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Can we pay for a terminated employee’s COBRA premiums?
Yes, this is not uncommon. We recommend that any continued coverage under a severance agreement be offered under COBRA. When an employer pays for or reimburses the former employee for the cost of the COBRA premium, the value is not taxable. However, there may be tax consequences to the former employee if your plan is self-insured and the former employee was highly compensated, or a domestic partner is also covered. When deciding for how long to subsidize COBRA, employers should also consider the deadlines that the former employee has to enroll in other coverage, such as a spouse's plan, new employer coverage, or the Health Insurance Marketplace.