On May 26, 2004, the Department of Labor published final regulations implementing the COBRA notice requirements for group health plans. These final regulations set minimum standards for the timing and content of various notices required by COBRA and add new notice requirements. Calendar year group health plans must comply with the new regulations by January 1, 2005.
Overview of the Regulations
These new regulations apply to notice obligations that arise on or after the first day of the first plan year beginning on or after November 26, 2004. The new regulations are separated into 4 components:
- the general notice provisions;
- notices provided by an employer upon the occurrence of a qualifying event;
- notices provided by qualified beneficiaries upon the occurrence of certain events; and
- the COBRA election notice and other notices required to be provided by an employer.
General Notice
A general notice must be provided to each covered employee (and the employee’s spouse) within the same time period as the summary plan description for an existing plan to a new participant (i.e., 90 days from the first day of coverage), unless the plan becomes subject to COBRA at a later time, or a COBRA qualifying event occurs so that a COBRA election notice is sent within the first 90 days of coverage. A single notice addressed to the covered employee and the covered spouse may be sent to their joint residence. However, a single notice is not permitted if the spouse’s coverage begins at a different time than the employee’s coverage, or if the employee and spouse are known to live at difference residences.
As noted above, the new regulations state that if an individual is provided with a COBRA election notice during the 90-day general notice period, the general notice obligation is met. In addition, the changes to the general notice requirements also allow the summary plan description to serve as a general notice. However, if the spouse is covered under the group health plan, the summary plan description containing the notice must be sent to the covered employee’s and spouse’s residence and not simply delivered to the covered employee at his or her worksite.
The regulations include a model general notice that can be used by single-employer group health plans. A multiemployer group health plan can use the model notice; however, the multiemployer group health plan would need to modify the model notice to reflect its own requirements.
Employer’s Notice of a Qualifying Event
Generally, an employer must provide notice to the plan administrator of the following qualifying events:
- termination of employment;
- reduction in hours of employment;
- death of the employee;
- the employee becoming entitled to Medicare; or
- the commencement of a proceeding in bankruptcy with respect to the employer.
The employer must notify the plan administrator no later than 30 days after such qualifying event. However, if the plan has elected in the plan documents for COBRA coverage to begin with the date of the loss of coverage rather than the date of the qualifying event, the 30-day period for providing notice begins with the date of the loss of coverage.
Qualified Beneficiaries’ Notice Obligations
The COBRA regulations provide that each covered employee or qualified beneficiary must notify the plan administrator of a qualifying event: a divorce or legal separation, or a child ceasing to qualify as dependent under the plan. The plan must develop reasonable written procedures regarding the notices that the covered employees and qualified beneficiaries must provide to the plan administrator. The new regulations discuss what must be included in the procedures and require that the procedures be included in the summary plan description. There are alternative regulations that apply if the plan fails to adopt reasonable written procedures.
The plan must allow a qualified beneficiary at least 60 days to provide the required notice. The 60-day period runs from the latest of:
- the date of the qualifying event;
- the date on which there is a loss of coverage; or
- the date on which the qualified beneficiary is informed, through the summary plan description or the general COBRA notice, of his or her obligation to provide notice and the procedures for providing such notice.
If the qualified beneficiary is seeking the 11-month disability extension under COBRA, the qualified beneficiary must provide the disability notice within 60 days after the latest of:
- the date of the Social Security Administration disability determination;
- the date of the qualifying event;
- the date on which there is a loss of coverage; or
- the date on which the qualified beneficiary is informed, through the summary plan description or the general COBRA notice, of his or her obligation to provide the disability notice and the procedures for providing such notice.
The final regulations clarify that for an individual who previously received a Social Security Administration disability determination, and has not received a subsequent Social Security Administration determination that he or she is no longer disabled, the individual will have at least 60 days after the qualifying event to provide the plan with notice of continued disability.
Qualified beneficiaries must notify the plan administrator of a change in disability status within 30 days of:
- the Social Security Administration final determination that the qualified beneficiary is no longer disabled; or
- the date on which the qualified beneficiary is informed, through the summary plan description or the general COBRA notice, of his or her obligation to provide notice and the procedures for providing such notice.
Under certain circumstances, a plan may reject an incomplete notice. However, the plan may not reject an incomplete notice as untimely if the notice is provided within the required time limits and contains enough information for the plan administrator to identify the plan, the covered employee and qualified beneficiaries, the qualifying event or disability determination, and the date on which the qualifying event or disability determination occurred. The plan’s procedures should identify when it will reject an incomplete notice.
Plan Administrator’s Notice Obligations
The COBRA regulations require a plan administrator to notify a qualified beneficiary of his or her COBRA election rights within 14 days after the plan administrator is notified of the qualifying event. Where the employer is also the plan administrator, the final regulations clarify that the election notice must be provided not later than 44 days after the date of the qualifying event, or, if the plan provides that coverage starts on the date of the loss of coverage, the date the qualifying beneficiary loses coverage under the plan.
The contents of the election notice have been revised by the regulations—for instance, certain HIPAA information and plan contact information must be included in the notice.
Each qualified beneficiary must be identified in the election notice; however, this can be accomplished by reference to their status (spouse, dependent, etc.) or by name. A model notice has been provided in the regulations. The model notice contains an optional paragraph regarding the Trade Act of 2002, but the election notice is not required to contain information about the COBRA provisions set forth in the Trade Act of 2002.
The regulations also create two additional notice obligations for the plan administrator:
- Notice of Unavailability of COBRA Continuation Coverage
If the plan administrator receives a notice from an individual who is not entitled to COBRA coverage (an initial notice, notice of a second event or notice of a disability), the individual must be provided with notice that he or she is not eligible for COBRA coverage within 14 days of the plan administrator receiving the notice. This unavailability notice must explain why the individual is not entitled to continuation coverage. - Termination Notice
The plan administrator must provide a qualified beneficiary with notice if the COBRA coverage terminates prior to the end of the maximum COBRA continuation coverage period. This notice is to be provided as soon as reasonably practicable after the plan administrator’s determination that COBRA coverage will terminate early. The termination notice must include the reason that COBRA continuation coverage has terminated earlier than the end of the maximum COBRA coverage period, the date of termination, and any rights the qualified beneficiary may have to elect an alternative group or individual coverage, such as a conversion right.
Because of the number of changes in the contents of the notice, the new notice requirements, and the requirements for plans to adopt written procedures regarding COBRA notices, group health plans should begin revising their COBRA documents as soon as possible. We are available to assist you with your COBRA compliance obligations.