Are disability benefits subject to COBRA?

An employee has gone on disability leave and is receiving long-term disability benefits from your company's benefit plan. Are the disability benefits subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

No. Because disability benefits are essentially for income replacement and not for medical care, they are not normally covered by COBRA. However, an employee's disability can initiate COBRA requirements if it produces a qualifying event.

Example: An employee is completely disabled and the employee's hours are reduced to zero. The employee is on disability leave with full salary and benefits until the employee's resignation one year later. The terms of the employer's plan will govern the definition of the qualifying event that will determine whether the employee lost the group plan coverage when the employee's working hours were reduced, at the time of the employee's resignation or at the time of some other event.

If an employee is on disability and there has been a qualifying event, COBRA requires a plan sponsor to provide the employee with an option to continue group health insurance coverage. A plan sponsor's duties under COBRA are satisfied by notifying the employee of his COBRA rights; COBRA does not require the employer to continue paying the premiums.

Reprinted with permission. © CCH