Most brokers know the job-loss SEP. An employee gets laid off, loses coverage, and has 60 days to enroll on the Marketplace. What gets less attention is the employer plan termination SEP: the employer cancels the group health plan entirely while employees remain on payroll. The trigger is the same regulation, the window is the same 60 days, but the dynamics are different enough to warrant a separate workflow.
Key Takeaways
- Employer plan termination triggers a 60-day SEP under 45 CFR 155.420(d)(1). The window starts on the last day the group plan is in force, not the date the employer announces the termination.
- Employees who were blocked from APTC because their employer plan was affordable become eligible for APTC as soon as the plan no longer exists. No plan, no affordability test.
- This SEP is different from job-loss SEP. The employee is still employed and their W-2 income is unchanged. There is no job-loss COBRA clock running alongside the Marketplace window.
- Small employers under 20 employees are generally not required to offer COBRA continuation. For those employees, the Marketplace SEP is the only continuation path.
- Run APTC quotes before the group plan ends. Employees need a real number to act within the 60-day window.
What triggers the SEP and when the clock starts
Under 45 CFR 155.420(d)(1), loss of minimum essential coverage is a qualifying life event that opens a Marketplace SEP. An employer terminating its group health plan is a loss of coverage event. Every employee who was enrolled in that plan has a 60-day enrollment window starting on the last day the plan is in force.
The announcement date does not start the clock. The termination date does. An employer who notifies employees in April that coverage ends June 30 has given them lead time to shop, but the SEP window does not open until July 1. Brokers who understand this can run quotes in May and June, have enrollments ready to submit, and get clients covered without any gap. Brokers who wait for the call after July 1 are working on a compressed timeline from day one.
For a broader look at SEP triggers and documentation requirements, see how brokers handle SEP qualifying life events.
The APTC block that disappears with the plan
This is the part most brokers miss, and it changes the math for a significant share of employees. Under ACA affordability rules, an employee is blocked from receiving APTC on the Marketplace if their employer offers self-only coverage that costs no more than a set percentage of household income. For 2026, that threshold is 9.02 percent of household income. An employee who earns $50,000 and is offered self-only coverage at $210 per month or less cannot claim APTC, even if family coverage through the employer costs far more.
When the employer plan terminates, the block vanishes. There is no plan to apply the test to. The employee walks into the next OEP or SEP as if the employer plan never existed. Their APTC eligibility is calculated purely on household income versus the federal poverty level and the cost of the SLCSP in their rating area. For many employees who were quietly ineligible for months or years, this is the first time a Marketplace plan is genuinely affordable. For a detailed look at how the affordability test works before that point, see the ACA employer coverage affordability test.
Termination SEP vs job-loss SEP
The two SEPs look similar from the outside. They are meaningfully different for the broker doing the intake call.
| Factor | Plan Termination SEP | Job-Loss SEP |
|---|---|---|
| SEP trigger | Employer cancels the group plan. Employee retains their job. | Employee loses their job or has hours reduced below coverage threshold. |
| Regulatory citation | 45 CFR 155.420(d)(1) — loss of coverage SEP | 45 CFR 155.420(d)(1) — same provision, different qualifying event |
| COBRA availability | Depends on employer size. Employers under 20 employees generally not required to offer COBRA. | Generally available from employers with 20+ employees for up to 18 months. |
| Income stability | Employee is still employed. Income projection for APTC is based on current wages. | Income may drop significantly. Projection requires estimating annual income through year-end. |
| APTC affordability block | Block disappears the day the group plan ends. Employees become newly eligible for APTC. | Block also disappears. But income change complicates APTC calculation. |
| Window length | 60 days from last day of group coverage. | 60 days from last day of employer-sponsored coverage. |
The income stability difference is where brokers save or lose time. A job-loss SEP requires projecting annual income through the rest of the year, accounting for unemployment benefits, potential re-employment, and any severance. A plan termination SEP usually does not. The employee is still working at the same wage. The APTC calculation is straightforward. Run the quote, confirm the income, submit the enrollment.
How APTC changes for employees who were previously blocked
Example: three employees at the same company, different incomes and different outcomes when the group plan ends.
| Employee | Before Termination | After Termination |
|---|---|---|
| Employee, age 42, income $48,000 (290% FPL) | Employer plan offered at $180/month employee share. Passes affordability test at 9.02% threshold. APTC blocked. | No employer plan. Marketplace Silver plan net premium after APTC: approximately $120/month. APTC unlocked. |
| Employee, age 55, income $62,000 (374% FPL) | Employer plan offered at $190/month. Passes affordability test. APTC blocked. | No employer plan. Marketplace Silver net after APTC: approximately $310/month. APTC reduces gross premium but does not eliminate it at this income. |
| Employee, age 38, income $32,000 (194% FPL) | Employer plan offered at $210/month. Fails affordability test at this income (exceeds 9.02% threshold). APTC already available. | No employer plan. APTC eligibility unchanged. Silver net premium approximately $60 to $80/month. |
Illustrative examples. Actual APTC amounts depend on rating area, household composition, and the specific plan year benchmark. The 9.02% affordability threshold applies for 2026.
