[Code of Federal Regulations]
[Title 26, Volume 17]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR54.4980B-7]

[Page 304-309]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 54_PENSION EXCISE TAXES--Table of Contents
 
Sec.  54.4980B-7  Duration of COBRA continuation coverage.

    The following questions-and-answers address the duration of COBRA 
continuation coverage:
    Q-1: How long must COBRA continuation coverage be made available to 
a qualified beneficiary?
    A-1: (a) Except for an interruption of coverage in connection with a 
waiver, as described in Q&A-4 of Sec.  54.4980B-6, COBRA continuation 
coverage that has been elected for a qualified beneficiary must extend 
for at least the period beginning on the date of the qualifying event 
and ending not before the earliest of the following dates--
    (1) The last day of the maximum coverage period (see Q&A-4 of this 
section);
    (2) The first day for which timely payment is not made to the plan 
with respect to the qualified beneficiary (see Q&A-5 in Sec.  54.4980B-
8);
    (3) The date upon which the employer or employee organization ceases 
to provide any group health plan (including successor plans) to any 
employee;
    (4) The date, after the date of the election, upon which the 
qualified beneficiary first becomes covered under any other group health 
plan, as described in Q&A-2 of this section;
    (5) The date, after the date of the election, upon which the 
qualified beneficiary first becomes entitled to Medicare benefits, as 
described in Q&A-3 of this section; and
    (6) In the case of a qualified beneficiary entitled to a disability 
extension (see Q&A-5 of this section), the later of--
    (i) Either 29 months after the date of the qualifying event, or the 
first day of the month that is more than 30 days after the date of a 
final determination under Title II or XVI of the Social Security Act (42 
U.S.C. 401-433 or 1381-1385) that the disabled qualified beneficiary 
whose disability resulted in the qualified beneficiary's being entitled 
to the disability extension is no longer disabled, whichever is earlier; 
or
    (ii) The end of the maximum coverage period that applies to the 
qualified beneficiary without regard to the disability extension.
    (b) However, a group health plan can terminate for cause the 
coverage of a qualified beneficiary receiving COBRA continuation 
coverage on the same basis that the plan terminates for cause the 
coverage of similarly situated nonCOBRA beneficiaries. For example, if a 
group health plan terminates the coverage of active employees for the 
submission of a fraudulent claim, then the coverage of a qualified 
beneficiary can also be terminated for the submission of a fraudulent 
claim. Notwithstanding the preceding two sentences, the coverage of a 
qualified beneficiary can be terminated for failure to make timely 
payment to the plan only if payment is not timely under the rules of 
Q&A-5 in Sec.  54.4980B-8.
    (c) In the case of an individual who is not a qualified beneficiary 
and who is receiving coverage under a group health plan solely because 
of the individual's relationship to a qualified beneficiary, if the 
plan's obligation to

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make COBRA continuation coverage available to the qualified beneficiary 
ceases under this section, the plan is not obligated to make coverage 
available to the individual who is not a qualified beneficiary.
    Q-2: When may a plan terminate a qualified beneficiary's COBRA 
continuation coverage due to coverage under another group health plan?
    A-2: (a) If a qualified beneficiary first becomes covered under 
another group health plan (including for this purpose any group health 
plan of a governmental employer or employee organization) after the date 
on which COBRA continuation coverage is elected for the qualified 
beneficiary and the other coverage satisfies the requirements of 
paragraphs (b), (c), and (d) of this Q&A-2, then the plan may terminate 
the qualified beneficiary's COBRA continuation coverage upon the date on 
which the qualified beneficiary first becomes covered under the other 
group health plan (even if the other coverage is less valuable to the 
qualified beneficiary). By contrast, if a qualified beneficiary first 
becomes covered under another group health plan on or before the date on 
which COBRA continuation coverage is elected, then the other coverage 
cannot be a basis for terminating the qualified beneficiary's COBRA 
continuation coverage.
    (b) The requirement of this paragraph (b) is satisfied if the 
qualified beneficiary is actually covered, rather than merely eligible 
to be covered, under the other group health plan.
    (c) The requirement of this paragraph (c) is satisfied if the other 
group health plan is a plan that is not maintained by the employer or 
employee organization that maintains the plan under which COBRA 
continuation coverage must otherwise be made available.
    (d) The requirement of this paragraph (d) is satisfied if the other 
group health plan does not contain any exclusion or limitation with 
respect to any preexisting condition of the qualified beneficiary (other 
than such an exclusion or limitation that does not apply to, or is 
satisfied by, the qualified beneficiary by reason of the provisions in 
section 9801 (relating to limitations on preexisting condition exclusion 
periods in group health plans)).
    (e) The rules of this Q&A-2 are illustrated by the following 
examples:

