COBRA rules may look straightforward, but hidden traps can catch even the most careful employer. From Medicare timing to open enrollment confusion, these situations show how easily mistakes can occur, resulting in costly consequences. Let’s test your knowledge with five tricky scenarios.

Scenario #1

An employee retires after 30 years. The employer lets their COBRA administrator know they will be subsidizing the retiring employee’s COBRA premiums for the next 12 months. One month after retirement, the employee turns 65 and becomes Medicare-eligible. Since the employer is paying the premiums for 12 months, there are no compliance issues. True or False?

Answer: False.

• Selective COBRA subsidies can raise discrimination and tax issues, and for self-funded plans may violate Section 105(h) nondiscrimination rules
• Employers must clearly define the payment time frame to avoid misunderstandings
• Delaying Medicare Part B can cause gaps and lifetime penalties (terminating COBRA doesn’t count as creditable coverage or trigger special enrollment)
• Medicare pays primary; COBRA is secondary so electing COBRA instead may result in higher out-of-pocket costs

Scenario #2

An employee is covered under a COBRA-eligible benefit for one day, then terminates. The employer doesn’t need to send the initial notice. True or False?

Answer: False.

• COBRA Initial Notice must be provided within 90 days of coverage under a group health plan
• If an employee is terminated before the notice is sent, you must still send both the Initial Notice and the Election Notice
• The Initial Notice explains COBRA rights in general (not tied to a specific event)
• Failure to send may result in:
  • $110 per day fine (enforceable by DOL or lawsuit from employee)
  • Self-reporting to IRS with an excise tax of $100 per day

Scenario #3

John was hired on 4/1/2024, enrolled in medical on 7/1/2024, completed open enrollment in October. John terminates employment on 11/30/2024 and elects COBRA and wants to enroll in a lower-cost medical plan for the new plan year. Is he eligible for open enrollment?​

Answer: No. John was already provided with an open enrollment option in October. The plan he elected in October is the plan under which he is offered COBRA. While he may have chosen a different plan due to a qualifying event, he is not allowed a second opportunity for open enrollment.

Scenario #4

Susie begins FMLA on 1/1/2025 and is responsible for paying her share of the employer premiums. Despite several requests, she has not paid the contributions. Can the employer just terminate coverage due to non-payment and offer COBRA?

Answer: No.

• Not paying COBRA premiums during leave is not a qualifying event but if Susie doesn’t return after FMLA ends, COBRA should be offered due to termination
• If coverage was suspended during FMLA for non-payment or by request it must be reinstated at the same level including family or dependent coverage upon return
• Employers may drop coverage if premiums are over 30 days late but must give written notice at least 15 days before termination​
• Coverage can be dropped retroactively if the employer has a policy allowing it and proper notice was given (see Family and Medical Leave Act Advisor)

Scenario #5

Tom turns 65 and enrolls in Medicare on 4/1/2024, then retires a year later with family coverage. Since Tom retired, the maximum COBRA coverage for him and his dependents is 18 months. True or False?

Answer: False. Tom may elect up to 18 months, and his dependents have 3 years of coverage from the Medicare entitlement date or 24months of coverage in this scenario.