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At Justworks, we understand that navigating employee benefits can be overwhelming, especially during times of change. This article is designed to guide you through the process of setting up Employer-Paid COBRA contributions for employees who are transitioning out of your company or experiencing changes in their eligibility status.
By following the steps outlined below, you can ensure that your employees receive the coverage they need, even during periods of transition.
Overview
Employer-Paid COBRA, also known as COBRA Severance, allows active companies with employees enrolled in COBRA through Health Equity (also known as WageWorks) to pay these employees’ COBRA premiums directly. This support can be a significant part of your severance package, demonstrating your ongoing commitment to your employees' well-being.
A note on COBRA:
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that mandates private-sector employers with 20 or more employees to provide temporary continuation of health, dental, and/or vision coverage to their employees and eligible dependents after a qualifying event. As Justworks is the employer of record for our customers, and we have more than 20 employees, we offer COBRA to eligible members.
More information can be found here: COBRA Coverage
Initiating Employer-Paid COBRA Contributions
To pay for an employee's COBRA premiums, the first step is to inform the Justworks Support team or your dedicated Customer Success team. This is applicable for employees separating from the company and those who are transitioning from full-time to part-time and becoming ineligible for benefits.
COBRA premiums are the full monthly cost of the employee’s current benefit plan, plus a 2% administrative fee.
Required Information:
- Employee Information: Full name of the employee
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Coverage Period: The months in which the company will be responsible for premium costs. This must be in full-month increments.
- Note that COBRA eligibility will begin in the month after the employee’s last day of benefits eligibility.
- Monthly Contribution Amount: For each type of coverage (Medical, Dental, Vision), you may cover the premiums in full or cover a flat dollar amount.
- COBRA Admin Fee: Indicate whether the company or employee will be responsible for the 2% administration fee.
Understanding Billing Cycles and Timing for Employer-Paid COBRA Contributions
Employers will be invoiced by Justworks for Employer-Paid COBRA charges. These invoices will be processed on the first business day of a given month. If an employee enrolls in COBRA at the end of the month or an Employer-Paid COBRA agreement is not submitted until the end of the month, it may take an additional month for these charges to appear on a Justworks invoice.
To avoid potential delays, we encourage employers to submit their COBRA contribution requests as soon as an employee's termination or benefits eligibility change is known.
Handling Non-Election of COBRA
Active companies will only be charged for the months in which their employee was enrolled in COBRA coverage. If the employee does not enroll in coverage, or if the employee cancels coverage early, the company will not see charges for unused months and will only be billed for the actual COBRA contributions made on behalf of their employees. This aligns with our commitment to transparent and fair billing practices.
Agreement and Implementation
Once you've shared all contribution details with Justworks, our team will draft a COBRA Contribution Agreement and send it to you for review and signature.
It's important to take the time to review the draft agreement carefully to ensure that all details accurately reflect your intentions regarding the COBRA contributions. Pay close attention to the coverage period dates and verify the contribution amounts and coverage types. If any discrepancies are found or adjustments need to be made, please communicate these back to Justworks promptly.
If all fields look to be complete, the employee and a representative of the company must sign the agreement and return it to Justworks.
Justworks requires a processing window of 4-5 business days to complete the setup of Employer-Paid COBRA with Health Equity (WageWorks).
During this processing period, we will coordinate with the COBRA administrator to ensure that your contributions are applied correctly to the employee's COBRA coverage.
Post-Implementation Follow-Up
After finishing the setup process, Justworks will send you a confirmation. This confirmation is to let you know that your Employer-Paid COBRA contributions have been successfully implemented and are now active. It's a good idea to review your billing statements after receiving the confirmation to make sure that the contributions are reflected accurately.
Employee Notification
We recommend informing the affected employee(s) that their COBRA coverage contributions have been set up after you receive confirmation from Justworks. This communication helps manage expectations and ensures they are aware of the status of their benefits.
Key Considerations
- Early notification and information submission help ensure timely processing and billing.
- Clearly communicate the COBRA contribution details and potential timing nuances to affected employees.
- Keep an eye on your Justworks billing statements for the appearance of COBRA charges, especially if the contribution request was submitted or elected late in the month.
Justworks is here to help
Our Customer Success team is here to assist you throughout this process. Whether you're setting up Employer-Paid COBRA for the first time or have specific questions about billing and timing, we're ready to provide the support you need.
Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.