COBRA and Dependent Children

COBRA regulations for dependent children can be confusing and we receive many calls from both brokers and employers about what must be offered to dependent children, newborns, and adopted children in regards to COBRA coverage. Hopefully the following will provide a better understanding on how to administrate COBRA for children as beneficiaries.

It is important to remember that the term “dependent child” is not defined by COBRA, but rather by the terms of the group health plan. Therefore the COBRA term “dependent Child” is not to be confused with the terms “dependent” or “tax dependent” which are used for federal tax purposes. For example, it is possible that an individual living in the household might be a tax dependent and yet not a COBRA qualified beneficiary because he or she is not a dependent child of the covered employee. Furthermore, dependent children who are qualified beneficiaries have COBRA rights separate from and independent of the covered employees and spouses who are their parents.

There is one circumstance that allows a child to be a qualified beneficiary regardless of whether that he or she is a dependent of the covered employee. For example, a child is receiving benefits according to a qualified medical child support order (QMCSO). A QMCSO creates the right of a child of a plan participant to receive benefits under the participant’s group health plan. It may be required that the health plan of a noncustodial parent provide coverage for that child even though he or she is not considered to be a “dependent” per the health plan’s definition. When a child is enrolled in a group health plan under a QMCSO he or she is treated as a beneficiary for all purposes of ERISA regardless of his or her status as a dependent of the covered employee.

In terms of adult children, if the group health plan provides coverage for the children of their participants, then the coverage generally must be available until the child turns age 26 regardless of their student status. Furthermore, a child enrolling under this mandate must be treated as a HIPAA special enrollee and be offered all of the benefits available to similar individuals who did not lose coverage due to loss of dependent status.

Newborn and newly adopted children that are born to or placed for adoption with the covered employee during COBRA continuation coverage are also considered to be a qualified beneficiary. However, there is a limitation added per the IRS COBRA regulation: If a covered employee who is a qualified beneficiary has not elected COBRA coverage then any newborn or adopted child of the employee born or adopted after the qualifying event is not a qualified beneficiary. It must be pointed out, however that the meaning of this statue is somewhat unclear and may be difficult to interpret in various scenarios. One thing is clear – the newborn or newly adopted baby must be born to or adopted by the covered employee in order to be a qualified beneficiary. For example, if a dependent child Mary ceases to be a dependent and elects COBRA, then gives birth to a baby, that baby would not be considered a qualified beneficiary.

As for a newborn or newly adopted child added at Open Enrollment, the qualifying event giving rise to the period of coverage during which the child is born or adopted determines the amount of remaining coverage. However, if there is a second qualifying event, such as the death of the covered employee, then the child’s COBRA coverage will be extended 36 months from the employee’s termination date. A newborn child has the parent’s maximum coverage period and a child is entitled to the same coverage as children of active employees. For example, if the active employee is allowed to change coverage or add dependents at subsequent open enrollments, then the newborn or adopted child must be allowed to do so as well. Additionally, there are stipulations in the case of an adopted qualified beneficiary with a dependent. For example, if 18 year old Julie is adopted by an active employee during his COBRA coverage, but her daughter Natalie is not adopted, then only Julie can elect coverage at that time. However, at the next open enrollment Natalie can become covered, although Natalie will not be considered a qualified beneficiary.

It must be noted that COBRA election rules (including the 60-day deadline) do not apply to the children born or adopted during the COBRA continuation period. They must be enrolled during either the plans’ special 30-day enrollment period or some other period such as open enrollment. In summary although a newborn or newly adopted child is automatically considered a qualified beneficiary, the child is not covered until enrollment occurs. Because the IRS COBRA regulations do not provide for a specific period in which a newborn or newly adopted qualified beneficiary must enroll for COBRA coverage, special caution and legal counsel should be taken before rejecting late enrollments. Furthermore, because the plan administrator is not required to provide a separate COBRA election notice for the newborn or adopted child, the rights of these children should be clearly explained in the election notice that is provided to the qualified beneficiary. The IRS regulation’s definition of adoption or placement for adoption means, “The assumption and retention by the covered employee of a legal obligation for total or partial support of a child in the anticipation of the adoption of the child.” ERISA offers more guidance on what “placed for adoption” means however plan administrators should note that a child may be placed for adoption prior to the adoptive parents having physical custody of the child. Typically when COBRA is elected coverage begins on the date of the qualifying event. Because this rule cannot be applied to a newborn or adopted child who becomes a qualified beneficiary during a COBRA continuation period caused by another qualifying event, the plan administrator will need to determine when the child’s coverage is effective.


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