It is the 2nd quarter of 2024, we just completed 2023 ACA filings (including all the State Filings*), and one of the questions I have asked our clients over and over during the filing rush was, did you offer COBRA to this active designated as a Part Time employee? A lot of organizations stop offering Full Time benefits when an employee moves into a Part Time position or a bargaining union that did not negotiate an offer of health coverage for Part Time employees. For many organizations, this can potentially be disastrous as their offer of coverage percentage can fall below 95% (it is required by the IRS to be over 95% monthly) and pose an enormous risk of penalties. This is where COBRA comes into play.
What is COBRA as an Offer of Coverage?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that most group health plans provide a temporary continuation of group health coverage that otherwise might be terminated. COBRA requires coverage to be offered due to certain specific events. One of those events is a reduction in the hours of a covered employee’s employment for reasons other than gross misconduct.
Therefore, when an employee reduces their hours, the first thing an organization should do is to contact their ACA vendor and ask – is employee, John Doe, ACA Full Time for the current reporting year? If an employee is ACA Full Time, i.e., required to be offered affordable coverage under the IRS ACA rules, the organization should have an offer of coverage for John. If the coverage is restricted by the union contract or company policy, COBRA would be an appropriate offer of coverage in this case. Second thing, an organization should obtain proof of alternative coverage if John waives said COBRA offer. Generally, COBRA is an unaffordable offer of coverage as it is 100% of the health plan’s premium cost per month. The third thing would be notifying the ACA vendor if John states that his alternative coverage is through the Exchange/Marketplace as that can potentially bring on affordability penalties. **
The Importance of COBRA in ACA Reporting
Many companies are more familiar with COBRA in its traditional sense when COBRA coverage is offered upon termination. Such coverage would be reported for ACA purposes only if the health plans are self-insured. Part III of the 1095-C form would reflect all individuals enrolled in COBRA for the months of enrollment during the filing year.
So, next time you get your monthly compliance reports, and your offer of coverage is down – think – were any of the employees moved into a Part Time position, and if yes, did I offer them COBRA? The answer should always be YES.
*If your organization has employees in CA, DC, NJ, and RI and your ACA Compliance vendor did not complete your state filings, please contact Paragon Compliance as soon as possible.
**Affordability penalty changes every year and is communicated through the IRS Letter 226-J. Please contact Paragon Compliance as soon as possible if you need help responding to such a letter.
How can Paragon Compliance help?
Let us help you – please reach out to clientservices@paragoncompliancellc.com for a quote or call us today!