    Example 1. (i) Employer X maintains a group health plan subject to 
COBRA. C is an employee covered under the plan. C is also covered under 
a group health plan maintained by Employer Y, the employer of C 's 
spouse. C terminates employment (for reasons other than gross 
misconduct), and the termination of employment causes C to lose coverage 
under X 's plan (and, thus, is a qualifying event). C elects to receive 
COBRA continuation coverage under X 's plan.
    (ii) Under these facts, X 's plan cannot terminate C 's COBRA 
continuation coverage on the basis of C 's coverage under Y 's plan.
    Example 2. (i) Employer W maintains a group health plan subject to 
COBRA. D is an employee covered under the plan. D terminates employment 
(for reasons other than gross misconduct), and the termination of 
employment causes D to lose coverage under W 's plan (and, thus, is a 
qualifying event). D elects to receive COBRA continuation coverage under 
W 's plan. Later D becomes employed by Employer V and is covered under V 
's group health plan. D 's coverage under V 's plan is not subject to 
any exclusion or limitation with respect to any preexisting condition of 
D.
    (ii) Under these facts, W can terminate D 's COBRA continuation 
coverage on the date D becomes covered under V 's plan.
    Example 3. (i) The facts are the same as in Example 2, except that D 
becomes employed by V and becomes covered under V 's group health plan 
before D elects COBRA continuation coverage under W 's plan.
    (ii) Because the termination of employment is a qualifying event, D 
must be offered COBRA continuation coverage under W 's plan, and W is 
not permitted to terminate D 's COBRA continuation coverage on account 
of D 's coverage under V 's plan because D first became covered under V 
's plan before COBRA continuation coverage was elected for D.

    Q-3: When may a plan terminate a qualified beneficiary's COBRA 
continuation coverage due to the qualified beneficiary's entitlement to 
Medicare benefits?
    A-3: (a) If a qualified beneficiary first becomes entitled to 
Medicare benefits under Title XVIII of the Social Security Act (42 
U.S.C. 1395-1395ggg) after the date on which COBRA continuation coverage 
is elected for the qualified beneficiary, then the plan may terminate 
the qualified beneficiary's COBRA continuation coverage upon the date on 
which the qualified beneficiary becomes so entitled. By contrast, if a

[[Page 306]]

qualified beneficiary first becomes entitled to Medicare benefits on or 
before the date that COBRA continuation coverage is elected, then the 
qualified beneficiary's entitlement to Medicare benefits cannot be a 
basis for terminating the qualified beneficiary's COBRA continuation 
coverage.
    (b) A qualified beneficiary becomes entitled to Medicare benefits 
upon the effective date of enrollment in either part A or B, whichever 
occurs earlier. Thus, merely being eligible to enroll in Medicare does 
not constitute being entitled to Medicare benefits.
    Q-4: When does the maximum coverage period end?
    A-4: (a) Except as otherwise provided in this Q&A-4, the maximum 
coverage period ends 36 months after the qualifying event. The maximum 
coverage period for a qualified beneficiary who is a child born to or 
placed for adoption with a covered employee during a period of COBRA 
continuation coverage is the maximum coverage period for the qualifying 
event giving rise to the period of COBRA continuation coverage during 
which the child was born or placed for adoption. Paragraph (b) of this 
Q&A-4 describes the starting point from which the end of the maximum 
coverage period is measured. The date that the maximum coverage period 
ends is described in paragraph (c) of this Q&A-4 in a case where the 
qualifying event is a termination of employment or reduction of hours of 
employment, in paragraph (d) of this Q&A-4 in a case where a covered 
employee becomes entitled to Medicare benefits under Title XVIII of the 
Social Security Act (42 U.S.C. 1395-1395ggg) before experiencing a 
qualifying event that is a termination of employment or reduction of 
hours of employment, and in paragraph (e) of this Q&A-4 in the case of a 
qualifying event that is the bankruptcy of the employer. See Q&A-8 of 
Sec.  54.4980B-2 for limitations that apply to certain health flexible 
spending arrangements. See also Q&A-6 of this section in the case of 
multiple qualifying events. Nothing in Sec. Sec.  54.4980B-1 through 
54.4980B-10 prohibits a group health plan from providing coverage that 
continues beyond the end of the maximum coverage period.
    (b)(1) The end of the maximum coverage period is measured from the 
date of the qualifying event even if the qualifying event does not 
result in a loss of coverage under the plan until a later date. If, 
however, coverage under the plan is lost at a later date and the plan 
provides for the extension of the required periods, then the maximum 
coverage period is measured from the date when coverage is lost. A plan 
provides for the extension of the required periods if it provides both--
    (i) That the 30-day notice period (during which the employer is 
required to notify the plan administrator of the occurrence of certain 
qualifying events such as the death of the covered employee or the 
termination of employment or reduction of hours of employment of the 
covered employee) begins on the date of the loss of coverage rather than 
on the date of the qualifying event; and
    (ii) That the end of the maximum coverage period is measured from 
the date of the loss of coverage rather than from the date of the 
qualifying event.
    (2) In the case of a plan that provides for the extension of the 
required periods, whenever the rules of Sec. Sec.  54.4980B-1 through 
54.4980B-10 refer to the measurement of a period from the date of the 
qualifying event, those rules apply in such a case by measuring the 
period instead from the date of the loss of coverage.
    (c) In the case of a qualifying event that is a termination of 
employment or reduction of hours of employment, the maximum coverage 
period ends 18 months after the qualifying event if there is no 
disability extension, and 29 months after the qualifying event if there 
is a disability extension. See Q&A-5 of this section for rules to 
determine if there is a disability extension. If there is a disability 
extension and the disabled qualified beneficiary is later determined to 
no longer be disabled, then a plan may terminate the COBRA continuation 
coverage of an affected qualified beneficiary before the end of the 
disability extension; see paragraph (a)(6) in Q&A-1 of this section.
    (d)(1) If a covered employee becomes entitled to Medicare benefits 
under Title XVIII of the Social Security Act

