Conference Call Summary
Final COBRA Regulations on Notice Requirements
June 30, 2004
Background
On May 26th, 2004, final COBRA (Consolidated Omnibus Budget Reconciliation Act) rules were published in the Federal Register setting minimum standards for timing and content of the notices required under the continuation coverage provisions of part 6 of title I of ERISA. The rules establish a uniform process for issuing notices between employers, employees and qualified beneficiaries, and plan administrators. These rules are important as they affect around 411,000 group health plans which cover about 111 million participants and their dependents. The final rules are expected to improve administrative efficiency among employers and plan administrators and reduce avoidable losses of group health plan coverage suffered by qualified beneficiaries.
All notice obligations pursuant to continuation coverage provisions that arise on or after the first day of the first plan year beginning on or after November 26, 2004 must comply with the final rules. This means that depending on the group’s plan year, notices may continue as they have under the proposed COBRA rules published on May 28, 2003 for an additional 18 months from publication.
Guest Speaker
Suzanne Adelman (202.693.8500)
Pension Law Specialist
Office of Regulations and Interpretations
Employee Benefits Security Administration
US Department of Labor
Ms. Adelman is listed in the Federal Register as one of two contact persons for questions related to the final COBRA regulations. During our conference call, she welcomed participants to call her directly with specific questions.
Summary of the Call
The Treasury Department and the Department of Labor share COBRA regulatory authority. Treasury regulations address the substantive provisions like the definitions of qualified beneficiaries and qualifying events. The DOL regulations strictly cover the notice and disclosure provisions and this was the focus of our conference call.
The effective date of the final regulations is July 26, 2004 which means that as of this date, the regulations are officially a part of the Federal Register. However, the applicability date or practical date that the regulations will be applied to a given situation commences with new notice obligations that arise on the first day of the first plan year after November 26, 2004.
General Notice
The plan administrator must provide general information to the covered employee and spouse within 90 days of either commencement of coverage or when the plan first becomes subject to the continuation coverage requirements. This notice can be combined with the Summary Plan Description (SPD). The plan administrator must ensure that the spouse gets a copy of the general notice/SPD unless one notice is mailed and both the employee and spouse share an address. A new provision in the final rules is that if there is a qualifying event in the first 90 days (before the general notice is provided), only an election notice has to be given, because the election notice has as much, if not more, information as the general notice.
The General Notice must include the following:
- Name of the plan
- General description of COBRA rights
- Description of the qualified beneficiary notice obligations (how and who to notify of a qualifying event) and the procedures
- A note of the importance to keep update contact information for qualified beneficiaries on record with the administrator
- A statement that more information about COBRA rights can be found in the SPD
The General Notice no longer requires information regarding a second qualifying event, but that information must be included in the Election Notice at which point it is more relative.
Notice requirement for employers
Employers are required to provide notice to the plan administrator, within 30 days, when a qualified beneficiary experiences a qualifying event that is the covered employee’s reduction in hours, termination of employment (other than gross misconduct), Medicare entitlement, death, or employer going bankrupt. Employer bankruptcy is only a qualifying event for retirees who are covered by retiree health coverage when the bankruptcy occurs. Multi-employers may provide different time limits which should be outlined in the SPD or a collective bargaining agreement.
The notice must include the plan, the covered employee, the qualifying event and the date of the qualifying event.
Notice requirements for covered employees and qualified beneficiaries
Covered employees and qualified beneficiaries must notify the plan administrator of the occurrence of a qualifying event that is: divorce or legal separation of a covered employee from his or her spouse; a loss of dependent child status under the terms of the plan; a second qualifying event; a disability determination; or the loss of disability status.
The notice must include the plan, the covered employee, the qualifying event and the date of the qualifying event.
If the employer does not establish formal procedures for reporting a qualified event, notice will be deemed given if this information is provided to an individual who usually handles employee benefit matters. A plan can require additional information before it provides an election notice, but can not deny COBRA if the aforementioned elements are provided.
Notice requirements for plan administrators
Plan administrators must notify new plan participants of their COBRA rights and the plan procedures for reporting qualifying events.
ELECTION NOTICE
After the plan administrator is notified by the employer or a qualified beneficiary or his/her representative of a qualifying event, an Election Notice must be provided to the qualified beneficiary at least 14 days after the plan administrator receives the notice. Delivery of Election Notice starts the clock for the 60-day time limit for the qualified beneficiary to elect COBRA. A single notice can be sent to all the qualified beneficiaries as long the address on file is the same for all. Acceptable means for sending notice includes hand-delivered, mail, or electronic. Each qualified beneficiary has to be identified in the notice.
UNAVAILABILITY NOTICE
An unavailability notice must be provided to a qualified beneficiary at least 14 days after the plan administrator receives notice of a qualifying event, but determines that the individual is actually not eligible for COBRA.
NOTICE OF TERMINATION
A notice of termination must be provided to a qualified beneficiary if COBRA coverage will end earlier than the maximum period due to termination of the entire plan or late or non-payment of the premium. The notice must explain why coverage is being terminated, the date of the termination, and any rights to alternative or individual coverage. This notice should be provided as soon as practicable after the administrator determines that coverage will be terminated.
Plans may establish their own time and content requirements, but there are regulatory minimums. A qualified beneficiary must be given at least 60 days to give notice of a qualifying event. The 60 days begins the latest of: the date of the qualifying event; the date of loss of coverage; the date that the qualified beneficiary is informed of his/her responsibility to report a qualifying event and the procedures for that notification.
Questions Answered During the Call
Q. Who should employees contact if they believe their employer has failed to notify the plan administrator of a qualifying event?
A. The employee can contact the appropriate regional office of DOL at .866.444.EBSA (3272). If the employer has violated COBRA, then there can be up to a $110 fine per day which is given directly to the qualified beneficiary.
Q. What are the standards for notices prior to the applicability date?
A. The Department of Labor considers it to be good faith compliance, if plans follow either the proposed rules or the final regulations.
Q. Why are the effective and applicability dates different?
A. The effective date is a regulatory construct meaning that as of that date, the regulation is considered a part of the Code of Federal Regulations. The applicability date is the more practical to expect compliance.
Q. What are the acceptable standards of delivery of notices?
A. Hand-delivery, electronic, and mail are all acceptable.
Q. Are plan administrators required to send new general notices and SPD to participants already enrolled in the plan?
A. No, the regulations only apply to new notice obligations. Only new hires must receive a new general notice.
Q. Can an individual receiving a COBRA disability extension experience a second qualifying event and therefore be eligible for additional time for up to a total of 36 months of COBRA coverage?
A. Yes
Q. What are the time limits and eligibility requirements for individuals who are anticipating a divorce?
A. Being in the process of a divorce is not a qualifying event, but the actual divorce and legal separation are qualifying events under COBRA.
Other Materials Related to the Call
If you would like more information regarding this call, you may contact Nedra Commodore, Private Insurance Coordinator, ncommodore@healthassistancepartnership.org.
