By now, most employers know the basics of COBRA — and we’ve already covered the fundamentals in earlier articles. But COBRA has layers, and the deeper you go, the more technical (and consequential) the rules become. One area that deserves special attention is what happens when dependent children age out of coverage. Unlike job loss or termination, this is a predictable qualifying event, and employers must monitor it closely. When a dependent turns 26, the Affordable Care Act (ACA) requires that coverage ends and a COBRA election notice be issued — making accurate tracking and timely communication essential.
What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows qualified beneficiaries to continue group health plan coverage when they would otherwise lose it due to a qualifying event, including:
– Termination or reduction of hours
– Divorce or legal separation
– Death of the covered employee
– Employee becoming entitled to Medicare
– Dependent child losing eligibility (aging out)
Coverage under COBRA is typically offered for 18 months, and in some cases 29 or 36 months depending on the type of qualifying event.
Aging-Out as a Qualifying Event
Most group health plans cover dependent children up to age 26, as required by the Affordable Care Act (ACA). When a dependent reaches the plan’s maximum age, this is a qualifying event that triggers COBRA rights.
Employer Responsibility:
– Provide a COBRA Election Notice within 14 days of receiving notice of the event (if the employer is the plan administrator)
– The notice must inform the dependent of their right to continue coverage, the cost, and how to elect COBRA
COBRA Notice Requirements
Employers (or their COBRA administrator) must provide:
– General Notice: Sent at the start of coverage, informing employees and dependents of COBRA rights
– Election Notice: Sent after a qualifying event (like aging out), explaining how to elect COBRA and what it will cost
Notices must be:
– Written in clear, understandable language
– Sent within required timelines
– Mailed to the last known address of the qualified beneficiary
Cost of COBRA Coverage
– COBRA continuation coverage is typically 102% of the total plan premium (employer + employee share + 2% administrative fee)
– The dependent who ages out is responsible for paying the full cost to continue coverage
Special Considerations for Aging-Out Dependents
– Tracking Eligibility: Employers must track dependent birthdates to ensure timely notification when a dependent approaches age 26
– Election Period: The dependent has 60 days from the date of notice (or loss of coverage, whichever is later) to elect COBRA
– Coverage Period: Coverage generally continues for 36 months for dependents aging out (a secondary qualifying event)
Compliance Risks
Failure to send timely or accurate COBRA notices can result in:
– IRS Excise Taxes: $100 per day per affected individual
– DOL Penalties: Up to $110 per day for late notices
– Lawsuits: Employees can sue for benefits plus attorney’s fees
Proper administration and documentation are critical to avoid these risks.
Best Practices for Employers
– Maintain Accurate Records: Track dependent eligibility and birthdays
– Use a COBRA Administrator: Outsourcing reduces compliance risk and ensures notices are sent on time
– Communicate Early: Notify employees in advance when dependents are nearing age 26
– Audit Regularly: Review COBRA notices and procedures annually
Sample Aging-Out COBRA Election Notice
[Employer/Plan Administrator Letterhead]
Date: [Insert Date]
To: [Dependent Name]
Address: [Insert Address]
Dear [Dependent Name],
Our records show that you are no longer eligible to remain as a dependent under the [Employer/Plan Name] group health plan because you have reached the maximum dependent age of 26.
Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), you have the right to continue your health coverage for up to 36 months, provided you elect continuation coverage and make the required premium payments.
Your Rights:
– You have 60 days from the date of this notice, or the date your coverage would otherwise end (whichever is later), to elect COBRA continuation coverage.
– If you do not elect continuation coverage, your group health coverage will end permanently.
– If you elect coverage, it will be retroactive to the date your coverage ended.
Cost of Coverage: $[Insert Amount] monthly
To elect COBRA, complete the enclosed election form and return it to [Plan Administrator Contact] no later than [Insert Deadline].
For questions about your COBRA rights or this notice, please contact:
[Plan Administrator Contact Info]
Sincerely,
[Plan Administrator / Employer Representative]
Aging-Out COBRA Timeline
Child Turns 26 → Employer Identifies Event → COBRA Election Notice Sent (within 14 days) → 60-Day Election Period → COBRA Coverage Starts (if elected) → Coverage Continues for up to 36 Months
Memberly’s Role
Memberly helps employers:
– Set up COBRA administration programs or partner with third-party COBRA administrators
– Audit plan documents and notices for compliance
– Implement automated processes to track dependent eligibility and trigger timely notices
– Educate HR teams on COBRA obligations to avoid costly penalties
Explore how fully insured plans handle COBRA administration and other compliance requirements.
Important Disclaimer
This article and sample notice are provided for educational purposes only. They may not satisfy all federal or state requirements. Employers should consult with legal counsel or a qualified compliance professional before issuing COBRA notices or making determinations related to aging-out dependents.
Talk to Memberly📍 Need help with COBRA compliance or aging-out notices? Contact Dom Maggiore, CEO of Memberly, at (631) 905-6555 | dom.maggiore@memberlybenefits.com or visit www.memberlybenefits.com to schedule a compliance review.
