Q. Would a group of less than 20 FTE employees in 2008 in Pennsylvania (a state without a mini-cobra requirement) who offers separated employees a continuation coverage, and uses a qualifying event letter that states “COBRA” throughout, be subject to ARRA?
A. No. Just saying you are subject to COBRA does not make you subject to COBRA. Employers with fewer than 20 employees are excepted from COBRA. An employer can always subsidize the cost of continuation coverage. If the employer is not subject to ARRA, the employer would not be able to recoup the subsidy from the government.
Q. I read in another firm’s newsletter that a qualified beneficiary would be eligible for the subsidy if the employee had “or reduction in hours.” What do you think?
A. A reduction of hours would not entitle a qualified beneficiary to assistance. The qualifying event with respect to COBRA continuation coverage must be the “involuntary termination” of the covered employee’s employment.
Q. If an employer provides COBRA to a separated employee who separated due to gross misconduct and now regrets providing such cobra coverage, can they go back and reclassify the employee and take away their coverage, or, minimally exclude them from ARRA?
A In general, courts do not look favorably upon denying COBRA coverage due to gross misconduct. Courts have set a very high standard for gross misconduct. There is a good chance that going back and “undoing” COBRA coverage based on gross misconduct would not withstand scrutiny.
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