The right to COBRA coverage was created by a federal law, the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”). COBRA may become available to an employee when he or
she would otherwise lose employer-provided health coverage under
an employer’s plan. It may also become available to a covered
spouse and dependents when they would otherwise lose their
coverage under the plan.Very small employers are not subject
to the federal COBRA rules. Generally, a plan is not subject to
COBRA with respect to Qualifying Events (see COBRA (employees)
for a discussion) occurring during a calendar year if, during
the prior calendar year, the employer(s) maintaining the plan
employed fewer than 20 employees on a typical business day.
Determining whether this small employer exception to COBRA
applies can be tricky. The rules for counting employees, and
determining whether an employer is aggregated with one or more
other employers (which would increase the employee count) are
complex. Employers are encourage to check with their advisor if
any questions exists about COBRA’s applicability.
For a more detailed discussion of the COBRA rules, see COBRA
(employees).
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