CSFS Course 6
State Regulations and Federally Mandated Benefits
Where ERISA preemption ends and state authority begins, what states may regulate for a self-funded plan, and the federal benefit mandates that apply regardless.
225 practice questions · page 2 of 5, questions 51–100 · answers and explanations included · updated September 2026
50 questions on this page 2 of 5, each with the answer and the reasoning behind it. Read straight through, or quiz yourself on them and the ones you miss stay in rotation until you get them right.
- 51
John had a choice of medical and/or dental coverage while active. Upon a qualifying event, what does the Core Benefit Rule require regarding his COBRA election, and how does this interact with plan limitations?
- •John can elect only the single most expensive coverage option; plan limitations are stricter for COBRA participants to offset adverse selection
- •John can elect to continue either medical and/or dental independently; plan limitations apply to COBRAs in the same manner as to non-COBRA participants, with COBRAs neither gaining nor losing any coverage
- •John must elect the same combination he held immediately before the qualifying event; plan limitations are suspended during the COBRA continuation period
- •John must elect to continue all coverages he had at the time of the qualifying event or none; plan limitations are waived for COBRA participants
Show answer
John can elect to continue either medical and/or dental independently; plan limitations apply to COBRAs in the same manner as to non-COBRA participants, with COBRAs neither gaining nor losing any coverage
The Core Benefit Rule allows John to elect any combination of coverages (medical and/or dental) he had a choice of as an active participant. Separately, plan limitations apply to COBRA and non-COBRA participants in similar manner—COBRAs neither gain nor lose any coverage.
- 52
Under COBRA, what happens to the coverage during the period between the qualifying event date and the COBRA election date?
- •Coverage continues provisionally but claims are held in reserve pending election confirmation
- •Coverage is suspended and claims incurred during that period are excluded from COBRA benefits
- •Coverage must be provided with no lapse or gap; upon electing COBRA, coverage is retroactively reinstated back to the qualifying event date
- •No coverage exists during the gap period, but the participant may submit claims retroactively up to 90 days after election
Show answer
Coverage must be provided with no lapse or gap; upon electing COBRA, coverage is retroactively reinstated back to the qualifying event date
The course states that coverage from the qualifying event to the election date must be provided with no lapse or gap. Upon electing COBRA, coverage is retroactively reinstated back to the qualifying event date.
- 53
John, an HMO participant in City X, experiences a qualifying event and moves to City Y where the employer has no HMO but does have an indemnity plan for City Y employees. Bill, a COBRA participant, is covered during a plan-wide open enrollment period. What do these two scenarios illustrate about change of coverage under COBRA?
- •Both are exceptions to the general rule that COBRA coverage must match coverage at the qualifying event: John may be moved to the indemnity plan, and Bill must be offered the opportunity to elect other coverage during open enrollment
- •John must remain in the City X HMO and receive benefits by mail-order; Bill's open enrollment rights are limited to the coverage he had at the qualifying event
- •John's situation is an exception allowing a coverage change, but Bill has no right to change coverage during open enrollment because he is a COBRA participant
- •Neither situation is an exception; both John and Bill must retain their original coverage for the full COBRA continuation period
Show answer
Both are exceptions to the general rule that COBRA coverage must match coverage at the qualifying event: John may be moved to the indemnity plan, and Bill must be offered the opportunity to elect other coverage during open enrollment
The course identifies two exceptions to the rule that COBRA must match qualifying-event coverage: (1) when a COBRA participant moves to a location where the employer offers a different plan to employees, and (2) when the plan has a plan-wide open enrollment, which must also be offered to COBRA participants.
- 54
Under COBRA, how are deductibles and out-of-pocket limitations handled when an active employee becomes a COBRA participant?
- •COBRAs and actives have the same deductibles, and COBRAs must have no-loss/no-gain privileges so that becoming a COBRA is in no way a penalty
- •COBRAs are exempt from deductibles during the first 60 days of continuation coverage as an incentive to elect
- •COBRAs must restart their deductible and out-of-pocket accumulations at the time of the qualifying event
- •Deductibles for COBRAs may be increased to offset the higher administrative cost of COBRA participants
Show answer
COBRAs and actives have the same deductibles, and COBRAs must have no-loss/no-gain privileges so that becoming a COBRA is in no way a penalty
The course states that COBRAs and actives have the same deductibles. COBRAs must have no-loss/no-gain privileges when meeting deductible and out-of-pocket limitations—becoming a COBRA may in no way be a penalty.
- 55
An employer adds newly acquired dependents to the base plan either automatically or as late entrants with health statements. How does this option extend to COBRA participants, and what is the critical distinction regarding qualified beneficiary status?
- •Both a newly acquired spouse and children added during COBRA become qualified beneficiaries with rights to second qualifying events
- •The option does not extend to COBRA participants because the COBRA coverage is limited to those enrolled at the qualifying event
- •The option extends but all newly acquired dependents are excluded from qualified beneficiary status because they were not covered on the day prior to the qualifying event
- •The option is extended to COBRA participants; a newly acquired spouse is not a qualified beneficiary, but dependent children added during COBRA do become qualified beneficiaries with rights to second qualifying events
Show answer
The option is extended to COBRA participants; a newly acquired spouse is not a qualified beneficiary, but dependent children added during COBRA do become qualified beneficiaries with rights to second qualifying events
The course states the base plan's option for adding newly acquired dependents extends to COBRA participants. However, John's newly acquired wife is not a qualified beneficiary, while dependent children added under COBRA do become qualified beneficiaries with rights to second qualifying events.
