific cost or quality info.

Some TPAs may try to say this info is proprietary — but plans must attest annually by December 31st that no gag clauses exist.

Fully-insured: carrier usually files.

Self-insured/level-funded: TPA can file — but always confirm.

Never assume — double check with your TPA or carrier.

Section 5: Wrap-Up & Takeaways

[54:27] Kelly:

And now Patrick is going to take us home with some takeaways and a look at resources.

[54:32] Patrick:

Key Takeaways

• COBRA requirements are prescriptive — talk with your vendors to ensure notices are going out at the right times.
• Medicare enrollment should not be influenced by the employer.
• FMLA and other leaves make benefits tricky — stay on top of how leaves affect eligibility and administration.
• Don’t assume your carrier/TPA is handling all transparency requirements — verify what is being done.
• Counting employees varies by law — employers on the 20- or 50-employee cusp should monitor headcount carefully.

We’ve mentioned throughout today’s presentation that NFP has excellent publications covering these topics in more depth.

Please reach out to your NFP representative — they’ll be happy to provide copies of any or all of these materials.

I’m afraid we’re at the top of the hour.

Thank you so much for joining us today!

We hope you have a great rest of your day. If you have questions, reach out to your NFP representative — we’re glad to help.

[56:25] Amber:

Thanks Patrick! Amber here — I’ll take us out.

Thank you Patrick and Kelly for your valuable time and expertise today.
Just to reiterate:

• Today’s presentation was recorded — you’ll receive the recording and slides by email on Monday.
• After this call, a survey will pop up — please take a moment to complete it. Your feedback helps us improve our education program.

That concludes today’s webinar. Thank you everyone for joining us — and have a great day!