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You have an employee who will soon finalize his divorce and, in anticipation of that, he wishes to drop his wife's medical coverage during open enrollment. Does the plan have to offer her COBRA coverage? What are your obligations regarding dropping the spouse's coverage?
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Yes, you do have to offer her coverage. If coverage is reduced or eliminated in anticipation of a COBRA-qualifying event, and an individual whose coverage was previously terminated or reduced is considered to be eligible for COBRA at least as of the qualifying event, then he or she must be offered coverage. The coverage must be effective at least from the date of the qualifying event, which in this case is the divorce.
COBRA rules note that, if an employee cancels a spouse's coverage in anticipation of a divorce or legal separation, “Upon receiving notice of the divorce or legal separation, a plan is required to make COBRA continuation coverage available, effective on the date of the divorce or legal separation (but not for any period before the date of the divorce or legal separation).”
Furthermore, if you fail to inform the employee of the obligation to provide notice in the case of a qualifying event, such as his divorce or legal separation, his failure to provide timely notice to the plan administrator will not affect the plan's obligation to make continuation coverage available upon receiving notice of such event.
Source: Reg. §54.4980B, as reported in CCH Employee Benefits Directions, Issue 478, October 26, 2010.
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