- 56
COBRA notification requirements differ from booklet requirements in three specific ways. Which of the following is one of those three differences?
- •The individuals to be notified
- •The language complexity of the notice
- •The premium amount that must be disclosed
- •The regulatory agency that must approve the form
Show answer
The individuals to be notified
The course states that COBRA notice requirements differ from booklet requirements in three ways: (1) individuals to be notified, (2) time period for distribution, and (3) method of distribution. Because of these differences, the most conservative approach is to send the notice by first-class mail and include COBRA language in the booklet.
- 57
The employer has 30 days to notify the plan administrator of a participant's termination, death, or bankruptcy. For divorce or eligibility for Social Security, the employer has 14 days after learning of the event. What is the participant's notification obligation regarding divorce?
- •The participant has no affirmative notification obligation; the employer must independently discover the divorce through administrative channels
- •The participant must notify the employer within 14 days of the divorce, matching the employer's deadline for learning of the event
- •The participant must notify the employer within 30 days of the divorce, matching the employer's notification deadline for termination
- •The participant must notify the employer within 60 days of the divorce
Show answer
The participant must notify the employer within 60 days of the divorce
The course specifies that the participant must notify the employer within 60 days of the divorce. This is distinct from the employer's 14-day deadline to notify the plan administrator after learning of the divorce or Social Security eligibility event.
- 58
Which of the following is an acceptable form of COBRA notification according to the course?
- •Communicated verbally during the employee's exit interview
- •Mailed to the last known address by first-class mail
- •Posted on a company bulletin board in a common area
- •Sent exclusively by certified mail with return receipt requested
Show answer
Mailed to the last known address by first-class mail
The course states that bulletin board notification is unacceptable. Acceptable notification is mailed to the last known address by first-class mail. The course specifically notes that mail does not have to be Return Receipt Requested, and personal delivery requires the employee to sign a form acknowledging receipt.
- 59
A qualifying event occurs on January 31, 2025, and the COBRA notification is sent on February 15, 2025. When does the 60-day election period begin?
- •February 15, 2025, because the notification date is after the qualifying event date
- •January 15, 2025, because the election period is backdated 30 days from the notification date
- •January 31, 2025, because the election period always starts from the qualifying event date
- •March 1, 2025, because the election period starts on the first day of the month following notification
Show answer
February 15, 2025, because the notification date is after the qualifying event date
The course states that if the notification date is after the qualifying event/loss of coverage date (qualifying event date 1/31/25, notification date 2/15/25), the 60 days would start as of 2/15/25. Conversely, if notification precedes the qualifying event, the 60 days start from the loss of coverage date.
- 60
John quits on April 1, signs a COBRA waiver on May 1, and then changes his mind on May 15, wishing to be covered. What is the coverage result?
- •John has forfeited all COBRA rights because he signed a waiver and may not revoke it
- •John may be provided COBRA continuation from May 15 forward, but the April 1 to May 15 period is a gap in coverage
- •John may be provided COBRA continuation retroactive to April 1 with no gap because the waiver was revoked within the 60-day election period
- •John may be provided COBRA from May 1 forward because the waiver is treated as voided on the date it was signed
Show answer
John may be provided COBRA continuation from May 15 forward, but the April 1 to May 15 period is a gap in coverage
The course states that when John revokes a COBRA waiver, he may be provided COBRA continuation but only from May 15 forward. The period from April 1 to May 15 is a gap in coverage, unlike a timely election which would provide retroactive coverage to the qualifying event date.
- 61
John quits and owes the employer $1,000 as a travel advance. Can the employer apply this amount as a lien against John's COBRA benefits?
- •No, but the employer may withhold COBRA election rights until the travel advance is repaid
- •No, the employer may not put the $1,000 against John as a lien against COBRA benefits
- •Yes, but only if the amount owed does not exceed one month's COBRA premium
- •Yes, the employer may offset the travel advance against COBRA benefits as an employment termination settlement
Show answer
No, the employer may not put the $1,000 against John as a lien against COBRA benefits
The course explicitly states that the employer may not put the $1,000 against John as a lien against COBRA benefits. COBRA benefits cannot be conditioned on employment termination settlements.
- 62
In a family plan, who may elect COBRA on behalf of the children, and what constraint applies to the employer's offering of the election?
- •Each child must independently elect once reaching age 18; the employer may require a single family election
- •Either the employee or the spouse may elect for the children; the employer is not allowed to offer only an accept/reject choice to a qualified beneficiary
- •Only the employee may elect for the children; the employer may offer a single accept/reject choice for the entire family unit
- •The spouse may elect only if the employee is deceased; the employer must provide separate elections for each dependent
Show answer
Either the employee or the spouse may elect for the children; the employer is not allowed to offer only an accept/reject choice to a qualified beneficiary
The course states that either the employee or the spouse may elect for the children. The court decisions section further establishes that it is wrong for an employer to offer only an accept/reject choice to a COBRA-qualified beneficiary—separate electability must be available.
- 63
Which of the following is NOT listed as an event that can cut short the COBRA statutory continuation period?
