Must an employer offer COBRA continuation on voluntary benefits programs?

An employer is not required to offer COBRA continuation on a voluntary benefit plan if (1) the plan does not qualify as a group health plan; and (2) the plan is considered completely voluntary.

COBRA continuation applies to plans that qualify as group health plans as defined by the Employee Retirement Income Security Act (ERISA). ERISA states that a group health plan must be a plan, fund or program that is maintained or established by an employer and that has the purpose of providing medical care. For the purposes of this definition, "medical care" includes the diagnosis, cure, treatment or prevention of disease. Programs generally meeting these criteria include health insurance plans, self-funded health plans, HMOs and prescription drug plans. For a plan to be considered completely voluntary, an employer must make certain that:

• The employee contributes 100 percent of the premium.
• Participation is voluntary.
  
• The employer does not endorse the plan but merely allows an insurer to publicize it.
• The employer simply collect premiums through payroll deductions and remits these payments to the insurer. (Deductions cannot be made pre-tax through the employer's cafeteria plan.)
• The employer receives no consideration in the form of cash or otherwise, other than reasonable administrative expenses in connection with the payroll deductions.

Voluntary plans that are typically not considered group health plans and not subject to COBRA include the following:

• Health savings accounts (HSAs) and Archer medical savings accounts (MSAs). (Note that COBRA does not apply to the bank account side of HSAs or MSAs because the bank account is in the name of the individual rather than the employer. The group-sponsored high-deductible medical plan attached to the HSA or MSA is definitely subject to COBRA.)

• Accidental death and dismemberment plans.
• Long- and short-term disability plans (as long as they do not provide medical care).
• Group term life insurance plans.
• Long-term care plans.
  
• Legal assistance programs.