Accounts
COBRA Coverage
Continuation of employer group health coverage after a qualifying event
Key takeaways
- Lets you keep the employer’s group health plan after job loss, reduced hours, or another qualifying event.
- You pay the full premium — both shares — plus up to a 2% administrative fee.
- Continuation typically runs 18 months, extending to 29 or 36 months in defined circumstances.
What it is
Continuation of employer group health coverage after a qualifying event. The account is a structure; the investments it holds are separate and carry their own risks.
How it works
- A qualifying event occurs and the plan issues an election notice.
- You have 60 days to elect coverage, and it applies retroactively to the date coverage ended.
- Premiums are paid monthly to the administrator to keep coverage in force.
Eligibility
Generally applies to group health plans of employers with 20 or more employees. Many states impose similar rules on smaller employers.
Contributions and funding
Paid by the qualified beneficiary: up to 102% of the full premium (150% during a disability extension).
What it can hold
Not a custody account — an administered continuation of group health coverage.
Taxes and reporting
Premiums are generally paid with after-tax dollars, though they may count toward the medical expense deduction.
Withdrawals and distributions
Coverage continues while premiums are timely paid, until the maximum period ends or other coverage begins.
Risks and limitations
- The unsubsidized cost is often far higher than expected
- Election and payment deadlines are strict; a late payment ends coverage
- Marketplace coverage is sometimes cheaper — compare before electing
Frequently asked questions
How long do I have to decide?
Sixty days from the later of the notice date or the loss of coverage. Coverage is retroactive if you elect.
Can I drop it later?
Yes, though you generally cannot re-enroll.
Does it cover my family?
Each qualified beneficiary has an independent right to elect.
Educational only. This page is general information, not individualized investment, legal, or tax advice. Rules depend on your account type, transaction, tax year, and circumstances — consult a qualified professional.