Protecting Retirement and Health Benefits after Job Loss
Job termination or a reduction in hours can result in a loss of retirement and health benefits. However, employees and their families may have rights under Federal law that can help protect benefits when employment changes.
HIPAA – Enrolling In Another Health Plan
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) helps when you are switching from one job to another. If other group health coverage is available (for example, through a spouse's employment-based plan), special enrollment in that plan should be considered. It allows the individual and his/her family an opportunity to enroll in a plan for which they are otherwise eligible, regardless of enrollment periods. However, to qualify, enrollment must be requested within 30 days of losing eligibility for other coverage. After special enrollment is requested, coverage must be effective no later than the first day of the first month following your request for enrollment. This type of coverage is usually the most cost effective of all the options.
HIPAA requires most health plans to provide coverage for preexisting medical conditions after 12 months (in most cases). The law also requires a new employer's health plan to offset this 12-month period by giving you credit for the number of days you had previous coverage -- unless you had a major break in coverage. Your former employer is required to provide a certificate that documents your "creditable coverage." (Order Your Health Plan and HIPAA...Making the Law Work for You for answers to commonly asked HIPAA questions.)
COBRA – Continuing In Your Old Health Plan
The Consolidated Omnibus Budget Reconciliation Act of 1985 – also known as COBRA – can help former employees and their families continue their health care coverage. If you were laid off, if you quit your job or retired, or if your hours were reduced, you may qualify. (You will not qualify, however, if you were laid off for gross misconduct.) Your employer must have had 20 or more employees, you must have been a participant in your employer’s group health plan, and your employer must continue to maintain a health plan.
Once your job ends, your plan must provide you with written notice explaining your rights under COBRA. You have 60 days from the date the notice is provided or from the date coverage ended – whichever is later – to sign up for (or elect) COBRA coverage. It begins the day your health care coverage ended and lasts up to 18 months (and longer in some cases). However, you may pay the entire group rate premium, plus a 2 percent administrative fee. (For more information on COBRA, order An Employee’s Guide to Health Benefits Under COBRA.)
ERISA – Protecting Your Retirement Assets
The Employee Retirement Income Security Act of 1974 (ERISA) provides guidance for employers who have retirement plans and gives you specific rights to plan information. For instance, if you lose your job, request a copy of your plan’s summary plan description (SPD) and ask for an individual benefit statement. The SPD tells you if and when you can collect your benefits or how to roll over your 401(k) account to a new employer’s plan or to an IRA (if your old plan permits you to do so). The individual benefit statement lets you monitor your account balance and is an important statement to keep on file. (For more information on protecting your retirement benefits, order What You Should Know About Your Retirement Plan.)
Note: The Affordable Care Act (ACA) adds important protections related to employment-based group health plans that will improve health coverage for you and your family. Many of these protections are available now including extending dependent coverage until age 26, prohibiting preexisting condition exclusions for children under 19, and banning lifetime limits on coverage for essential health benefits. Additional protections will be available in 2014. This publication does not reflect the provisions of the Affordable Care Act. For more information, visit the Employee Benefits Security Administration’s ACA web page at www.dol.gov/ebsa/healthreform.
Get the Facts Now
More information on your rights and responsibilities as a dislocated worker are contained in Retirement and Health Care Coverage…Questions and Answers for Dislocated Workers.
If you have questions about your rights and responsibilities under HIPAA, COBRA, ERISA, and ACA, visit www.askebsa.dol.gov or call 1-866-444-3272 to order any of the publications mentioned or to request assistance from a benefits advisor.