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Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Federal COBRA

The consolidated omnibus budget reconciliation act (COBRA) is a federal program that provides temporary continuation of health insurance when employer-sponsored coverage is lost. Employers with 20+ employees are required to offer COBRA as part of their group health plan. Learn more about COBRA from the US Department of Labor's website.

State Continuation

Some states have developed their own version of continuation coverage. This is sometimes called "mini" COBRA, or in California, Cal-COBRA, and may extend the amount of time required for employers to offer continuation coverage. State continuation  usually applies to employers with fewer than twenty employees.

COBRA coverage with Gusto

If your health benefits are managed by Gusto, here's what we'll do to help with COBRA:

  • We’ll determine whether your company is subject to federal COBRA or state continuation laws.

  • We’ll provide an administrator for companies subject to COBRA to ensure that employees are handled correctly. (Note: if companies opt out, they’ll be responsible for all components of COBRA administration). Administration assistance for state continuation and COBRA comes at no additional cost to the company.

  • We’ll provide support for employers subject to state continuation.

  • The Summary Plan Document (SPD)—made available in your team’s Gusto accounts—provides initial notification of the right to continue coverage.

  • Your team will receive continuation notices when they’ve been dismissed from your company to make them aware of their rights and what to do in order to continue being covered after leaving the company. This notice will be available in the Documents section of their Gusto account, which they'll use if they choose to enroll in continuation coverage.

  • The SPD is available to employees in the Documents section of their Gusto accounts. 

  • Notices from our administrator or carrier partners are sent directly to the employee, typically via snail mail.

Deadline to enroll:

  • State continuation: In most states, terminated employees have 60 days from the date of lost coverage to enroll.

    • Note: some states may have shorter election windows.

  • COBRA: Terminated employees have 60 days from the date of lost coverage or the date COBRA election notices were received—whichever happens last—to enroll.

Cost: This will vary based on the plan. The employee is responsible for paying 100% of the premium and any additional administration fees, which can be up to 15% of the premium. If they choose to enroll, the payment between the employer and former employee is to be managed outside of Gusto. 

Plan Options: Employees are only eligible to enroll in lines of coverage they were actively enrolled in at the time of termination (i.e. if they previously waived dental coverage, they can’t enroll in dental COBRA coverage). However, if they were previously enrolled in more than one line of coverage (i.e. medical & dental) they can choose which lines to continue (i.e. continue medical & drop dental).


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