- •The COBRA participant becomes covered under another group plan that does not have any preexisting limitations
- •The COBRA participant fails to make timely contributions using a 30-day grace period
- •The COBRA participant's spouse obtains coverage under a different employer's plan
- •The employer terminates the plan entirely
Show answer
The COBRA participant's spouse obtains coverage under a different employer's plan
The course lists four events that can cut short COBRA: employer terminates the plan, participant becomes eligible for Medicare, participant fails to make timely contributions (with a 30-day grace period), and participant becomes covered under another group plan without preexisting limitations. The spouse's separate coverage is not listed.
- 64
A COBRA participant becomes covered under a new group health plan after electing COBRA. Under what specific condition does OBRA permit the participant to retain COBRA continuation coverage alongside the new plan?
- •If and only if the new plan contains an exclusion or limitation with respect to any preexisting condition of the participant; in this case, the COBRA plan is primary over the new plan under coordination-of-benefits rules
- •If the new plan is a high-deductible health plan, the participant may keep COBRA as secondary coverage regardless of preexisting condition limitations
- •If the new plan's premium exceeds the COBRA premium by more than 50%, the participant may maintain both until the COBRA period expires
- •The participant may always maintain both plans simultaneously under OBRA, with the new plan being primary and COBRA being secondary
Show answer
If and only if the new plan contains an exclusion or limitation with respect to any preexisting condition of the participant; in this case, the COBRA plan is primary over the new plan under coordination-of-benefits rules
The course states that under OBRA, a participant can continue COBRA in spite of new group coverage if (and only if) the new plan has an exclusion or limitation for preexisting conditions. In these cases, normal coordination-of-benefits rules apply, making the COBRA plan primary over the new group health plan.
- 65
A disabled COBRA participant may have the continuation period extended from 18 months to 29 months. What entity must determine the disability, and by when must the disability have existed?
- •The Department of Labor must approve the disability extension, and the disability must have existed within the first 90 days of COBRA coverage
- •The participant's treating physician must certify the disability, and it must have existed on the day of the qualifying event only
- •The plan administrator determines disability based on plan definitions, and it must have existed at any point during the first 18 months of COBRA
- •The Social Security Administration must determine total disability, and the disability must have existed on the day of the qualifying event or within the first 60 days of continuous COBRA coverage
Show answer
The Social Security Administration must determine total disability, and the disability must have existed on the day of the qualifying event or within the first 60 days of continuous COBRA coverage
The course states that the Social Security Administration must determine total disability under Title II or XVI of the Social Security Act, and the disability must have existed on the day of the qualifying event or within the first 60 days of continuous COBRA coverage.
- 66
For a disabled COBRA participant to receive the 29-month extension, a copy of the Social Security determination notice must be provided to the employer or COBRA administrator subject to two deadlines. Which of the following correctly states both?
- •The copy must be sent before the end of the initial 18-month period and within 60 days of the date of the determination notice
- •The copy must be sent within 30 days of the determination notice and before the end of the initial 12-month period
- •The copy must be sent within 60 days of the qualifying event and before the disability is redetermined by Social Security
- •The copy must be sent within 90 days of the determination notice and before the participant's 29th month of COBRA coverage
Show answer
The copy must be sent before the end of the initial 18-month period and within 60 days of the date of the determination notice
The course specifies two deadlines: the qualified beneficiary must provide the Social Security determination notice before the end of the initial 18-month period, and this copy must be sent within 60 days of the date of the determination notice. Both deadlines must be met.
- 67
John terminates with family coverage. After 12 months of COBRA, John dies. Then, in a separate scenario, Bill terminates with family coverage and after 12 months becomes eligible for Medicare. What is the maximum remaining COBRA continuation for each spouse?
- •Both wives receive 18 additional months because the original qualifying event was termination, not death or Medicare entitlement
- •John's wife Mary may elect a death-benefit continuation for 24 additional months; Bill's wife Mary may elect a Medicare extension of 24 additional months, both capped at 36 months total
- •John's wife receives 18 additional months and Bill's wife receives 36 additional months from the second qualifying event
- •John's wife receives 36 months from the date of death and Bill's wife receives 29 months from the Medicare entitlement date
Show answer
John's wife Mary may elect a death-benefit continuation for 24 additional months; Bill's wife Mary may elect a Medicare extension of 24 additional months, both capped at 36 months total
The course provides these exact examples: after 12 months of COBRA, John's death creates a second qualifying event allowing wife Mary 24 additional months (totaling 36). Similarly, Bill's Medicare entitlement after 12 months allows wife Mary an additional 24 months. Multiple qualifying events can extend continuation but never beyond 36 months total.
- 68
What is the COBRA continuation period for widows or widowers of retirees who die prior to the employer's bankruptcy filing?
- •18 months from the date of the retiree's death
- •29 months if the surviving spouse is disabled, otherwise 18 months
- •36 months from the date of bankruptcy filing
- •Lifetime coverage
Show answer
Lifetime coverage
The course states that bankruptcy of the employer provides lifetime coverage to retirees and widows or widowers of retirees who die prior to bankruptcy. For widows or widowers of retirees who died after bankruptcy, coverage is extended for 36 months.
- 69
A participant called to active military duty has a qualifying event. What is the maximum COBRA continuation period, and how does this differ from the standard termination period?
- •18 months, identical to all other termination-related qualifying events
- •24 months, compared to the standard 18-month period for voluntary or involuntary termination
- •29 months, equivalent to the disability extension period
- •36 months, the same as for death or divorce qualifying events
Show answer
24 months, compared to the standard 18-month period for voluntary or involuntary termination
The course states that 24 months could also be a qualifying event for a participant called to active duty in the military, which exceeds the standard 18-month period for termination-type qualifying events but is less than the 36-month period for events like death, divorce, or Medicare entitlement.
