JEANINE L. POOLE, ESQ.

REPLY TO: CAPITAL OFFICE

FAX NO: (603) 224-2557

E-MAIL: jpoole@sulloway.com

 

 

OCTOBER, 2003 LEGAL UPDATE

 

DANCING WITH COBRA

The Steps Have Changed

 

            Under the Consolidated Omnibus Budget Reconciliation Act of 1985 – better known as COBRA – certain employed individuals are entitled to continue coverage in their "welfare benefit" plans – otherwise known as health, dental and vision insurance plans – at their own expense, upon termination of employment or another "qualifying event."  The U.S. Department of Labor (DOL) has recently issued new proposed regulations which modify the process of COBRA administration for employers and plan administrators.

 

What were they thinking?

 

            The goal of the DOL's initiative is to create certainty and uniformity in the COBRA process, while improving the consistency and quality of information provided about COBRA rights to participants and beneficiaries.

 

Immediate Changes

 

            The new COBRA regulations are scheduled to take effect for calendar years beginning January 1, 2004.  Effective immediately, however, employers who use the DOL's 1986 model COBRA notice will no longer be considered in good faith compliance with COBRA.  The DOL has published model COBRA notice and election forms which are available on the DOL's website (www.dol.gov) by looking under the "DOL Agencies" and clicking on "EBSA (PWBA)" which connects to the Employee Benefits Security Administration which has posted the forms.

 

Other Changes

 

            Every employer and plan administrator should review the new regulations to find out how significantly the new regulations will impact their practices.  In general, however, the following changes will affect most covered employers and administrators:

 

 

 

 

            The Initial Notice

 

• Notice of COBRA coverage must be provided to each covered employee and covered spouse within 90 days of the beginning of his or her insurance coverage.  The notice may be mailed jointly to the employee and spouse as long as they reside at the same address and begin coverage on the same day.

 

• Notice may be included in a summary plan description (SPD) so long as it is distributed to the employee and spouse within the 90 day period.

 

• A covered employee may be provided the notice at work, however, such notice will not be considered sufficient notice to the employee's spouse.

 

            Notice of A Qualifying Event

 

• Employers are required to set up "reasonable" procedures for employees and qualified beneficiaries to provide notice of qualifying events they are required to report (including, divorce, legal separation or dependent who no longer qualifies for coverage).

 

• Notification procedures will be considered reasonable if they are set out in an SPD and indicate who must receive notice, the means by which notice may be given, and the required content of the notice.  If the procedures are not available in written form, the employer must accept any reasonable written or oral notice.

 

• An employer may require that a specific notice form be used so long as the form is easily available to employees at no cost.

 

• Employers may not consider incomplete notices untimely where the missing information can be obtained and the employer has adequate information to determine the identity of the covered employee and qualified beneficiary(ies), the qualifying event, and the date on which the qualifying event occurred.

 

• The employer must accept notice from someone acting on behalf of an employee or qualified beneficiary.

 

            Election Notices

 

• An election notice must be supplied by the plan administrator to the employee or qualified beneficiary within 14 days after receiving notice of a qualifying event.

 

• If the employer is the plan administrator, the election notice must be provided within 44 days after the employer receives notice of the qualifying event.

 

            New Notices

 

• Plan administrators must provide notice regarding early termination of COBRA continuation coverage "as soon as practicable" after a determination is made that coverage will end (for example, because of non-payment of premiums or termination of the group health plan).  This notice must provide the date of termination and the individual's rights upon termination.

 

• If a determination is made that the individual is not entitled to continuation coverage, the plan administrator must so notify the individual and provide the reason therefor within 14 days of notice of the qualifying event.

 

Bottom Line

 

            COBRA has always had time lines and notice requirements to remember.  Now we all have a new set to learn.  The first thing to do is find and review the new model notice forms, and begin to use them.  Then review the new regulations[1].  The DOL has taken the position that pending the promulgation of the new regs, employers are required to operate in good faith compliance with a reasonable interpretation of the new COBRA rules.

 

 

 

 

 

 

 

 

This article was initially written for publication in the November, 2003 New Hampshire Employment Law Letter, a newsletter written by attorneys at Sulloway & Hollis for New Hampshire employers and published by M.Lee Smith Publishers LLC in Brentwood, Tennessee.