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COBRA Strikes Again by Amy Erlbacher-Anderson

 

Most employers are aware that if they have 20 or more employees, a federal law, affectionately referred to as COBRA, requires them to allow departing employees and their families to maintain group health insurance coverage for at least 18 months after certain terminations of employment and other events. What many do not realize is that in the nearly 20 years since COBRA was enacted, there was little guidance provided on how COBRA actually works. Earlier this year, this situation changed when the Department of Labor issued final regulations governing COBRA. The new rules go into effect on January 1, 2005 for most plans. Given the number of changes instituted under the new regulations, employers do not have much time to prepare. 

 

The new regulations not only impact current COBRA administration, but also create a number of new requirements for employers that must be complied with by the beginning of next year, including the addition of two new notices. This article highlights a few of the changes created by the new regulations. To avoid writing a book rather than an article, please note that I have assumed that the reader is already familiar with current COBRA rules.

 

Initial (General) COBRA Notice

 

The new rules set minimum content requirements for the initial COBRA notice which are listed in the regulation and demonstrated in a model notice. The DOL warns employers that use of the model is a safe harbor for an employer if the notice is modified to be specific to the employer. In addition, the DOL specifically warns employers to stop using the model notice issued in 1986. If you are using the original model notice, you should prepare a new COBRA notice as soon as possible. 

 

The new rules clarify that the initial notice must be provided within 90 days from the date coverage begins. A single notice is allowed if the covered employee and spouse reside at the same address; however, a notice that is hand delivered to the employee at work is not sufficient notice for a spouse or dependent, and a separate notice must be sent. Separate notices may be required in other situations. 

 

The initial notice may be included in the plan’s summary plan description rather than provided as a separate notice. Unfortunately, this will change the requirements for summary plan descriptions to the stricter rules under COBRA – a result most employers will not desire. 

 

Qualifying Event Notices

 

Under the new rules, the employee must provide notice within 60 days of the latest of:  the date of the qualifying event, the date coverage would end, or the date the individual is told of the obligation to provide the employer with this information. If the qualifying event is a disability, the 60-day period begins on the latest of:  the date the disability determination is made, the date of the qualifying event, the date on which coverage will be lost, or the date the individual is told of the obligation. 

 

In accordance with previous, unofficial guidance, the new rules clarify that the employer has 30 days to inform the plan administrator of a qualifying event. The plan administrator must then provide an election notice to the covered employee or qualified beneficiary within 14 days of receipt of the qualifying event notice from the employer. If the employer acts as the plan administrator, the employer has 44 days to provide the election notice. 

 

Finally, the new rules provide that a single election notice is sufficient for all qualified beneficiaries who live at the same address. A model election notice is provided, but it also must be modified and/or supplemented to qualify under the new rules. 

COBRA Strikes Again

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