Medicare and COBRA 

Q. We have an employee who is going on Medicare and plans to continue covering her husband on COBRA until he is 65. Can she pay for his premiums on a pretax basis through payroll, or does she have to pay with after-tax dollars?

A. The short answer is “yes” she can pay on a pretax basis, but it might depend on multiple factors. First, employers can easily be confused by the conflicting language in the Internal Revenue Service (IRS) regulations, Department of Labor (DOL) notices, Center for Medicare & Medicaid Services (CMS) rules and the Consolidated Omnibus Budget Reconciliation Act (COBRA) statute for purposes of coverage related to Medicare, especially as there is a distinction between a person being “entitled to” or “eligible for” Medicare. Since you have stated that the employee is going on Medicare suggesting that she has already applied for the benefits, it is presumed here that she is entitled to Medicare for purposes of COBRA. Consequently, being entitled to Medicare affects the eligibility and length of COBRA coverage for her husband.

Next, as long as your employee’s husband was an enrolled dependent under your group health plan on the day before the employee became entitled to Medicare and he will not become covered under a group health plan maintained by another employer, the coverage for the husband as a qualified beneficiary must be offered for at least 36 months. Finally, the regulations provide for payment of the COBRA payments through a Section 125 cafeteria plan on a pretax basis and the entitlement to Medicare will entitle the employee to make a change in her cafeteria plan election. Note, however, that your plan may need to be amended to provide for pre-tax payment of COBRA premiums or midyear election changes on account of a COBRA qualifying event.

Jason R. Mau is an attorney in the Boise office of Parsons Behle & Latimer. He can be reached at 208-562-4898 or