[[Page 307]]

(42 U.S.C. 1395-1395ggg) before experiencing a qualifying event that is 
a termination of employment or reduction of hours of employment, the 
maximum coverage period for qualified beneficiaries other than the 
covered employee ends on the later of--
    (i) 36 months after the date the covered employee became entitled to 
Medicare benefits; or
    (ii) 18 months (or 29 months, if there is a disability extension) 
after the date of the covered employee's termination of employment or 
reduction of hours of employment.
    (2) See paragraph (b) of Q&A-3 of this section regarding the 
determination of when a covered employee becomes entitled to Medicare 
benefits.
    (e) In the case of a qualifying event that is the bankruptcy of the 
employer, the maximum coverage period for a qualified beneficiary who is 
the retired covered employee ends on the date of the retired covered 
employee's death. The maximum coverage period for a qualified 
beneficiary who is the spouse, surviving spouse, or dependent child of 
the retired covered employee ends on the earlier of--
    (1) The date of the qualified beneficiary's death; or
    (2) The date that is 36 months after the death of the retired 
covered employee.
    Q-5: How does a qualified beneficiary become entitled to a 
disability extension?
    A-5: (a) A qualified beneficiary becomes entitled to a disability 
extension if the requirements of paragraphs (b), (c), and (d) of this 
Q&A-5 are satisfied with respect to the qualified beneficiary. If the 
disability extension applies with respect to a qualifying event, it 
applies with respect to each qualified beneficiary entitled to COBRA 
continuation coverage because of that qualifying event. Thus, for 
example, the 29-month maximum coverage period applies to each qualified 
beneficiary who is not disabled as well as to the qualified beneficiary 
who is disabled, and it applies independently with respect to each of 
the qualified beneficiaries. See Q&A-1 in Sec.  54.4980B-8, which 
permits a plan to require payment of an increased amount during the 
disability extension.
    (b) The requirement of this paragraph (b) is satisfied if a 
qualifying event occurs that is a termination, or reduction of hours, of 
a covered employee's employment.
    (c) The requirement of this paragraph (c) is satisfied if an 
individual (whether or not the covered employee) who is a qualified 
beneficiary in connection with the qualifying event described in 
paragraph (b) of this Q&A-5 is determined under Title II or XVI of the 
Social Security Act (42 U.S.C. 401-433 or 1381-1385) to have been 
disabled at any time during the first 60 days of COBRA continuation 
coverage. For this purpose, the period of the first 60 days of COBRA 
continuation coverage is measured from the date of the qualifying event 
described in paragraph (b) of this Q&A-5 (except that if a loss of 
coverage would occur at a later date in the absence of an election for 
COBRA continuation coverage and if the plan provides for the extension 
of the required periods (as described in paragraph (b) of Q&A-4 of this 
section) then the period of the first 60 days of COBRA continuation 
coverage is measured from the date on which the coverage would be lost). 
However, in the case of a qualified beneficiary who is a child born to 
or placed for adoption with a covered employee during a period of COBRA 
continuation coverage, the period of the first 60 days of COBRA 
continuation coverage is measured from the date of birth or placement 
for adoption. For purposes of this paragraph (c), an individual is 
determined to be disabled within the first 60 days of COBRA continuation 
coverage if the individual has been determined under Title II or XVI of 
the Social Security Act to have been disabled before the first day of 
COBRA continuation coverage and has not been determined to be no longer 
disabled at any time between the date of that disability determination 
and the first day of COBRA continuation coverage.
    (d) The requirement of this paragraph (d) is satisfied if any of the 
qualified beneficiaries affected by the qualifying event described in 
paragraph (b) of this Q&A-5 provides notice to the plan administrator of 
the disability determination on a date that is both