- 70
COBRA premiums for the standard continuation period are set at what percentage of the applicable premium?
- •100% of the applicable premium with no administrative surcharge
- •102% of the applicable premium
- •110% of the applicable premium to offset adverse selection
- •150% of the applicable premium for the entire continuation period
Show answer
102% of the applicable premium
The course states that the qualified beneficiary pays an amount equal to 102% of the applicable premiums. The 150% rate applies only to the disability extension months (months 19 through 29).
- 71
A disabled COBRA participant is in their 22nd month of coverage. What premium rate applies, and what was the rate for their first 18 months?
- •102% for the entire 29-month period because the disability extension does not change the premium rate
- •150% for all 29 months because the disability determination retroactively adjusts the premium from month 1
- •Up to 150% of the group rates for months 19 through 29; the first 18 months were limited to 102% of the group rates
- •Up to 200% for months 19 through 29; the first 18 months were at 150% due to the disability status
Show answer
Up to 150% of the group rates for months 19 through 29; the first 18 months were limited to 102% of the group rates
The course states that premiums for disabled COBRA participants are limited to 102% of the group rates for the first 18 months. For the disability extension period (months 19 through 29), premiums may be increased to a maximum of 150% of the group rates.
- 72
A COBRA participant elects coverage on March 15. Their qualifying event was February 1. Under the 45-day rule, what amount must be paid by the 45th day from election, and what is the subsequent payment schedule?
- •Only the first month's premium is due by the 45th day; premiums for the gap period may be spread over the remaining COBRA months
- •Payment by the 45th day covers only March; February is waived because the participant had not yet elected COBRA
- •Payment by the 45th day must include premiums from the February 1 qualifying event through the month the 45th day falls in; thereafter, payment is due on the first of each month with a 30-day grace period
- •The 45th day payment covers only the current month, with retroactive premiums due within 90 days of election
Show answer
Payment by the 45th day must include premiums from the February 1 qualifying event through the month the 45th day falls in; thereafter, payment is due on the first of each month with a 30-day grace period
The course states that initially, premiums must be paid 45 days from date of COBRA election. If paid on the 45th day, payment must include premiums from the qualifying event date through the month the 45th day falls in. Thereafter, payment must be made 30 days from the due date (the first of the month in which payment is due).
- 73
Regarding Health Reimbursement Arrangements (HRAs) and COBRA, which of the following statements is correct?
- •COBRA applies to HRAs, and the premium cannot be based on each individual's HRA account balance; the employer must likely use a blended composite rate
- •COBRA does not apply to HRAs because they are employer-funded accounts rather than insurance plans
- •HRAs are exempt from COBRA unless the employer contributes more than $3,000 annually per participant
- •The COBRA premium for an HRA is simply the individual's account balance divided by 12 months
Show answer
COBRA applies to HRAs, and the premium cannot be based on each individual's HRA account balance; the employer must likely use a blended composite rate
The course states that COBRA applies to HRAs. The premium cannot be based on each individual's HRA account balance. The employer must use a different method, likely a blended composite rate so all participants are charged the same rate.
- 74
A court has made clear that the 45-day grace period for COBRA premium payment has a specific scope. Which statement correctly describes this scope?
- •The 45-day grace period applies to every monthly premium throughout the COBRA continuation period
- •The 45-day grace period is an extension of the standard 30-day grace period available when the QB demonstrates financial hardship
- •The 45-day grace period is for the first premium only, and the QB must have their account current by the 45th day—they cannot just pay their first month's premium on the 45th day
- •The 45-day grace period is for the first premium only, and the QB need only pay the single first month's premium by the 45th day
Show answer
The 45-day grace period is for the first premium only, and the QB must have their account current by the 45th day—they cannot just pay their first month's premium on the 45th day
The course states that the court has made clear the 45-day grace period is for the first premium only. The QB needs to have paid their account current by the 45th day as well. They cannot just pay their first premium on the 45th day—all premiums from the qualifying event through the month containing the 45th day must be paid.
- 75
Which of the following is an instance where the course states that actuarially determined COBRA premiums are specifically needed?
- •Fully insured plans changing carriers mid-year, because the premium must be prorated between carriers
- •High-low plans, because the actuarially determined benefit content values of the plan options are usually needed
- •Plans with a calendar-year deductible, because the COBRA premium must reflect partial-year exposure
- •Plans with fewer than 50 participants, because credibility adjustments must be applied to the claims data
Show answer
High-low plans, because the actuarially determined benefit content values of the plan options are usually needed
The course lists four instances where actuarially determined COBRA premiums are needed: (1) stop-loss vs. specific-only situations, (2) lasering or aggregated specific, (3) high-low plans where benefit content values are needed, and (4) miscellaneous instances such as non-core or ancillary benefits.
- 76
In the context of actuarially determined COBRA premiums, the course identifies a specific improper practice regarding aggregate funding factors. What is it?
