Fourteen Employees, a Pregnancy Leave, and a 23-Year-Old Dependent
Tanya has worked full time for four years at a New Jersey bakery that employs 14 people, all covered on the company's group health plan. She is 34 and pregnant; on her doctor's orders she stops working at 28 weeks and goes on New Jersey Temporary Disability Insurance. Her doctor expects her to be out 14 weeks in total. Tanya also wants to stay home unpaid for another 12 weeks after the baby arrives. The owner asks whether Tanya can keep her health coverage, who pays for it, and for how long. Tanya's 23-year-old daughter is on the plan and just graduated from college with no job lined up.
1. Which continuation law applies to the bakery, and what are the terms?
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Federal COBRA does not apply - it covers employers with 20 or more employees, and the bakery has 14.
New Jersey's small-employer continuation law does. It covers employers with 2 to 50 employees and provides up to 18 months of continuation at the group rate, with the qualified beneficiary paying up to 102% of the premium (the extra 2% is a permitted administrative charge).
Operational points the owner must understand:
- The employee must receive written notice of the right to continue; verbal notice is not enough, and the plan document governs both the notice window and the election period.
- Coverage ends earlier than 18 months if she fails to pay, becomes covered under another group plan, becomes entitled to Medicare, or the employer terminates the group plan entirely.
- Taking unpaid leave does not by itself end coverage; check the plan's leave-of-absence rule, and remember that the employer may require her to pay her share - and possibly the employer share under the plan's leave policy - while she is not working.
The 18-month clock comfortably covers the 14 weeks of disability plus 12 weeks of unpaid leave.
2. How do New Jersey TDI and Family Leave Insurance fit together for her 14 + 12 weeks, and who funds them?
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TDI: covers her own disability from pregnancy complications or recovery, paying 85% of her average weekly wage up to the state maximum, for up to 26 weeks. Her 14 weeks sits inside that window.
FLI: when TDI ends, Family Leave Insurance covers bonding with a new child for up to 12 weeks at the same 85%/state-maximum formula - which lines up almost exactly with the extra 12 weeks she wants.
They run consecutively, not simultaneously. She cannot collect both for the same day; the claim design should be TDI first, then an FLI bonding claim beginning the day after TDI ends.
Funding: both are employee-funded through payroll contributions. The employer's cost is administrative - withholding and filing - not a premium the bakery bears.
Common client error: assuming pregnancy is covered by workers' compensation. It is not; TDI is the correct program. The producer should also confirm the health premium during unpaid leave is actually being billed and paid, because nonpayment is the fastest way to end a continuation period.
3. What happens to the 23-year-old daughter when she graduates and has no job?
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Nothing yet. Under the ACA, dependent coverage must be offered to age 26 regardless of student status, financial dependence, marital status (in New Jersey, regardless of marriage), or whether the dependent has an offer of coverage elsewhere. "No job lined up" is irrelevant until her 26th birthday.
At 26, coverage ends on her birthday or at the end of the month in which it falls, depending on the plan document.
Then:
- Losing dependent status is a qualifying event, so she gets a special enrollment period (generally 60 days) to enroll in an individual plan through the marketplace, with any premium assistance determined on her own income.
- She may also be offered continuation as a dependent who lost eligibility - up to 18 months under the small-employer continuation law, usually at a much higher cost than a subsidized marketplace plan.
- A plan cannot charge more or exclude her for a pre-existing condition; guaranteed availability applies in the individual market.
Advise Tanya to get the exact termination date in writing and start the marketplace application before the 60-day window closes.