Human Resource Blog

Insurance Benefits Out of Last Paycheck

I live in Colorado. My brother received his 1 year review plus a raise on Feb. 12th. By Feb. 22 he was termed. The reason they gave him was they were eliminating his position. They did not give him a final check at the time of termination. He got his final check a week later and had insurance premiums deducted from his check. He also received a check for the balance of his earned vacation and insurance premiums were taken out of that check too. He has recently received a letter from his insurance company stating that he has lost his coverage when he was terminated. The company HR rep has told him the same thing. Is this right??

If the situation is as you describe, the employer has likely violated several laws including the federal COBRA law and the Colorado Wage Act.

 

If the employer has 20 or more employees, than they are required under federal law to offer terminated employees an extension of their group health insurance benefits for up to 18 months under COBRA. That’s the Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provision passed in 1986. 

 

COBRA permits workers who have been terminated to keep their group health insurance coverage. Employees have 60 days after termination to enroll in the COBRA program. If the employee elects to take advantage of COBRA coverage, he or she has 45 days to make the first payment.

 

An employee who opts for COBRA coverage must pay the entire insurance premium, including any portion of it that was previously paid by the employer. Employers may add a 2% administrative fee, as well. Still, COBRA coverage is almost always cheaper than comparable individual health insurance.

 

There is one exception. Under federal law, employers are not required to offer COBRA coverage to workers who are terminated for gross misconduct such as theft, making threats or having weapons at work. (Is it possible that your brother is being less than truthful about the reason for his termination?)

 

The Colorado Wage Act limits the deductions that an employer can make from a worker’s paycheck. From your description, it sounds as if the employer has made an error and deducted too much for insurance premiums.

 

Almost all companies deduct insurance premiums from an employee’s wages in advance. So, a premium will be deducted on Feb. 14 or earlier for insurance coverage that starts on Feb. 15.

 

If a full insurance premium was deducted from the employee’s check on Feb. 29, and again from an additional check 2 weeks later, the employee should normally have insurance coverage at least until March 15 or March 30.

 

It’s possible that the employer simply made a mistake and deducted an extra insurance premium from the worker’s final paycheck. To determine that, the employee needs to find out the date his insurance coverage ended. Then he should compare that to the date of the final insurance deduction.

 

If there seems to be a discrepancy in the two, and the employer refuses to resolve it, the worker should contact the Colorado Department of Labor and Employment, Division of Labor at 303-318-8441. They enforce the Colorado Wage Act.