COBRA
On May 26, 2004, the Department of Labor (“DOL”) issued final rules and regulations on the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Satisfaction of either the proposed rules or the final rule constitutes “good faith” compliance.
(Please click here to access the July 2003 Legislative Update for a Summary of the proposed changes.)
Applicability of the Final Regulations
Plans must comply with the notice obligations provided in the final regulations on the first day of the first plan year following November 26, 2004. This means that December 1, 2004, is the earliest date of mandatory compliance for group health plans whose plans renew on December 1, 2004.
SUMMARY OF FINAL COBRA REGULATIONS
Initial COBRA Notice (COBRA general notice)
The recently issued final COBRA rules and regulations:
- Confirm a 90-day period for furnishing the COBRA general notice (initial) on the earliest of: 1) the date on which the covered employee or spouse first becomes covered under the plan, or if later 2) the date that is 90 days after the date on which the plan participant first becomes eligible to continuation coverage (COBRA) requirements 3) the date after the employee or spouse are covered under the plan and they experience a qualifying event.
- Allow an employer to send and condense two current notices, the election notice and the COBRA general notice, if a qualifying event occurs within the 90-day initial period.
- Eliminate the identification of both the plan administrator and the COBRA administrator from the COBRA general notice. The COBRA general notice is compliant if it provides the name, address and phone number of a party or parties who will provide information about the plan and answer COBRA questions upon request.
- Eliminate the information regarding how qualified beneficiaries must provide notice of a second qualifying event from the general notice. This information is no longer required because it is already included in the group health plan’s Summary Plan Description (“SPD”) and COBRA election notice distributed to qualified beneficiaries. While no longer necessary, a plan is not prohibited from including more information than necessary regarding the plan/COBRA administrator and/or information regarding the notice obligations of qualified beneficiaries experiencing second qualifying events. Thus, the finalized rules establish minimum standards that must be satisfied.
- Eliminate the reference to COBRA coverage beginning dates from the COBRA general notice. A plan may choose to offer COBRA on either the date of the qualifying event or the date of a participant’s loss of coverage under the group health plan.
- Confirm that a single general notice is permitted to be sent to the place of residence of the qualified beneficiary and spouse if their coverage starts on the same date. An employer may send a single notice to multiple qualifying beneficiaries if it is known that they reside at a single address and the address is the most current available. A single notice is not permitted if a spouse's coverage under the plan starts at a later date, unless the spouse's coverage commences before the date on which the initial notice must be delivered to the employee.
- Confirm that in-hand delivery of the COBRA general notice to an employee is acceptable, but in-hand delivery of the notice to a spouse is unacceptable. A notice that is hand delivered to an employee will not satisfy the COBRA notification requirements for a spouse or other qualified beneficiaries, but will satisfy notification requirements for the employee.
- Confirm the use of a “single disclosure” document as a valid form of notifying participants. A single disclosure document would be an SPD, as long as the SPD contains the COBRA general notice.
Notice Requirements for An Employer
The recently issued final COBRA rules and regulations:
- Clarify that for plans in which continuation begins with the date of loss of coverage, the 30-day period within which an employer must notify the plan administrator of the qualifying event begins with the date of the plan participant’s loss of coverage.
- Confirm that notice of a qualifying event must be provided by the employer to the plan administrator no later than 30 days after the date on which the qualified beneficiary loses coverage under the plan due to a qualifying event.
- Recommend that an employer implement “reasonable procedures” for an employee to follow in order to notify the employer of a second qualifying event.
- Establish that in the absence of “reasonable procedures” for an employee to notify the employer of a qualifying event, oral notice by an employee of a qualifying event will constitute actual notice.
- Provide that a plan may reject a qualified beneficiary’s notice of a qualifying event as untimely if following a request to provide the information required by the plan’s procedures, the covered employee or qualified beneficiary fails to provide the requested information.