- •Aggregate funding factors may only be used when the plan has more than 500 participants to ensure statistical credibility
- •Aggregate funding factors must be certified by an enrolled actuary before being applied to COBRA premium calculations
- •Aggregate funding factors must be recalculated monthly to reflect current COBRA participant claims experience
- •The aggregate funding factors may not be used as a crutch to set COBRA premiums by the worst-case scenario logic
Show answer
The aggregate funding factors may not be used as a crutch to set COBRA premiums by the worst-case scenario logic
The course states that in the stop-loss vs. specific-only context, the aggregate funding factors may not be used as a crutch to set COBRA premiums by the worst-case scenario logic. This is one of the key instances where actuarially determined premiums are needed to properly compute COBRA costs.
- 77
A TPA has claims experience and census for the entire plan but lacks a breakdown between the high-benefit and low-benefit sub-plans. The course describes a technique for computing COBRA premiums in this situation. What is the benefit-content technique, and when may the experience-based division be ignored?
- •The benefit-content technique applies actuarial tables published by the DOL to each sub-plan; the experience-based division is always required regardless of credibility
- •The benefit-content technique assigns a cost index of 100 to the high-cost plan and a lower index (e.g., 80) to the low-cost plan; the experience-based division may be ignored when data is insufficient or selection bias makes it unreliable
- •The benefit-content technique divides total claims equally between the sub-plans; the experience-based division may be ignored when fewer than 100 participants are enrolled
- •The benefit-content technique prorates premiums by enrollment count in each sub-plan; the experience-based division may be ignored only when the stop-loss carrier consents
Show answer
The benefit-content technique assigns a cost index of 100 to the high-cost plan and a lower index (e.g., 80) to the low-cost plan; the experience-based division may be ignored when data is insufficient or selection bias makes it unreliable
The course states that the benefit-content technique puts a cost index of 100 on the high-cost plan and a lower index (e.g., 80) on the low-cost plan. The experience-based division may be ignored when experience is not credible due to insufficient data or selection bias (e.g., the high-benefit plan turns out less costly than the low-benefit plan).
- 78
An aggressive attorney challenges a self-funded plan's COBRA premiums. According to the course, what specific angle will the attorney likely pursue regarding aggregate stop-loss terms?
- •The attorney will argue that aggregate stop-loss terms should have been negotiated directly with the COBRA participants
- •The attorney will attempt to determine whether the aggregate terms were unduly conservative so as to produce higher funding factors and, consequently, higher COBRA premiums
- •The attorney will challenge whether the aggregate deductible was set too low, making the stop-loss carrier bear disproportionate risk
- •The attorney will seek to prove that the aggregate stop-loss contract was an illegal arrangement under ERISA
Show answer
The attorney will attempt to determine whether the aggregate terms were unduly conservative so as to produce higher funding factors and, consequently, higher COBRA premiums
The course states that the current practice of stop-loss carriers to pick the aggregate funding factors as the place to be competitive adds confusion. An aggressive attorney can be expected to determine whether the aggregate terms were unduly conservative so as to produce higher funding factors and, consequently, higher COBRA premiums.
- 79
What is the recommended approach for reducing FAS 106 retiree reserves according to the course?
- •Amend the plan by replacing the early retiree benefit with an extended COBRA continuation benefit, which shifts the accounting from FAS 106 to FAS 112
- •Increase the retiree contribution percentage until the plan becomes participant-pay-all, eliminating the FAS 106 liability
- •Negotiate with the stop-loss carrier to assume the retiree liability in exchange for higher aggregate premiums
- •Transfer the retiree coverage to a separate VEBA trust, removing the liability from the employer's balance sheet entirely
Show answer
Amend the plan by replacing the early retiree benefit with an extended COBRA continuation benefit, which shifts the accounting from FAS 106 to FAS 112
The course recommends replacing the early retiree benefit with an extended COBRA continuation benefit. By replacing the participant's 'retiree hat' with the COBRA 'hat,' FAS 106 is no longer applicable but FAS 112 becomes applicable—replacing a high liability with a low one.
- 80
When early retirees are reclassified as extended COBRA participants to reduce FAS 106 liabilities, what determines whether the resulting FAS 112 reserves must be actuarially certified?
- •Actuarial certification is always required regardless of the COBRA continuation period because FAS 112 mandates it for all post-termination benefits
- •Actuarial certification is needed only when the employer has more than 500 total plan participants, regardless of continuation period length
- •Actuarial certification is needed when COBRA periods are of longer duration (e.g., to age 65 or beyond) because increments and decrements are significant; it is not needed for short-duration periods such as 18 months
- •Actuarial certification is never required for FAS 112 reserves because the present-value computation is straightforward
Show answer
Actuarial certification is needed when COBRA periods are of longer duration (e.g., to age 65 or beyond) because increments and decrements are significant; it is not needed for short-duration periods such as 18 months
The course states that FAS 112 reserves need not be actuarially certified if the COBRA continuation periods are of short duration (e.g., 18 months). However, where retirees are reclassed as COBRAs and periods are longer (to age 65 or beyond), FAS 112 reserves should be actuarially certified because the impact of increments and decrements will be significant.
- 81
The course describes four scenarios regarding whether FAS 112 applies to the employer's liability resulting from insufficient COBRA premiums. In which scenario do the outside auditors wish FAS 112 to apply but the employer objects?
