Is my company subject to COBRA?

Sometimes it's complicated.

While the rule outlining which companies are subject to Federal COBRA are pretty straightforward, sometimes a little math is involved.


Example #1: Big Hammer Construction builds stuff like houses, but they do it in Wisconsin. Business slows way down in the winter, so they have a lot of seasonal employees. During the building season, they may have as many as 30 employees, but come January, they're down to 6.  Are they subject to COBRA?


Remember, the rule is as follows:  20 or more employees during 50% of the business days in the preceding calendar year.


Big Hammer crunched some numbers and found that during the 7 busy months of the building season, they employed no less than 30 full time employees. So in their case, the other five months weren't relevant.


Verdict: Subject to COBRA.


Example #2: The Red Apple Co. sells apples, apple cider and other apple products out of a big barn outside of Boston. Aside from two owners and two managers, all of the employees are students who work part-time.

Red Apple employs 36 part-time employees, all of whom work exactly 20 hours per week.

Since COBRA rules tell us that a part-time employee is a fraction of a full-time employee, all 36 part-timers are essentially half of a full-time employee (since 20 hours per week is half of a full time, 40-hour week).

So, 36 part-time employees is the equivalent of 18 full-time employees. Add that number to the 4 actual full-time employee and you have 22 employees.


Verdict: Subject to COBRA.


Example #3: The Layoff Company is not doing so well. They had over 100 employees, but on Thanksgiving of last year they laid off 85 of them. Not only that, they sold the break-room ping pong table, cancelled the Christmas party and dropped all of the group health plans.

The math is pretty easy. Layoff Co. definitely had more than 20 employees for more than 10 months of the previous calendar year.

Are they subject to COBRA this year?

This is a trick question. Although the company has enough employees to be subject to COBRA, they no longer maintain any group health plan.


Verdict: No group health plan means there is no COBRA to offer.