Notice Requirements for Covered Employees and Qualified Beneficiaries
The recently issued final COBRA rules and regulations:
- Confirm that covered employees and qualified beneficiaries are required to provide notice to a plan administrator when they experience a qualifying event. The notice by an employee to the employer must be furnished within the time limitations as set forth in the SPD, but the time period established by the employer may not be earlier than 60 days.
- Provide that the plan must allow an employee or a qualified beneficiary at least 60 days to provide notice of a qualified event that is:
- Divorce/legal separation
- Child ceasing t be a dependent under the plan
- the 1st qualifying event
- the 2nd qualifying event e.g. Medicare entitlement or a SSA determination of disability
- Establish that an employee must notify the employer of a qualifying event at least 60 days from the occurrence of the qualifying event. The 60-day mandatory notification rule that an employee must comply with may run from the later of either:
- the date of the qualifying event
- the date on which there is a loss of coverage
- the date the qualified beneficiary is informed via the SPD or the general notice of his /her obligations to provide notice to the employer of qualifying events and appropriate procedures to follow
- Confirm that the qualified beneficiary must provide notice to an employer within 60 days of a Social Security Act Administration (“SSA”) determination of disability. The 60-day notification period may run from the later of:
- the date of a SSA disability determination
- the date on which the qualified beneficiary is informed of the obligation to provide notice of the SSA determination of disability
- Establish that the notice from an employee to an employer of a SSA determination of disability must be provided prior to the expiration of the initial 18-month COBRA period. An employee must provide notice to an employer within 30 days of receipt of a SSA determination that a qualified beneficiary is no longer disabled.
Notice Requirements for Plan Administrators
The recently issued final COBRA rules and regulations:
- Provide that the plan administrator must notify each qualified beneficiary entitled to elect COBRA within 14 days after the plan administrator is notified of the qualifying event by the employer.
- Confirm that a Notice of Unavailability must be furnished to a qualified beneficiary within 14 days of the date the Plan Administrator is notified of the qualifying event, if it is determined that COBRA continuation coverage is unavailable (or if the plan denies coverage for any reason to the participant). Therefore, if a plan administrator receives notice of a qualifying event from an employer, and it is determined that the participant is not entitled to COBRA, the plan administrator must then notify this participant within 14 days and provide an explanation why COBRA will not be offered.
- Confirm that a Notice of Termination must be furnished to a qualified beneficiary if coverage is terminated before the maximum period of COBRA continuation coverage (i.e., failure to pay the premium). The notice must be understood by the average plan participant and must contain the date of the coverage termination and include any conversion rights, if available.
- Allow plans to send the early termination notice accompanied by a certificate of credible coverage under HIPAA.
Distribution of a COBRA Election Notice
The recently issued final COBRA rules and regulations:
- Establish that if an employer is the plan administrator then the “special timing rule” applies in regard to the election notice. The special timing rule is the period of time within which an employer acting as its own plan administrator must furnish all qualified beneficiaries with an election notice. The election notice must be furnished to all qualified beneficiaries not later than 44 days following the date of the qualifying event.
- Retain HIPAA information and plan contact information in the content of the election notice.
- Eliminate the information regarding alternative coverage and conversion rights from the content of the election notice. Alternative coverage and conversion rights are already requirements that an employer must provide as an option to an employee within 180 days after the expiration of the maximum period of COBRA coverage.
- Clarify that the model election notice need not identify each qualified beneficiary by name. Reference to status (i.e. dependent child) will suffice. The final model election notice has been revised accordingly.
- Clarify that the Health Coverage Tax Credit (“HCTC”) information is optional content in the election notice. A plan may use its discretion in placing HCTC information in the election notice based upon whether its employees are affected by the Trade Adjustment Act.
Click here to view a revised Model General Notice of COBRA Continuation Coverage Rights and a Model COBRA Continuation Coverage Election Notice. Note that the model notices are intended to be used only by single-employer plans. They are neither to be used by multi-employer plans, plans sponsored by unions, nor when the employer’s bankruptcy is the qualifying event.
