Terminating Benefits

April 13, 2006

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When an employee is terminated or leaves your employ, you will have to do two or three things:

terminate the employee's benefits coverage
provide the employee with a certificate of coverage
offer to extend the employee's health benefits under COBRA (this is only required of employers with 20 or more employees)

Terminating benefits is generally a simple process. The insurer will usually provide you with a form or procedure for terminating the coverage of an employee. Generally, the insurance company will terminate coverage at the end of the month, not in between, to make premium remittance easier. Some have a policy that, if an employee leaves before the 15th of the month, they will waive premiums for that month; for those employees who are terminated after the 15th of the month, the whole month's premium will be due. Be sure to know your insurer's policy on this.

If Joe has health benefits with you and quits work on June 8th, the insurance company will discontinue his coverage at the end of June. You will be required to pay for that month.

If you paid for coverage in advance (i.e., June premiums in May), you can stop deducting health premiums from Joe's checks. If you pay month by month, you may have to make the payment for the whole month despite the fact that Joe is gone, and that includes deducting enough from Joe's last check to cover his premiums for the whole month.