Benefits and Compensation

Benefits: Does Divorcing a Spouse Mean Divorcing Your Company?

Trying to find market data for some jobs may seem a little like searching for a needle in a haystack—tedious, time-consuming, and marginally successful. Often, the problem isn’t that no data are available but in how we’re look for them, says BLR’s Senior Compensation Editor Sharon McKnight, CCP, SPHR.

Divorce isn’t much fun for anyone involved—and that includes employers. While you certainly want to avoid prying into the details of employees’ personal lives as much as possible, divorce is a topic you simply can’t avoid if the cast-off spouse is covered under your health plan.

For a period of time after a divorce, you’re required to offer health insurance continuation and conversion benefits to an employee’s former spouse and dependents.

Today and tomorrow, attorney Kathryn Grigg of Axley Brynelson, LLP, discusses your obligations, deadlines, costs, and responsibilities after Cupid’s arrow loses its zing.

Legal Framework

Federal law and some states’ laws offer an employee’s former spouse the option to continue group health coverage for a period of time after the divorce. The Consolidated Omnibus Budget Reconciliation Act (COBRA), which is federal law, generally applies to group plans covering more than 20 employees, group plans sponsored by state and local governments, and self-funded health insurance plans.

COBRA offers 36 months of continued coverage after the divorce. If an employer is subject to both state and federal law, the two time periods run concurrently.

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Employers aren’t required to subsidize or contribute to the former spouse’s premium rates for any continuation or conversion coverage. A former spouse would have to pay 102 percent (under federal law) of the normal premium to remain on a group policy.

For an individual policy, the former spouse’s premium rate would be determined based on the rates applicable to the age and class of the risks for each person to be covered and the type and amount of coverage provided, with no contribution from the employer.

As a result, continuation or conversion is often a more expensive option for the former spouse than obtaining coverage elsewhere. That’s especially true with the implementation of the Affordable Care Act (ACA). Regardless of the small number of former spouses who actually elect continuation or conversion coverage, employers are still required to provide written notification of those options directly to the former spouse following a divorce.

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Date of Divorce

While the divorce is pending but before it’s granted, there is typically a temporary court order in place to prevent the employee from removing his or her spouse from any employer-sponsored health insurance plan.

Therefore, you shouldn’t expect to make any changes in an employee’s health insurance coverage merely because he or she is in the midst of a divorce. The termination of coverage for the nonemployee spouse will not occur until the judgment of divorce is officially granted.

Notification Requirements

Under federal law, the plan administrator must be notified within 60 days after the judgment of divorce is granted. You should reasonably expect that employees may need assistance contacting the plan administrator. The plan administrator then has 14 days to notify the former spouse of his or her continuation options.

Tomorrow, Grigg will explain the process for the former spouse’s election of continuation of coverage—including the five circumstances under which such coverage may be terminated early.