Many people are told they are not qualified for COBRA because they employer has less than 20 full time employees. Having worked at the company (especially if management or payroll), the employee may have a very good idea if they were 20 or more full time employees.
Below are some typical questions (and answers) but I am leaving some stuff out, like pay periods, revenue rulings, etc. You can read the actual IRS Revenue Ruling for all the juicy details.
What is the small employer exemption from COBRA? An employer is exempt from COBRA if it had under 20 total "full time" Common law employees on at least 50% of its typical business days in the entire previous calendar year. How long does the employer need to have 20 or more full time employees?
50% of the previous calender year.
What types of employees are not included in the calculations?
"Common-law" employees are not independent contractors (and their employees), self-employed persons (within the meaning of section 401(c)(1)), or Directors (in the case of a corporation), even if they are covered on the group health plan.
What defines a full time employee?
The definitions "full time" and "part time" are not defined in the regulations. They are terms agreed to by the employer and employee. But full time cannot be more than 8 hours per day and 40 hours per week.
How do I count part-time employees?
Part-time employees are counted as fractions of full-time employees based on the number of hours worked by full-time employees in that business. For example, if a full-time employee normally works an 8 hour day, then two part-time employees each working 4 hours a day equal 1 full-time employee.
Example: Last year a business has 10 part time employees getting 4 hours each day. Since the part timers are working half days, 2 of them equal 1 full time employee. The business has 5 full time employees and is exempt from COBRA.
Example 2: Last year a business has 40 employees working 4 hours each day. The business has 20 full time employees and is subject to COBRA.
Are nonresident alien employees counted?
Nonresident aliens who are "Common law employees" which must be counted when determining is an employer is subject to COBRA.
What happens if any employee enrolls in COBRA, then the employer qualifies for the small employer exemption?
The employee, spouse or dependent would stay on COBRA for the duration of the 18-36 months, as long as the employer maintained a group health insurance.
What happens when companies merge as a result of a stock transfer?
The 2 Companies are now considered by the IRS to be a single employer, and the number of workers employed both are combined in the previous calendar year, to determine if they are at least twenty.
Craig Casey is an Writer, Coach, Blogger, Husband, and Former Health Insurance Agent helping people on the web since 1999 with their health insurance problems.
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