Benefits Q&A: Do We Have to Offer COBRA Coverage During FMLA Leave?

Question:

In a recent Question of the Month, you stated that employees may choose to discontinue their health benefits at the beginning of FMLA leave. When they do that, do we have to offer them or their family members COBRA coverage?

Answer:

No, because taking FMLA leave is not, by itself, considered a qualifying event under COBRA.* But a qualifying event does occur when the employee, spouse, and/or dependents were covered by the employer’s health plan on the day before leave began, and:

• The employee does not return to work at the end of FMLA leave. In these circumstances, the qualifying event occurs on the last day of leave.
• The employee kept her benefits while on FMLA leave, but fails to pay her share of the premiums in a timely manner. In this situation, you may terminate the employee’s coverage (assuming you follow the FMLA’s notification requirements in doing so), but the COBRA qualifying event still doesn’t occur until the last day of leave.
• While on FMLA leave, the employee notifies you unequivocally that she will not be returning to work at the end of leave. When this happens, you are allowed to terminate the employee’s coverage immediately, and the COBRA qualifying event occurs on the date the coverage ends.

*Note that although the phrase “qualifying event” is a COBRA term, many people use it to refer to the situations in which employees may be allowed to change their benefits elections under the cafeteria plan regulations. The commencement of FMLA leave is a “change in status” for the purpose of the cafeteria plan, but it’s not a “qualifying event” under COBRA. You can see how that gets confusing. It’s best to keep the terminology straight, especially when talking about how to handle an employee’s benefits during their leave.