New COBRA Regulations
by Mindy K. Dale

Last summer, the US Department of Labor (DOL) issued final COBRA Regulations regarding the timing and content requirements of various notices that must be furnished by employers, plan administrators, workers and their families in connection with group health continuation coverage. These final regulations were effective for any obligation to provide a COBRA notice occurring on or after the first day of the plan year beginning after November 26, 2004 ( January 1, 2005 for employers with calendar-year group health plans). The new regulations address four different issues:

1. General COBRA Notices
2. Employer Notice of Qualifying Event
3. Qualified Beneficiary Notices
4. Plan Administrator Notice Obligations

General COBRA Notice

The final regulations issued by the DOL include a new model General COBRA Notice that, if used by the employer, will be deemed to be in compliance. The DOL has also made it clear that employers who continue to use the prior model General Notice will no longer be in compliance.

In addition to the changes in the General Notice itself, the final regulations make two changes regarding the distribution of the General Notice. First, the notice must be provided to the covered employee and covered spouse, if applicable, no later than 90 days after coverage begins. Second, the notice may be included in the summary plan description (SPD) provided the SPD is furnished to the covered employee and any covered spouse within the 90-day time limit.

Employer Notice of Qualifying Event

Final regulations have clarified that employers have 30 days to notify the plan administrator of a covered employee's termination of employment, reduction of hours, or death that would be considered a qualifying event. The regulations also specify plan administrators have 14 days following the receipt of the Notice of Qualifying Event from the employer to notify the qualified beneficiaries.

Notice of Qualifying Event (by Qualified Beneficiaries)

In addition, the final regulations require a qualified beneficiary to provide notice to the plan administrator of a qualifying event (such as divorce or legal separation or a loss of dependant status or a notice of a social security disability determination). Plans must establish reasonable procedures for a qualified beneficiary to provide notice. Procedures will be considered reasonable if they are included in the group health plan's SPD and specify: the required content of the notice, the means for giving notice, and the person designated to receive such notice from a qualified beneficiary. If the employer has not created reasonable procedures, a qualified beneficiary will be deemed to have satisfied the notice requirements by providing notice of the qualifying event, either verbally or in writing, to any person customarily handling employee benefit matters. It is highly recommended that employers establish procedures for providing Notice of a Qualifying Event. Such procedures will reduce confusion and ensure notices are given to the correct person.

Notice for Election of COBRA Continuation

The final regulations describe the required content for a COBRA Election Notice. The regulations also include both a Model Election Notice and Model Election Form which will be deemed to comply with the content requirements of the new regulations. However, keep in mind the Model Notices are generic forms that may not be appropriate or desirable for use with all plans.

Additional Required Notices

Two new notices are now required: Notice of Unavailability of Coverage and Notice of Early Termination of COBRA Coverage. If a plan administrator receives notice of a qualifying event or secondary qualifying event and determines that the individual is not entitled to COBRA continuation coverage, the plan administrator must, within 17 days from receipt of the notice, provide the individual with a written Notice of Unavailability of Coverage. This notice must explain the reasons why the individual is not entitled to elect continuation coverage.

If COBRA coverage is terminated earlier than the maximum time period for which COBRA must be made available (for example, failure to pay COBRA premiums in a timely manner), the plan must notify each affected qualified beneficiary in writing, stating the reasons for the termination and providing information on any available alternative group or individual coverage. Notice of Early Termination of COBRA coverage must be provided "as soon as reasonably practicable."

What Should Employers Be Doing?

The following steps should be taken by employers:

• Revise the General COBRA Notice and the COBRA Election Notice to comply with the final regulations.
• Create new Notices for Unavailability of Coverage and Early Termination of COBRA Coverage. (While the regulations make these required notices, model forms were not provided by the DOL.)
• If your company uses an outside COBRA vendor/administrator, verify they are aware of the new and revised notices and the timetables for providing those notices pursuant to the final regulations.

You may also want to consider the following:

• Updating the SPD to include reasonable procedures for qualified beneficiaries to provide Notice of Qualifying Events.
• Create a form to be used by qualified beneficiaries to give Notice of a Qualifying Event.
• Review the company's procedures for overall COBRA compliance.

Please note that there may be additional requirements for employers who are subject to applicable Wisconsin law.

This article is intended for general informational purposes only, and should not be construed as legal advice. Always contact your legal counsel for advice or answers to your questions.