When an employee resigns from their job in California, employers have specific obligations regarding their benefits package and health insurance coverage. This guide outlines the key steps employers should take to ensure compliance with state and federal laws.
1. COBRA Notification and Continuation
COBRA Eligibility: Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), eligible employees and their dependents may continue their employer-sponsored health insurance coverage for a certain period after their employment ends.
Notification Requirement: After receiving a notice of a qualifying event, the plan must provide the qualified beneficiaries with an election notice within 14 days.
Continuation Costs: The employee will generally be responsible for paying the full premium cost, plus a small administrative fee.
2. Health Insurance Continuation Coverage (HICC)
California-Specific Law: In addition to COBRA, California has its own Health Insurance Continuation Coverage (HICC) law, called Cal-COBRA.
Eligibility: HICC may apply to employees who lose their employer-sponsored health insurance coverage due to termination, reduction in hours, or other qualifying events.
Continuation Period: Cal-Cobra extends for 36 months (only 18 months if you have already exhausted your Federal COBRA Benefits.)
3. PFL Benefits
Paid Family Leave (PFL): If an employee has used Paid Family Leave (PFL) benefits during their employment, employers must provide the required notice to the California State Disability Insurance (SDI) program.
PFL Repayment: If an employee has received PFL benefits while employed by a small employer (less than 50 employees), the employer may be eligible for reimbursement from the SDI program.
4. Retirement Plan Distributions
Qualified Retirement Plans: If the employee has a qualified retirement plan, such as a 401(k) or IRA, the employer must follow the plan’s rules regarding distributions.
Required Minimum Distributions (RMDs): If the employee is over 72 years old, the employer may need to assist with RMD calculations and distributions.
5. Accrued Vacation and Sick Leave
Payment Requirements: California law generally requires employers to pay out accrued vacation and sick leave upon an employee’s termination.
Calculation and Payment: The employer should calculate the amount owed based on the employee’s hourly wage and the number of accrued hours.
6. Other Benefits
Review Benefit Plans: Employers should review their employee benefit plans to determine any specific requirements or obligations related to termination.
Life Insurance and Disability Insurance: If the employee has life insurance or disability insurance through their employer, the employer may need to provide information or assistance with claims.
One Final Note: It is essential for employers to consult with an HR professional or attorney to ensure compliance with all applicable state and federal laws when handling employee benefits upon termination. If you need more information about employee benefits and compliance with the law, call us at Bay Area Health Insurance so that we can guide you through the numerous complexities of this situation.
