Page 172 - Essentials of Payroll: Management and Accounting

Benefits
If an employee chooses coverage, he or she can be required to pay
up to 102 percent of the cost of the insurance.And if the employee fails
to make timely payments under the terms of the insurance plan (with-
in 30 days of the due date), the COBRA coverage can be terminated.

COBRA coverage also will end if the employer stops providing med-
ical coverage to its regular employees, if the covered individual obtains
coverage under another health insurance plan subsequent to taking the
COBRA coverage, or if the covered individual becomes covered by the
Medicare program.
Example. A cook at the Humble Pie Company is laid off at the end
of March. She is given paperwork to fill out at the time of termination

for COBRA coverage. She submits the documentation accepting cov-
erage after 55 days. The company is required to keep her on COBRA,
since she filed in a timely manner.After three months, she obtains work
with another company and enrolls in its medical insurance program.
Because she is now covered by a different insurance program subse-
quent to her election to accept COBRA coverage, the Humble Pie
Company no longer has to provide her COBRA coverage, and so ter-
minates it.

Life Insurance 1

It is common practice for a company to provide group term life insur-
ance to its employees as part of a standard benefit package.This requires
some extra reporting from a tax perspective, however. If the amount of
the life insurance benefit exceeds $50,000, the company must report
the incremental cost of the life insurance over $50,000 (to the extent
that the employee is not paying for the additional insurance) on the
employee’s W-2 form as taxable income. In the less common case,

where the company provides life insurance that results in some amount
of cash surrender value, then the cost of this permanent benefit to the

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