[[Page 308]]

within 60 days after the date the determination is issued and before the 
end of the original 18-month maximum coverage period that applies to the 
qualifying event.
    Q-6: Under what circumstances can the maximum coverage period be 
expanded?
    A-6: (a) The maximum coverage period can be expanded if the 
requirements of Q&A-5 of this section (relating to the disability 
extension) or paragraph (b) of this Q&A-6 are satisfied.
    (b) The requirements of this paragraph (b) are satisfied if a 
qualifying event that gives rise to an 18-month maximum coverage period 
(or a 29-month maximum coverage period in the case of a disability 
extension) is followed, within that 18-month period (or within that 29-
month period, in the case of a disability extension), by a second 
qualifying event (for example, a death or a divorce) that gives rise to 
a 36-month maximum coverage period. (Thus, a termination of employment 
following a qualifying event that is a reduction of hours of employment 
cannot be a second qualifying event that expands the maximum coverage 
period; the bankruptcy of an employer also cannot be a second qualifying 
event that expands the maximum coverage period.) In such a case, the 
original 18-month period (or 29-month period, in the case of a 
disability extension) is expanded to 36 months, but only for those 
individuals who were qualified beneficiaries under the group health plan 
in connection with the first qualifying event and who are still 
qualified beneficiaries at the time of the second qualifying event. No 
qualifying event (other than a qualifying event that is the bankruptcy 
of the employer) can give rise to a maximum coverage period that ends 
more than 36 months after the date of the first qualifying event (or 
more than 36 months after the date of the loss of coverage, in the case 
of a plan that provides for the extension of the required periods; see 
paragraph (b) in Q&A-4 of this section). For example, if an employee 
covered by a group health plan that is subject to COBRA terminates 
employment (for reasons other than gross misconduct) on December 31, 
2000, the termination is a qualifying event giving rise to a maximum 
coverage period that extends for 18 months to June 30, 2002. If the 
employee dies after the employee and the employee's spouse and dependent 
children have elected COBRA continuation coverage and on or before June 
30, 2002, the spouse and dependent children (except anyone among them 
whose COBRA continuation coverage had already ended for some other 
reason) will be able to receive COBRA continuation coverage through 
December 31, 2003. See Q&A-8(b) of Sec.  54.4980B-2 for a special rule 
that applies to certain health flexible spending arrangements.
    Q-7: If health coverage is provided to a qualified beneficiary after 
a qualifying event without regard to COBRA continuation coverage (for 
example, as a result of state or local law, the Uniformed Services 
Employment and Reemployment Rights Act of 1994 (38 U.S.C. 4315), 
industry practice, a collective bargaining agreement, severance 
agreement, or plan procedure), will such alternative coverage extend the 
maximum coverage period?
    A-7: (a) No. The end of the maximum coverage period is measured 
solely as described in Q&A-4 and Q&A-6 of this section, which is 
generally from the date of the qualifying event.
    (b) If the alternative coverage does not satisfy all the 
requirements for COBRA continuation coverage, or if the amount that the 
group health plan requires to be paid for the alternative coverage is 
greater than the amount required to be paid by similarly situated 
nonCOBRA beneficiaries for the coverage that the qualified beneficiary 
can elect to receive as COBRA continuation coverage, the plan covering 
the qualified beneficiary immediately before the qualifying event must 
offer the qualified beneficiary receiving the alternative coverage the 
opportunity to elect COBRA continuation coverage. See Q&A-1 of Sec.  
54.4980B-6.
    (c) If an individual rejects COBRA continuation coverage in favor of 
alternative coverage, then, at the expiration of the alternative 
coverage period, the individual need not be offered a COBRA election. 
However, if the individual receiving alternative coverage is a covered 
employee and the spouse or a dependent child of the individual would

[[Page 309]]

lose that alternative coverage as a result of a qualifying event (such 
as the death of the covered employee), the spouse or dependent child 
must be given an opportunity to elect to continue that alternative 
coverage, with a maximum coverage period of 36 months measured from the 
date of that qualifying event.
    Q-8: Must a qualified beneficiary be given the right to enroll in a 
conversion health plan at the end of the maximum coverage period for 
COBRA continuation coverage?
    A-8: If a qualified beneficiary's COBRA continuation coverage under 
a group health plan ends as a result of the expiration of the maximum 
coverage period, the group health plan must, during the 180-day period 
that ends on that expiration date, provide the qualified beneficiary the 
option of enrolling under a conversion health plan if such an option is 
otherwise generally available to similarly situated nonCOBRA 
beneficiaries under the group health plan. If such a conversion option 
is not otherwise generally available, it need not be made available to 
qualified beneficiaries.

[T.D. 8812, 64 FR 5184, Feb. 3, 1999, as amended by T.D. 8928, 66 FR 
1853, Jan. 10, 2001]