- •In all four scenarios, the outside auditors agree that FAS 112 does not apply because COBRA premiums are always sufficient by regulation
- •In one scenario, the outside auditors wish it to apply but the employer objects and the auditors acquiesce; in another, the auditors wish it to apply with or without the employer's acquiescence
- •In only one scenario do auditors and employers disagree, and it is always resolved in favor of the employer
- •The outside auditors never advocate for FAS 112 application; it is always the employer that wishes to recognize the liability
Show answer
In one scenario, the outside auditors wish it to apply but the employer objects and the auditors acquiesce; in another, the auditors wish it to apply with or without the employer's acquiescence
The course lists four scenarios: (1) FAS 112 not applied due to immateriality, (2) not applied because auditors honor the plan document's identical funding treatment, (3) deemed not to apply because auditors wish it to apply but employer objects and auditors acquiesce, and (4) deemed to apply because auditors wish it to apply, with or without employer acquiescence.
- 82
According to COBRA court decisions, waiving COBRA rights is acceptable under what condition, and what happens when the COBRA participant is incapacitated?
- •Waiving is acceptable as long as it is not done under duress; COBRA election rights should be frozen while the participant is incapacitated
- •Waiving is acceptable only if approved by the plan administrator in writing; incapacitated participants permanently forfeit COBRA rights
- •Waiving is never acceptable under any circumstance; incapacitated participants must have a guardian elect within 30 days
- •Waiving requires DOL approval and a 7-day cooling-off period; incapacitation has no effect on the election timeline
Show answer
Waiving is acceptable as long as it is not done under duress; COBRA election rights should be frozen while the participant is incapacitated
The course states that waiving COBRA rights is entirely acceptable as long as it is not done under duress. COBRA election rights should be frozen while the COBRA participant is incapacitated, and the suspension would be lifted when a guardian is appointed.
- 83
A self-funded health plan fails to offer COBRA. According to the court decisions discussed in the course, what financial consequence may the employer face beyond statutory penalties?
- •The employer faces only the standard statutory penalties; no additional claims liability attaches
- •The employer is required to provide fully insured replacement coverage at its own expense for the duration of what would have been the COBRA period
- •The employer may have to pay for medical claims incurred by the employee, former employee, spouse, or children, and those payments may not be covered by the employer's stop-loss policy
- •The stop-loss carrier is automatically liable for any claims the employer must pay due to the COBRA failure
Show answer
The employer may have to pay for medical claims incurred by the employee, former employee, spouse, or children, and those payments may not be covered by the employer's stop-loss policy
The course states that failure to comply with COBRA could result in an employer having to pay for medical claims incurred by the employee, former employee, spouse, or children. Those payments may not be covered by the stop-loss policy because the payments may be paid outside of the medical plan that relates to the stop-loss policy.
- 84
A participant was kept on the employer's plan as an extended disability participant due to administrative error, when the correct status should have been COBRA. What did the court hold?
- •The administrative error voided all coverage retroactively, and the employer owed nothing beyond the qualifying event date
- •The court required the employer to maintain both disability continuation and COBRA simultaneously for the full statutory period
- •The employer was liable for the full extent of coverage provided under the disability continuation because it had created a reasonable expectation
- •The employer was not liable for additional coverage beyond what COBRA would have provided
Show answer
The employer was not liable for additional coverage beyond what COBRA would have provided
The course states that when a participant was kept on the plan as an extended disability participant by administrative error (instead of as a COBRA), the court held that the employer was not liable for additional coverage beyond what COBRA would have provided.
- 85
According to COBRA court decisions, which entity determines disability for COBRA extension purposes?
- •The Department of Labor, based on its own disability assessment criteria
- •The participant's treating physician, subject to plan administrator review
- •The plan's independent medical examiner, using the plan's definition of disability
- •The Social Security Administration, not the participant's physician
Show answer
The Social Security Administration, not the participant's physician
The course states in the court decisions section that it is the Social Security Administration, not the participant's physician, that determines disability for COBRA purposes.
- 86
An employer's self-funded plan document failed to specify that COBRA could be terminated if the beneficiary became eligible for Medicare. What was the court's ruling?
- •The court applied the statutory COBRA termination provisions and allowed the employer to terminate despite the document gap
- •The court required the employer to amend the plan document prospectively but allowed termination for the current beneficiary
- •The court ruled that Medicare eligibility automatically terminates COBRA regardless of plan document language
- •The document oversight was held against the employer, meaning COBRA could not be terminated despite the Medicare eligibility
Show answer
The document oversight was held against the employer, meaning COBRA could not be terminated despite the Medicare eligibility
The course states that when an employer's self-funded plan document failed to specify that COBRA could be terminated if the beneficiary became eligible for Medicare, this document oversight was held against the employer. This underscores the importance of precise plan document drafting.
- 87
Regarding COBRA and MEWAs, what determines whether a participating employer must provide COBRA continuation coverage?
- •Both the employer's size and the MEWA's total enrollment must exceed 20 for COBRA to apply
- •COBRA always applies to MEWAs regardless of individual employer size because the MEWA is the plan sponsor
- •The size of the MEWA as a whole determines COBRA applicability; individual employer size is irrelevant
- •The size of the participating employer, not the size of the MEWA, is the determinant; this position has been adopted by Treasury's COBRA regulations
Show answer
The size of the participating employer, not the size of the MEWA, is the determinant; this position has been adopted by Treasury's COBRA regulations
The course states that courts have held the size of the participating employer, not the size of the MEWA, is the determinant in qualifying for COBRA. This position has also been adopted by the Treasury's COBRA regulations.
- 88
An employer denied COBRA to a terminated employee claiming gross misconduct. The employee had resigned in the face of an alleged act of misconduct. What did the court hold?
