Question: How do the COBRA second qualifying event rules extend the maximum coverage period?
Short Answer: The COBRA second qualifying event rules permit a spouse or dependent qualified beneficiary to extend the COBRA maximum coverage period from 18 months to 36 months.
General Rule: COBRA Maximum Coverage Period
- Termination of employment
- Reduction of hours
- Disability extension
- Death of employee
- Divorce or legal separation from employee
- Child reaches age 26
Note that the 18-month events can be extended by another 18 months under a fully insured policy sitused in California (for a total of 36 months) through Cal-COBRA, but only for medical coverage (not dental or vision).
COBRA Second Qualifying Event: Two Requirements
A spouse or dependent qualified beneficiary will experience a second qualifying event only if both of the following two conditions are satisfied:
- The original qualifying event was the employees termination of employment or reduction of hours (18-month events);and
- Within that 18-month maximum coverage period, a second qualifying event occurs.
COBRA Second Qualifying Event: Which Events Qualify?
The spouse or dependents second qualifying event can be:
- Death of the employee;
- Divorce or legal separation from the employee; or
- Child reaching age 26.
Legal separation is a second qualifying event only if the plan terms provide for loss of coverage upon a legal separation. For full details, see our previous post: Legal Separation vs. Divorce.
Medicare enrollment can only be a second qualifying event in the rare situation that the employer is not subject to the Medicare Secondary Payer rules. For full details, see our previous post: Medicare Secondary Payer Employer Size Requirements.
COBRA Second Qualifying Event: Which Individuals Qualify?
Only the spouse and dependent(s) who are COBRA qualified beneficiaries at the time of the second qualifying event receive the extension of the COBRA maximum coverage period.
There is never a second qualifying event COBRA extension available for the covered employee.
COBRA Second Qualifying Event: What is the Extension of Coverage?
Where the spouse or dependent(s) experiences a second qualifying event, the COBRA maximum coverage period extends from 18 months to 36 months.
The 36-month maximum coverage period runs from the start date of the original 18-month maximum coverage period (not from the date of the second qualifying event). It thereby extends the total COBRA maximum coverage period for the spouse or dependent period to 36 months.
- Billy Ray terminates employment in June 2020 while covering himself and his child Miley under the companys group health plan.
- Billy Ray elects COBRA for himself and Miley that is effective July 1, 2020.
- Miley reaches age 26 while covered through COBRA at some point between July 1, 2020 and December 31, 2021 (the 18-month maximum coverage period).
- Miley has experienced a second qualifying event that extends her COBRA maximum coverage period through June 30, 2023 (36 months from July 1, 2020).
- Billy Rays COBRA maximum coverage period is not affected by Mileys second qualifying event, so his COBRA period still ends December 31, 2021 (18 months from July 1, 2020).
COBRA Second Qualifying Event: 60-Day Notice Requirement
The COBRA rules provide the qualified beneficiary must notify the plan within 60 days from the date of the second qualifying event to qualify for the maximum coverage period extension to 36 months.
For more details on everything COBRA, see our Newfront Office Hours Webinar: COBRA for Employers.
Treas. Reg. 54.4980B-7, Q/A-6(b):
Q-.6.Under what circumstances can the maximum coverage period be expanded?
A-6.(a) The maximum coverage period can be expanded if the requirements of Q&A-5 of this section (relating to the disability extension) or paragraph (b) of this Q&A-6 are satisfied.
