Q: Can we terminate an employee’s COBRA coverage for nonpayment of COBRA premiums? Her check for her first payment bounced.
A: If an employee fails to make a COBRA payment within the required time period, you may terminate her coverage. As a general rule, an employee is entitled to a 45-day grace period to submit her first COBRA payment, measured from the date of election, and a 30-day grace period for all subsequent payments. See 26 C.F.R. §54.4980B-8 (Q&A 5). So, if her check bounces for the first payment, I would suggest notifying her of this fact and explaining that she must provide the payment within that 45-day period.
In addition, before you terminate her coverage, you (or your plan administrator) must give notice to each qualified beneficiary of the early termination of continuation coverage for nonpayment of premiums. See 29 C.F.R. §2590.606-4(d)(1). (This notice requirement is triggered when a plan cancels a beneficiary’s coverage prior to the maximum coverage period, such as for nonpayment or when the employer ceases to offer health care coverage.) The notice must include the reason the coverage has terminated early, the date of coverage termination, and any conversion rights the beneficiary might have. 29 C.F.R. §2590.606-4(d)(2). The regulations specify that the notice must be provided “as soon as practicable” following the administrator’s determination that coverage is terminating. 29 C.F.R. §2590.606-4(d)(3).
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