How To Handle COBRA Qualifying Events In Conjunction With FMLA Leave

The Internal Revenue Service (IRS) has issued regulations indicating that while the loss of coverage during an FMLA-qualifying leave is not a COBRA qualifying event, a COBRA qualifying event can occur at the end of the FMLA leave period.

The IRS regulations clarify that a COBRA qualifying event occurs if the following three circumstances exist:

The employee, spouse, or a dependent child of the employee is covered on the day before the first day of FMLA leave (or becomes covered during the FMLA leave), and
The employee does not return to employment with the employer at the end of the FMLA leave, and
The employee, spouse, or a dependent child of the employee would, in the absence of COBRA continuation coverage, lose coverage under the group health plan before the end of the maximum coverage period

Here are two examples that illustrate how these regulations would work.

Example (Exhaustion of 12 weeks of FMLA): John is an employee of ABC Company. John and his wife Mary are covered under the ABC Company group health plan. John takes FMLA leave due to his own serious health condition and continues his and Mary's coverage during the FMLA leave period. The last day of John's 12 weeks of FMLA leave is March 31, but John will not be able to return to work April 1. Both John and Mary experience a COBRA qualifying event on March 31.

Example (Notice of intent not to return): Sue is an employee of XYZ Company. Sue and her husband George are covered under the XYZ Company group health plan. Sue takes FMLA leave due to her own serious health condition and continues her and George's coverage during the FMLA leave period. On March 31, in the sixth week of FMLA, Sue notifies XYZ Company that she does not intend to return to work after her leave. Under FMLA, Sue's last day of employment is March 31, and both Sue and George experience a COBRA qualifying event on March 31.

In each of these situations, the individuals had coverage before the FMLA period, did not return to work, and would, without COBRA, lose coverage effective April 1. Therefore, they have experienced COBRA events.

Here, then, are the four general types of situations in which COBRA events would occur related to FMLA leaves:

The employee continues coverage during the FMLA leave period but does not return at the end of the 12-week leave period.
The employee continues coverage during the FMLA leave period but gives notice during the leave period of the intent not to return.
The employee fails to make premium payments during the FMLA leave period and the employer cancels the coverage, and the employee does not return to work after the FMLA leave period.
The employee waives health insurance coverage during the FMLA leave period, and the employee does not return to work after the FMLA leave period

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