- •A resignation in the face of an alleged act of misconduct was held to be not sufficient reason to deny COBRA
- •The court held that the employer had discretion to classify any resignation tied to misconduct allegations as gross misconduct
- •The resignation converted the qualifying event from termination to voluntary quit, eliminating COBRA rights entirely
- •The resignation was treated as an admission of gross misconduct, validating the COBRA denial
Show answer
A resignation in the face of an alleged act of misconduct was held to be not sufficient reason to deny COBRA
The course states that a resignation in the face of an alleged act of misconduct was held to be not sufficient reason to deny COBRA. The employer may not arbitrarily deem a termination as due to gross misconduct to avoid COBRA obligations.
- 89
An employer justified denying COBRA based on a good-faith belief that the employee had committed gross misconduct. What was the court's response?
- •The court accepted the good-faith belief as a valid defense and upheld the COBRA denial
- •The court held that a good-faith belief in misconduct was not sufficient reason to deny COBRA
- •The court held that good-faith belief shifts the burden of proof to the employee to demonstrate no misconduct occurred
- •The court ruled that good-faith belief is sufficient if the employer documents the basis for the belief within 30 days
Show answer
The court held that a good-faith belief in misconduct was not sufficient reason to deny COBRA
The course states that an employer's justification in denying COBRA was a good-faith belief in misconduct, but the court held this was no sufficient reason. To deny COBRA for gross misconduct, it must pass the likelihood test.
- 90
Criminal charges were brought against an employee and COBRA was denied due to gross misconduct. The charges were later dropped. According to the court decision discussed in the course, what was the outcome?
- •COBRA did not have to be reinstated even though the criminal charges were dropped
- •COBRA had to be reinstated prospectively from the date the charges were dropped, with no retroactive coverage
- •COBRA had to be reinstated retroactively to the date of the original qualifying event
- •The employer had to offer a new 60-day election period starting from the date the charges were dropped
Show answer
COBRA did not have to be reinstated even though the criminal charges were dropped
The course states that when criminal charges were brought against the employee and COBRA was denied due to gross misconduct, COBRA did not have to be reinstated when such charges were later dropped. This is a significant holding regarding the finality of gross misconduct determinations.
- 91
A participant lost COBRA rights due to gross misconduct. What did the court hold regarding the participant's dependent spouse?
- •The dependent spouse also lost COBRA rights because the family election is treated as a single unit
- •The dependent spouse could elect COBRA only if the spouse independently demonstrated no knowledge of the misconduct
- •The dependent spouse retained COBRA rights but only for an 18-month maximum, not the 36-month divorce period
- •The loss of COBRA rights due to gross misconduct did not extend to the dependent spouse's option
Show answer
The loss of COBRA rights due to gross misconduct did not extend to the dependent spouse's option
The course states that a participant lost COBRA rights due to gross misconduct, but such loss did not extend to the dependent spouse's option. The spouse retains independent COBRA election rights.
- 92
Under the 'mailbox rule' as applied to COBRA notices, what is the employer's obligation and what presumption does the court apply?
- •The employer must send the notice and confirm receipt by telephone; the court presumes receipt only after verbal confirmation
- •The employer must send the notice and follow up within 14 days if no response; the court presumes non-receipt if no follow-up occurs
- •The employer must send the notice by certified mail and obtain proof of delivery; the court will not presume receipt without a signature
- •The employer must send the notice; it is not necessary that the notice be received. If properly mailed to the last-known address, the court will presume it was received
Show answer
The employer must send the notice; it is not necessary that the notice be received. If properly mailed to the last-known address, the court will presume it was received
The course states that the mail-of-notice rule is that the notice must be sent; it is not necessary that it be received. The court will presume that notices, properly mailed, were actually received (the mailbox rule). The employer's obligation ends with the mailing, not the receiving.
- 93
An employer sent a COBRA notice by certified mail, knowing it would not be received, even though the address was the last-known address. What did the court hold, and what practical lesson does the course draw?
- •The court held against the employer because using certified mail while knowing delivery would fail demonstrated bad faith
- •The court held for the employer but required future notices to be sent by registered mail with return receipt
- •The court held for the employer; the course notes this indicates the importance of maintaining accurate records for mailings, which do not need to be by certified mail
- •The court held the notice invalid because the employer's knowledge of likely non-receipt defeated the mailbox rule presumption
Show answer
The court held for the employer; the course notes this indicates the importance of maintaining accurate records for mailings, which do not need to be by certified mail
The course states that an employer sent a COBRA notice by certified mail, knowing it would not be received, but the address was the last-known address. The court held for the employer. The course draws the lesson that this indicates the importance of maintaining accurate records for mailings, which do not need to be by certified mail.
- 94
Was a plan administrator obligated as an ERISA fiduciary to tell a dependent spouse of COBRA rights when the employee was terminated and was having expensive health problems, even though the spouse only inquired about death benefits?
- •No, because the fiduciary obligation runs only to the employee, not to dependent beneficiaries
- •No, because the spouse's inquiry was limited to death benefits, and the plan administrator had no obligation to volunteer unrelated information
- •Yes, but only because the employee was incapacitated; otherwise the plan administrator could have relied on the employee to inform the spouse
- •Yes, the court ruled there was an ERISA fiduciary obligation to notify the spouse of COBRA
Show answer
Yes, the court ruled there was an ERISA fiduciary obligation to notify the spouse of COBRA
The course states that when a spouse inquired about possible death benefits and the employee was terminated with expensive health problems, the court ruled that there was an ERISA fiduciary obligation to notify the spouse of COBRA rights. The plan administrator cannot remain silent when a beneficiary makes a relevant inquiry.
