July Question of the Month: Does hitting 20 employees mid-year trigger COBRA eligibility?


Dear Gina, 

My company just reached 20 employees this month (July).  Are we supposed to offer COBRA now? – Signed, Every small business owner everywhere!


We get this question ALL the time. The answer is: NO!

An employer’s eligibility for COBRA is always determined on January 1st and remains in effect for the entire calendar year even if they drop down to only 1 employee during that calendar year.  That said, even though you reached 20 employees in July, you may or may not be eligible when the 1/1/2018 determination rolls around. To achieve COBRA eligibility for 2018, you must have had at least twenty full-time employees for fifty percent of the business days in 2017. Therefore, if you are nearing that COBRA employee threshold, keeping detailed records of how many employees you have each month is critical.

There are other factors that come into play with respect to COBRA eligibility as well. Here are the basic rules for counting the number of employees to determine if an employer must offer COBRA benefits:

  • All full-time and part-time employees are counted when determining if an employer had at least twenty employees in the previous calendar year.
  • Part-time employees are counted as fractions of full-time employees based on the number of hours worked by typical full-time employees in that business. For example, if a full-time employee normally works a 6-hour day, then two part-time employees each working three hours a day equal one full-time employee.
  • Employers may use either a daily period or a pay period as the basis on which to count these employees. But whichever period is chosen, it must be used uniformly for the entire year.
  • If the number of employees is determined on a daily basis, each full-time employee is counted as one employee. A full-time employee works the number of hours (up to 8 per day, 40 per week) considered normal for that business.
  • If the number of employees is determined on the basis of a pay period, the employer must count the number of full-time employees working during that period, plus the number of part-time employees and the hours worked by each during that entire pay period.
  • Only “common-law” employees are counted — not independent contractors, self-employed persons and corporate directors – even if these individuals receive employee benefits, such as being covered on the group health plan.
  • Common law employees who are nonresident aliens must be counted when determining whether an employer is subject to COBRA requirements.

Send all your COBRA questions my way!

– Gina

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