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Legal Separation vs. Divorce

Question: Do spouses lose eligibility for the health plan upon legal separation?  Or do they remain eligible until a final divorce?

Compliance Team Response:

Some plans terminate a spouse’s eligibility at the point of legal separation, and some plans do not terminate a spouse’s eligibility until the point a divorce is finalized.  This is a plan design feature.

There isn’t always a legal separation prior to divorce, but where there is it will often terminate the spouse’s eligibility under the plan terms prior to the divorce being finalized.  Keep in mind that legal separation requires a court order (i.e., it is not simply a result of the parties choosing to no longer reside together).

Where the plan terminates spousal eligibility at the point of legal separation (as opposed to requiring final divorce), the spouse loses eligibility at the point of the legal separation and must be removed at that point.  Loss of coverage based on legal separation or divorce are both COBRA qualifying events.

To summarize, there are two possible scenarios:

1. Plan Provides That Spouse Loses Eligibility Upon Legal Separation or Divorce

The employee must remove the spouse from coverage upon legal separation or divorce.

  • Regardless of whether the spouse’s coverage is lost as a result of a legal separation or a final divorce, the spouse will have COBRA rights.
  • Note that not all married couples legally separate prior to a divorce.
  • Note that a legal separation requires a court order (merely living apart is not “legally separated”).
  • The employee or spouse must notify the plan within 60 days of the legal separation of divorce to preserve the spouse’s COBRA rights.

2. Plan Provides That Spouse Loses Eligibility Only Upon Final Divorce

The employee must remove the spouse from coverage when the divorce is finalized.

  • An earlier legal separation will have no effect on the spouse’s eligibility.
  • The employee will not be able to drop the spouse at the point of legal separation (because it is not a permitted election change event where eligibility is not lost).
  • The employee or spouse must notify the plan within 60 days of the divorce to preserve the spouse’s COBRA rights.

Additional related information:

Regulations:

Treas. Reg. §54.4980B-4, Q/A-1(b):

(b) An event satisfies this paragraph (b) if the event is any of the following—

(1) The death of a covered employee;

(2) The termination (other than by reason of the employee’s gross misconduct), or reduction of hours, of a covered employee’s employment;

(3) The divorce or legal separation of a covered employee from the employee’s spouse;

(4) A covered employee’s becoming entitled to Medicare benefits under Title XVIII of the Social Security Act (42 U.S.C. 1395-1395ggg);

(5) A dependent child’s ceasing to be a dependent child of a covered employee under the generally applicable requirements of the plan; or

(6) A proceeding in bankruptcy under Title 11 of the United States Code with respect to an employer from whose employment a covered employee retired at any time.

(c) An event satisfies this paragraph (c) if, under the terms of the group health plan, the event causes the covered employee, or the spouse or a dependent child of the covered employee, to lose coverage under the plan…

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 child’s 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:

http://www.dol.gov/ebsa/modelgeneralnotice.doc

For all other qualifying events (divorce or legal separation of the employee and spouse or a dependent child’s 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

Brian Gilmore

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.


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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