The third scenario above is often overlooked. Employees whose employer plan already failed the affordability test were eligible for APTC even before the termination. For them, the termination is a coverage change but not an APTC status change. The relevant question for their intake call is whether their income has changed, not whether the plan ended.
COBRA when the employer terminates the plan
COBRA applies when an employer with 20 or more employees terminates a group health plan. Loss of coverage due to plan termination is a qualifying COBRA event under ERISA. Employees have 60 days from receiving the COBRA election notice to elect continuation, and coverage can be retroactive to the termination date.
COBRA and the Marketplace SEP run on overlapping but independent timelines. The Marketplace SEP clock starts on the termination date. The COBRA election clock starts on the date the employee receives the election notice, which may arrive days or weeks after the termination. A client can evaluate both options simultaneously, but electing COBRA does not pause or extend the Marketplace SEP window.
For employers with fewer than 20 employees, federal COBRA generally does not apply. Some states extend COBRA-like rights to smaller employers through mini-COBRA laws, but the duration and rules vary. In those cases, the Marketplace SEP is the primary continuation option and brokers should move quickly to present quotes before the window closes.
The proactive broker workflow
Tools like Quotit surface group renewal data, but they are not built to alert brokers when a small employer group plan is cancelling. That information usually arrives as a phone call from the employer, a forwarded termination notice, or nothing at all until an employee calls asking what to do.
Brokers who build a proactive system around employer plan terminations do three things. First, they ask every small employer group client once a year whether they are evaluating dropping the plan. Second, they have a ready-made workflow for handling the SEP: a short intake call, an APTC quote, and a same-session enrollment for employees who qualify. Third, they know which of their employer contacts have fewer than 20 employees, because those employees will have no COBRA safety net and need a Marketplace enrollment or they have no coverage at all.
The 60-day window sounds long until the employer calls on day 45. Run quotes early. Confirm income. Get enrollments submitted before the window compresses.
FAQ
Questions brokers field when an employer terminates the group health plan.
Does the SEP window open on the date the employer announces the termination or the last day of coverage?
The 60-day SEP window opens on the last day of coverage, not the announcement date. If an employer announces in March that the group plan will end June 30, employees have from July 1 through August 29 to enroll on the Marketplace. The announcement date does not start any clock. Brokers should note the actual termination date on the group plan documents and set a reminder 45 days before the window closes.
If an employee was blocked from APTC before the termination, do they need to do anything special to claim it after?
No special process is required. When they enroll on the Marketplace during the SEP, they complete the standard application and attest to having no other minimum essential coverage. Without an active employer plan, the Marketplace does not apply the affordability test. APTC is calculated based on household income and the SLCSP in their rating area. The broker should make sure the application does not carry over any prior employer plan information that could incorrectly reapply the block.
Is COBRA required when an employer terminates the group plan but does not lay off employees?
COBRA continuation is required for employers with 20 or more employees, regardless of whether the termination is due to layoffs or a business decision to cancel coverage. The loss of coverage due to plan termination is a qualifying event under ERISA. However, employers with fewer than 20 employees are generally not subject to federal COBRA. Some states have mini-COBRA laws that extend similar rights to employees of smaller employers. The Marketplace SEP is available in either case.
How does an employer plan termination affect an employee who added dependents to the group plan mid-year?
All covered individuals lose coverage on the same date. Each covered person qualifies for the Marketplace SEP on that date. Dependents can be enrolled with the employee on a Marketplace family plan or separately. If any dependent qualifies for Medicaid or CHIP, the broker should assess that option before enrolling them on a Marketplace plan, since Medicaid eligibility is separate from APTC eligibility and the cost is usually lower.
Can an employee on an employer plan that is terminating enroll immediately, or do they have to wait until the last day of coverage?
They can enroll at any point during the 60-day SEP window, including before the coverage ends. Marketplace coverage effective dates under an SEP are generally the first of the month following plan selection. If the group plan ends June 30 and the employee enrolls on the Marketplace on June 15, coverage typically begins July 1. There is usually no gap. The broker should confirm the specific effective date rules with the Marketplace for the employee's state.