(b) The requirements of this paragraph (b) are satisfied if a qualifying event that gives rise to an 18-month maximum coverage period (or a 29-month maximum coverage period in the case of a disability extension) is followed, within that 18-month period (or within that 29-month period, in the case of a disability extension), by a second qualifying event (for example, a death or a divorce) that gives rise to a 36-month maximum coverage period. (Thus, a termination of employment following a qualifying event that is a reduction of hours of employment cannot be a second qualifying event that expands the maximum coverage period; the bankruptcy of an employer also cannot be a second qualifying event that expands the maximum coverage period.) In such a case, the original 18-month period (or 29-month period, in the case of a disability extension) is expanded to 36 months, but only for those individuals who were qualified beneficiaries under the group health plan in connection with the first qualifying event and who are still qualified beneficiaries at the time of the second qualifying event. No qualifying event (other than a qualifying event that is the bankruptcy of the employer) can give rise to a maximum coverage period that ends more than 36 months after the date of the first qualifying event (or more than 36 months after the date of the loss of coverage, in the case of a plan that provides for the extension of the required periods; see paragraph (b) in Q&A-4 of this section). For example, if an employee covered by a group health plan that is subject to COBRA terminates employment (for reasons other than gross misconduct) on December 31, 2000, the termination is a qualifying event giving rise to a maximum coverage period that extends for 18 months to June 30, 2002. If the employee dies after the employee and the employees spouse and dependent children have elected COBRA continuation coverage and on or before June 30, 2002, the spouse and dependent children (except anyone among them whose COBRA continuation coverage had already ended for some other reason) will be able to receive COBRA continuation coverage through December 31, 2003. See Q&A-8(b) of 54.4980B-2 for a special rule that applies to certain health flexible spending arrangements.
IRS Revenue Ruling 2004-22:
The expanded maximum coverage period of Q&A-6 of54.4980B-7 applies only when the 36-month qualifying event follows the qualifying event that is a termination (or reduction of hours) of employment. (However, Q&A-4(d) of54.4980B-7 provides a special rule for the measurement of the maximum coverage period in a case where the covered employees becoming entitled to Medicare benefits precedes the termination (or reduction of hours) of employment; this special rule applies regardless of whether the Medicare entitlement is a qualifying event.) Because a covered employee is not a qualified beneficiary with respect to any 36-month qualifying event, the expanded period that applies in connection with a second qualifying event will not apply to a covered employee but only to the spouse or a dependent child of a covered employee.
Based on the statute and regulations, for a spouse or dependent child of a covered employee to be entitled to the expanded maximum coverage period when a second qualifying event occurs, the following three conditions must be satisfied:
- (1) The spouse or dependent child must be a qualified beneficiary in connection with a termination (or reduction of hours) of employment;
- (2) The spouse or dependent child must still be a qualified beneficiary at the time that the 36-month event occurs; and
- (3) The 36-month event must be a qualifying event.
Treas. Reg. 54.4980B-6, Q/A-2(a):
Q-2. Is a covered employee or qualified beneficiary responsible for informing the plan administrator of the occurrence of a qualifying event?
A-2. (a) In general, the employer or plan administrator must determine when a qualifying event has occurred. However, each covered employee or qualified beneficiary is responsible for notifying the plan administrator of the occurrence of a qualifying event that is either a dependent childs ceasing to be a dependent child under the generally applicable requirements of the plan or a divorce or legal separation of a covered employee. The group health plan is not required to offer the qualified beneficiary an opportunity to elect COBRA continuation coverage if the notice is not provided to the plan administrator within 60 days after the later of
(1) The date of the qualifying event; or
(2) The date the qualified beneficiary would lose coverage on account of the qualifying event.
(b) For purposes of this Q&A-2, if more than one qualified beneficiary would lose coverage on account of a divorce or legal separation of a covered employee, a timely notice of the divorce or legal separation that is provided by the covered employee or any one of those qualified beneficiaries will be sufficient to preserve the election rights of all of the qualified beneficiaries.
Model COBRA Notice:
For all other qualifying events (divorce or legal separation of the employee and spouse or a dependent childs losing eligibility for coverage as a dependent child), you must notify the Plan Administrator within 60 days [or enter longer period permitted under the terms of the Plan] after the qualifying event occurs. You must provide this notice to: [Enter name of appropriate party]. [Add description of any additional Plan procedures for this notice, including a description of any required information or documentation.]
About the author
Lead Benefits Counsel
Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law. Connect with Brian on LinkedIn.
The information provided is of a general nature and an educational resource. It is not intended to provide advice or address the situation of any particular individual or entity. Any recipient shall be responsible for the use to which it puts this document. Newfront shall have no liability for the information provided. While care has been taken to produce this document, Newfront does not warrant, represent or guarantee the completeness, accuracy, adequacy, or fitness with respect to the information contained in this document. The information provided does not reflect new circumstances, or additional regulatory and legal changes. The issues addressed may have legal, financial, and health implications, and we recommend you speak to your legal, financial, and health advisors before acting on any of the information provided.
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