Health Care Reimbursement Account (HCRA) — COBRA

Plan Guidelines for Direct Pay Participation

  • General HCRA COBRA Information
  • Leave Without Pay Guidelines
  • Separation Guidelines
  • COBRA Administrative Guide
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    Consolidated Omnibus Budget Reconciliation Act (COBRA)

    If an employee loses eligibility to participate in the Health Care Reimbursement Account (HCRA) Plan for any reason during the Plan Year (i.e., leave of absence without pay, retirement, termination, etc.), contributions may be continued on an after-tax basis through COBRA through the end of the Plan Year. The employee must have a positive account balance at the time of separation or leave without pay in order to participate. The employee or dependents must enroll in COBRA within sixty (60) days of notification of the qualifying event or the loss of coverage, whichever is later. The employee has an additional forty-five (45) days from the date of election to submit the first contribution to the Claims Administrator (CA). There are no tax savings on contributions made to HCRA through COBRA. If an employee chooses not to continue contributions through COBRA, expenses incurred after the event date will not qualify for reimbursement, even if a positive balance exists.

    The following provides guidelines for processing participation through COBRA (leave without pay and separation).

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    Leave Without Pay Guidelines

    Prior to going on leave without pay, the campus benefits representative should discuss intended plan participation with the employee. The employee must be notified in writing of the ability to participate within fourteen (14) days of losing eligibility.

    The employee has the option to either continue participation with after-tax contributions or cease participation during leave status. There must be funds remaining in the account in order to continue participation in the Plan during leave without pay.

    1. If an employee chooses to continue participation while on leave without pay, the employee must submit a completed Request for Direct Pay Enrollment form to the benefits representative within sixty (60) days from the later of date of notification of the qualifying event, or the loss of coverage. The benefits representative is responsible for forwarding the form to the CA as notification of the employee's intent to continue participation. A copy of the form is filed at the campus.

    • As a result of the leave, if the employee chooses to adjust the contribution under a “Change of Status Event,” the employee may increase the deduction up to a maximum of $416.66 per month (minimum $20 per month).

    • Upon receipt of the form, the CA mails a payment coupon book to the employee. While on leave, contributions are made directly to the CA by the employee with after-tax money.

    • The employee must submit the contribution on or before the time specified by the CA, along with the corresponding coupon. The first payment must be made to the CA within forty-five (45) days from the date of election. The first payment must include sufficient funds so that the account will be current. Payments must be paid to the order of the CSU Board of Trustees, and are made on a monthly basis unless the employee chooses to pay in advance.

    • Making payments directly to the CA allows the employee to submit claims for expenses incurred during this time period.

    • If the employee fails to pay the CA during the leave period, the employee ceases to be a participant in the Plan. The employee is no longer eligible to submit claims for expenses incurred during the time the contributions were not made to the CA.

    • Upon return from leave, the employee's deductions automatically resume regardless of whether the employee actively made contributions to the CA while on leave without pay.

    • The benefits representative is not required to make any adjustment to the resumed deduction.

    • Upon return, if an employee chooses to adjust the resumed deduction under a “Change in Status Event,” the employee may adjust the deduction up to a maximum of $416.66 per month (minimum $20 per month).

    2. If an employee chooses not to continue coverage after being notified of the qualifying event, no further action is required by the campus benefits representative.

    • An employee on leave without pay who chooses not to continue contribution payments while on leave, may not submit claims for expenses incurred while on leave. It is the responsibility of the CA to monitor expense claims made by the employee.

    • Deductions via regular payroll will automatically resume when employee returns to payroll status.

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    Separation Guidelines

    Prior to separation (i.e., termination, retirement), the campus benefits representative should discuss intended plan participation with the employee. The employee must be notified in writing of his/her ability to participate within fourteen (14) days of losing eligibility.

    The employee has the option to either continue participation through COBRA with after-tax contributions or cease participation upon separation. There must be funds remaining in the account in order to continue participation in the Plan for the remainder of the plan year.

    1. If an employee chooses to continue participation after separating from employment, the employee must submit a completed Request for Direct Pay Enrollment form to the benefits representative within sixty (60) days from the later of the date of notification of the qualifying event, or the loss of coverage. It is the responsibility of the benefits representative to mail the form to the Claims Administrator (CA) as notification of the employee's intent to continue participation. A copy of the form is filed at the campus.

    • The separating employee may NOT adjust his/her deduction when continuing participation under COBRA (except the addition of the 2% administration fee).

    • Upon receipt of the form, the CA mails a payment coupon book to the participant. While on COBRA, contributions are made directly to the CA by the participant with after-tax money.

    • The participant must submit the contribution on or before the time specified by the CA along with the corresponding coupon. The first payment must be made to the CA within forty-five (45) days from the date of election. The first payment must include sufficient funds so that the account will be current. Payments must be paid to the order of the CSU Board of Trustees, and are made on a monthly basis unless the participant chooses to pay in advance.

    • Making payments directly to the CA allows the participant to submit claims for expenses incurred during this time period.

    • If the participant fails to pay the CA while on COBRA, the individual ceases to be a participant in the Plan. The individual is no longer eligible to submit claims for expenses during the time the contributions were not made to the CA.

    • If the former employee is rehired, the employee continues to have access to the account balance accumulated in prior employment and during participation under COBRA for expenses incurred throughout the Plan Year IF the employee reenrolls in the Plan. If the former employee is rehired but chooses to not reenroll, the employee has access to prior balances but only for expenses incurred prior to being rehired.

    2. If a separating employee chooses not to continue coverage after being notified of the qualifying event, no further action is required by the campus benefits representative.

    • A former employee may not submit claims for expenses incurred subsequent to separation. It is the responsibility of the CA to monitor expense claims made by the former employee.

    • If the former employee is rehired, the employee continues to have access to the account balance accumulated during prior employment for expenses incurred during prior employment. IF the employee reenrolls in the Plan upon reemployment, the employee has access to prior balances but only for expenses incurred while employed — both in prior employment and future employment within that Plan Year.

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    Content Contact:
    Benefits Insider
    (562) 951-4411
    Technical Contact:
    webmaster@calstate.edu

    Last Updated: June 30, 2011


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