Offboarding an employee involves more than collecting keycards and revoking system access. Benefits termination has its own set of rules, deadlines, and obligations — and getting it wrong can create legal and financial exposure.
Coverage End Date
Most group health plans end coverage at the end of the month in which employment terminates. Some end on the termination date itself. Knowing which applies to your plan is important so you can communicate accurate information to departing employees.
COBRA Notification Requirements
Employers with 20 or more employees are required by federal law to offer COBRA continuation coverage and to provide a written COBRA election notice within 14 days of the qualifying event (termination). Failure to provide timely COBRA notice can expose employers to significant penalties.
Smaller employers may be subject to state “mini-COBRA” laws, which vary by state. New Jersey, for example, has its own continuation coverage requirements.
COBRA Coverage Details
Under COBRA, the terminated employee can continue their same group health coverage for up to 18 months — but they pay the full premium (employer + employee share) plus a 2% administrative fee. It’s expensive, but it provides continuity while the former employee finds new coverage.
FSA and HSA Treatment
FSA balances are generally forfeited when employment ends (unless COBRA FSA continuation is available). HSA balances belong to the employee and go with them — the account is fully portable and doesn’t end at termination.
Life Insurance and Disability Portability
Some group life and disability policies offer conversion or portability options that allow terminated employees to convert their group coverage to an individual policy without underwriting. Employees should be informed of these options at offboarding.
Document Everything
Keep records of COBRA notices sent, coverage termination dates, and any elections made. These records protect you if a former employee later claims they weren’t properly notified.
Questions about benefits offboarding? Garden State Benefits supports employers through the full employee lifecycle — including terminations.