- 95
According to the court decisions, notice penalties for COBRA violations track which unit?
- •Each individual beneficiary — penalties are assessed per person affected by the infraction
- •The employer's total workforce — penalties scale with the number of active employees
- •The participant, not the beneficiary — an infraction involving a family will be no more costly than a similar infraction against an individual
- •The plan as a whole — a single penalty is assessed regardless of how many participants are affected
Show answer
The participant, not the beneficiary — an infraction involving a family will be no more costly than a similar infraction against an individual
The course states that notice penalties track the participant, not the beneficiary. An infraction involving a family will be no more costly than a similar infraction against an individual.
- 96
In divorce-related COBRA cases, a participant was ordered by the court to pay his former spouse's COBRA premiums but then filed for bankruptcy. What was the outcome?
- •The bankruptcy court reduced the COBRA premium obligation to 50% of the original amount
- •The bankruptcy filing discharged the obligation to pay COBRA premiums as an unsecured debt
- •The employer was required to absorb the COBRA premiums for the duration of the former spouse's coverage
- •The participant was not able to avoid the court-ordered obligation to pay his former wife's COBRA premiums by filing for bankruptcy
Show answer
The participant was not able to avoid the court-ordered obligation to pay his former wife's COBRA premiums by filing for bankruptcy
The course states that a participant was not able to avoid a court-ordered obligation to pay his former wife's COBRA premiums by filing for bankruptcy. This indicates that COBRA premium obligations arising from divorce decrees are non-dischargeable in bankruptcy.
- 97
The federal government's CHAMPUS (now TRICARE) program was considered by the court in the context of COBRA. How was it classified?
- •TRICARE is considered equivalent to Medicare for purposes of COBRA termination
- •TRICARE is considered other coverage only when the participant is on active military duty
- •TRICARE is considered other group health coverage that terminates COBRA eligibility
- •TRICARE is not considered other group health coverage for COBRA purposes
Show answer
TRICARE is not considered other group health coverage for COBRA purposes
The course states that the federal government's CHAMPUS (now TRICARE) program is not considered other group health coverage for COBRA purposes. This means a participant covered by TRICARE may still maintain COBRA continuation coverage.
- 98
The Supreme Court addressed the issue of double coverage under COBRA. What was the Court's holding, and how did it expand upon prior lower court rulings?
- •The Supreme Court deferred to the DOL and held that double coverage is a matter of administrative discretion, not statutory right
- •The Supreme Court held that double coverage in place at the time of the qualifying event could be continued after the COBRA-qualifying event, expanding the earlier position that dual coverage was permitted where it covered gaps
- •The Supreme Court held that double coverage is permitted only for the first 18 months and must be coordinated thereafter
- •The Supreme Court overruled lower courts and held that double coverage is never permitted under COBRA regardless of circumstances
Show answer
The Supreme Court held that double coverage in place at the time of the qualifying event could be continued after the COBRA-qualifying event, expanding the earlier position that dual coverage was permitted where it covered gaps
The course states that where dual coverage is arranged to cover gaps of coverage, courts permit COBRA in addition to other coverage. This position was later expanded by the Supreme Court, which held that double coverage in place at the time of the qualifying event could be continued after the COBRA-qualifying event.
- 99
According to the COBRA court decisions, which of the following correctly describes the liability allocation when a TPA or COBRA vendor makes an error?
- •Even though the TPA or COBRA vendor made the error, it is the plan administrator—as ERISA plan administrator—that must pay the penalties; however, the plan administrator, not the plan itself, bears the legal burden
- •Liability is split equally between the plan administrator and the TPA/vendor under a contributory negligence standard
- •The plan itself, rather than the plan administrator, bears the legal burden because COBRA liabilities attach to the plan entity
- •The TPA or vendor bears full liability for its own errors, and the plan administrator is shielded by the delegation of duties
Show answer
Even though the TPA or COBRA vendor made the error, it is the plan administrator—as ERISA plan administrator—that must pay the penalties; however, the plan administrator, not the plan itself, bears the legal burden
The course cites multiple court decisions establishing that when a third party or COBRA vendor makes an error, it is the employer as ERISA plan administrator that must pay the penalties. Additionally, it is the plan administrator, not the plan itself, that has the legal burden. The plan administrator suffers from errors made by TPAs or vendors to whom COBRA responsibilities were assigned.
- 100
Under the NAIC Insurance Information and Privacy Protection Model Act, within what timeframe must an insurer provide an individual with requested confidential information?
- •Within 15 business days of a written request, as to content but not source
- •Within 30 days of a written request, as to both content and source
- •Within 45 days of a written request, with the source disclosed only at the insurer's discretion
- •Within 60 days of an oral or written request, limited to content only
Show answer
Within 30 days of a written request, as to both content and source
The course states that under the NAIC model act, the insurer must give the individual, within 30 days of request, confidential information if requested in writing, both as to content and source. When provided and incorrect, the individual may seek to correct it.
CSFS is the Certified Self-Funding Specialist designation. These are my own practice questions, written while studying for the exam. This site is not affiliated with, endorsed by, or connected to the organisation that administers the CSFS designation, and nothing here is official exam content or a substitute for the course material.
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