Cobra and retirement insurance question

[PontGuy]

After 23 years working at my megacorp I accepted a retirement package earlier this year. It was a few years earlier than planned, but was a better option than relocating with the company especially considering the big golden parachute that came with the package.

The company is paying 100% of Cobra insurance coverage until May next year (0-cost to me). And then it will automatically convert to retirement insurance. My employer was big-pharma so my insurance package was/is excellent. The retirement insurance is also very good, and very cheap, so a huge benefit.

Here is the question. I would like to do some contract/project work during the next few years to help cover the income gap, so "semi-retired". And there is a possibility of going back to work full time for a while if a good opportunity presents itself. How does this affect Cobra?

For example, if I go to work for a company that offers health insurance can I elect not to accept it, still stay on 0-cost Cobra and then roll over to the megacorp retirement plan?

Searching on Cobra rules gets me this sort of response:

Cobra coverage begins on the date that coverage would otherwise have been lost by reason of a qualifying event and can end when:

• The last day of maximum coverage is reached
• Premiums are not paid on a timely basis
• The employer ceases to maintain any group health plan
• Coverage is obtained with another employer group health plan that does not contain any exclusion or limitation with respect to any pre-existing condition of such beneficiary
• A beneficiary is entitled to Medicare benefits

 

[MichaelB]

For example, if I go to work for a company that offers health insurance can I elect not to accept it, still stay on 0-cost Cobra and then roll over to the megacorp retirement plan?

Most large group insurance plans require all eligible employees to sign up, so if you were to take a job that offered health insurance you would probably have to take it and lose your Cobra coverage.

 

[PontGuy]

I am not so much concerned about losing Cobra coverage early if I take another job but want to make sure that I don't somehow lose the retirement plan coverage as a result. And signing up on the plan can't be deferred until later. I know guys that are on the retirement plan and working other jobs but they started working at those jobs after they were already on the retirement plan and just continued the payments, no problem.

 

[JoeWras]

I am not so much concerned about losing Cobra coverage early if I take another job but want to make sure that I don't somehow lose the retirement plan coverage as a result. And signing up on the plan can't be deferred until later. I know guys that are on the retirement plan and working other jobs but they started working at those jobs after they were already on the retirement plan and just continued the payments, no problem.

PontGuy,

You need to check the SPD (Summary Plan Description) of your Megacorp. Mine has an SPD for the retirement medical. You have a right to see your SPD.

My SPD is very clear about this. You skip or drop Cobra, then you lose the retiree medical forever. (Maybe in my case not a huge deal since the retirees pay 100% of the cost.) There can be no gaps. None at all.

Also, my SPD says you can covert from Cobra to Retiree at any time during the Cobra period. If you have this choice, it might get you out of the situation. But you'll be paying more.

 

[ivinsfan]

Sounds like you are better off waiting until your retirement insurance kicks it, I wouldn't risk it. They are always making changes to retirement health bennies and I wouldn't open myself up to any problems at all.

Can't you just find something part time that doesn't have benefits if you want to work?

 

[ivinsfan]

I am not so much concerned about losing Cobra coverage early if I take another job but want to make sure that I don't somehow lose the retirement plan coverage as a result. And signing up on the plan can't be deferred until later. I know guys that are on the retirement plan and working other jobs but they started working at those jobs after they were already on the retirement plan and just continued the payments, no problem.

As far as guys you know, there are sweeping changes to health going on all the time. Because they did something years ago doesn't mean you can do it today. ACA has brought on a lot of arcane regulations that you don't want to run afoul of.

 

[txtig]

I took early retirement almost five years ago from a company I worked for for 27 years. I was entitled to the maximum pre-65 retiree health insurance (company pays 80% of premium). However, since I was leaving to take new job, I deferred accepting their insurance and took the health insurance from the new employer. I finally FIRE'd from company 2 last week and will be filing to get my retiree health insurance from company 1 as soon as my current health benefits expire. I recently called company 1 to ensure that all was in order and I just need to file a form and provide evidence that I am no longer covered. Should be smooth sailing.


Sent from my iPhone using Early Retirement Forum

 

[JoeWras]

I took early retirement almost five years ago from a company I worked for for 27 years. I was entitled to the maximum pre-65 retiree health insurance (company pays 80% of premium). However, since I was leaving to take new job, I deferred accepting their insurance and took the health insurance from the new employer. I finally FIRE'd from company 2 last week and will be filing to get my retiree health insurance from company 1 as soon as my current health benefits expire. I recently called company 1 to ensure that all was in order and I just need to file a form and provide evidence that I am no longer covered. Should be smooth sailing.

Smooth for you. That's great.

But I want people to realize this is not a hard and fast rule. Many Megacorps drop you if there is a gap of any sort. They have no deferral, and there's no chance of return.

It all depends on the plan, and you have to read the details and double check them. Sharing our experiences here are great, but this is one area with huge differences among the many Mega/Kilo/Micro corps out there.

 

[PontGuy]

I know that deferring until later is not possible in my case. That is made clear.

The documentation that I have just states the sequence as a result of the force reduction. Cobra, then the retirement plan at the end of the 0-cost Cobra period. No ifs, then's or buts. I guess I need to bite the bullet and call 1-800-HR and see if I can find someone to explain it to me.

It would be sad to find out that going to work for a company that had insurance benefits before Cobra ran out would somehow disqualify me from the company retirement plan. Especially since I know others that have been doing just that.

 

[JoeWras]

It would be sad to find out that going to work for a company that had insurance benefits before Cobra ran out would somehow disqualify me from the company retirement plan. Especially since I know others that have been doing just that.

More than sad, it could cost you many thousands per year, maybe even over 10k. You said the retirement insurance is very cheap. Losing that could be catastrophic. Retirement medical before age 65 in many plans costs $500 to $1200 per month (individual) for many people, depending on the plan. Other people report premiums below $100 per month with low deductible.

Being moved from say $100 to $700 will be very costly. And if you don't get the ACA subsidy, that's no help either.

You are wise to be exploring this in detail. A little short term job could cost you huge bucks later.

 

[txtig]

Smooth for you. That's great.

But I want people to realize this is not a hard and fast rule. Many Megacorps drop you if there is a gap of any sort. They have no deferral, and there's no chance of return.

It all depends on the plan, and you have to read the details and double check them. Sharing our experiences here are great, but this is one area with huge differences among the many Mega/Kilo/Micro corps out there.

I agree with you on this. Before I made the decision to defer taking my retiree insurance, I carefully checked out the rules and documented the company's response that I would be able to get the coverage once I FIRED'd for good. Making a mistake could have been very costly. I wasn't trying to imply that this would be the case for everyone, just relating my experience.


Sent from my iPad using Early Retirement Forum

 

[JoeWras]

I wasn't trying to imply that this would be the case for everyone, just relating my experience.

Sure, txtig. That's fine, no harm meant. Thank you for sharing. It is just a clarification and I think everyone gets the point. Good to know the diversity of plans out there.

I have a friend who has an extremely generous state employee retiree based health plan and when I talk about my plan, it doesn't compute. He thinks everyone gets the same kind of benefit he has, that it is some sort of standard way of doing it. He had a second career as a financial "adviser" too! Another reason I shy away from those FA guys.

 

[PontGuy]

I just checked my documentation and it clearly states that Cobra coverage ends if I accept a job at another employer with insurance. But no mention of how this would affect retirement insurance.

The retirement plan will pay 90% of my premium and 70% of my wife's. It works out to $5,000 per year total for essentially the same insurance that we have now. My health is good but my wife's is not, so good coverage is critical for us. And I certainly don't plan on working at a full time job until Medicare kicks in.

I haven't called yet, procrastinating because I am not sure I really want to know the answers...

 

[ivinsfan]

I just checked my documentation and it clearly states that Cobra coverage ends if I accept a job at another employer with insurance. But no mention of how this would affect retirement insurance.

The retirement plan will pay 90% of my premium and 70% of my wife's. It works out to $5,000 per year total for essentially the same insurance that we have now. My health is good but my wife's is not, so good coverage is critical for us. And I certainly don't plan on working at a full time job until Medicare kicks in.

I haven't called yet, procrastinating because I am not sure I really want to know the answers...

Go ahead and call but when you do be sure they send you everything in writing..if it's not written down it didn't happen.

 

[sakowitzm]

I think ivinsfan was on the right track several posts above. It seems that you could do the part-time work, and even full-time work on a 1099-basis. That is, an independent consultant. That way you would not be eligible for another employer's group health plan. At least 99.99% of the time.

Two years ago I transitioned from full-time employee to 1099 (term = the company sends you a 1099 after the end of the year to report your income, rather than a W-2), and it was very straightforward and easy. Perhaps biggest change is that you have to pay quarterly estimated taxes, which you can do online through EFTPS website.

 

[PontGuy]

I got the Summary plan Description and read through it (42 pages!) and here are the sections that apply to me:

Enrolling in Coverage for Retiree Medical Benefits
If you wish to participate in the Pre-Medicare Retiree Benefit, you must elect retiree medical coverage at the time you terminate employment and begin to pay the appropriate premium. In order to be covered under the Medicare Retiree Benefit, you must have been eligible for and properly elected such coverage. If you choose to waive coverage under the Medical Plan because you have coverage under your spouse’s or another employer’s plan, you cannot enroll in the future. That is, you forfeit any future right to enroll if you don’t enroll when first eligible.
​

The above confirms that I need to enroll as soon as I am eligible. And as long as I don't waive coverage I should be OK even if I go to work for a company with medical benefits.

When Retiree Medical Benefits Begin
If you receive severance pay at termination of employment, you will continue to be covered at no cost until the end of the month of your severance pay period, not to exceed one year, or until covered by a new employer’s medical plan, whichever comes earlier. Retiree medical coverage will begin on the first day of the month after the end of your severance pay period.
​

The above confirms that retirement medical will begin at the end of the severance pay period which is May 1 next year. And if I go to work for an employer with a medical plan before this then the 0-cost Cobra will end. There is no mention about losing eligibility for retiree insurance in this case, but it is not clear to me how this would be managed.

When Pre-Medicare and Medicare Retiree Benefit Coverage Ends
If you fail to make a premium payment by the deadline, your retiree coverage ends on the last day of the month through which coverage was paid.
​

There is no mention in the above about any impact if I go to work after retirement coverage begins.

Based on the above what questions would you ask?