Department of Labor Issues New COBRA Model Notices and COBRA Subsidy Fact Sheet to Reflect TEA Changes
On March 16, 2010, the Department of Labor (“DOL”) issued new COBRA model notices and a revised COBRA Premium Reduction Fact Sheet to reflect the changes that the Temporary Extension Act of 2010 (“TEA”) made to the premium reduction available under the American Recovery and Reinvestment Act of 2009 (“ARRA”). ARRA generally requires plan sponsors to notify all qualified beneficiaries of the availability of the premium reduction, as amended. The new model notices can help plan sponsors satisfy their ARRA notification requirements, as they address the following TEA changes:
- the extension of the eligibility period for COBRA premium assistance from February 28, 2010, to March 31, 2010; and
- the expansion of the subsidy to individuals who are eligible for COBRA because of a reduction of hours of employment that is later followed by an involuntary termination that occurs during the period between March 2, 2010, and March 31, 2010.
See our Special Alert from earlier this month for full details on the changes made by TEA.
New DOL Model Notices
NEW MODEL GENERAL NOTICE — for Use on a Prospective Basis for All Qualifying Events and Qualified Beneficiaries
The new model general notice, which is intended to replace all prior model general notices issued by the DOL, includes:
- the new March 31, 2010, premium assistance eligibility deadline;
- a summary of the COBRA premium assistance law under ARRA, as amended by both the 2010 Department of Defense Appropriations Act and TEA; and
- a revised Request for Treatment as an Assistance Eligible Individual form.
Plan sponsors may send this notice to qualified beneficiaries who have experienced any qualifying event any time between September 1, 2008, and March 31, 2010, and have not yet received a COBRA election notice.
NEW MODEL NOTICE OF NEW ELECTION PERIOD — for the Group of Individuals Who Had a Reduction of Hours Followed by a Termination of Employment and Who Do Not Currently Have COBRA
TEA extends the subsidy to certain individuals who have lost coverage because of a reduction of hours of employment, and requires that these individuals be notified of their new rights, including the right to reinstate or re-elect COBRA. This notice must be sent to individuals who:
- experienced a reduction of hours of employment any time from September 1, 2008, and March 31, 2010;
- experienced termination of employment at any point from March 2, 2010, and March 31, 2010; and
- either did not elect COBRA when it was first offered OR who elected but subsequently discontinued COBRA.
Individuals who experience an involuntary termination after experiencing a reduction of hours must receive the notification of their rights within 60 days of the termination of employment.
This new Notice of New Election Period is largely the same as the general model notice, but includes additional information regarding:
- Eligibility requirements for the new election period and premium assistance (Note: if COBRA is reinstated, no preexisting condition exclusion may be applied to the coverage)
- How the COBRA eligibility period is measured (i.e., the maximum coverage period is measured from the date of the reduction of hours or loss of coverage relating to the reduction of hours, as applicable, not the date of the involuntary termination)
- How the premium assistance period is measured (i.e., from the first COBRA coverage period that follows the involuntary termination, generally April 1, 2010, for plans that administer COBRA on a monthly basis from the first day of each month)
MODEL SUPPLEMENTAL INFORMATION NOTICE — for Certain Individuals Who Currently Have COBRA, but Who Were Not Notified of Their TEA Rights
This model notice provides information about TEA’s extension and expansion of the premium reduction to certain individuals who elected and currently have COBRA, but who were not notified of their rights under TEA. The notice must be sent to individuals who:
- elected and maintain COBRA coverage because of a termination of employment that occurred on or after March 1, 2010, but did not receive a notice describing the availability of the ARRA premium assistance. This notice must be provided before the end of the required time period for providing a COBRA election notice (i.e., generally within 60 days of the termination of employment or the date coverage was lost because of the termination of employment); and
- became eligible for COBRA because of a reduction of hours of employment between September 1, 2008, and March 1, 2010, and subsequently were involuntarily terminated between March 2, 2010, and March 31, 2010.
This notice must be provided within 60 days of the termination of employment.
NEW NOTICE OF EXTENDED ELECTION PERIOD — for Certain Individuals Who Currently Do Not Have COBRA and Who Were Not Notified of Their TEA Rights
The DOL has also prepared a new notice for those individuals who were terminated on or after March 1, 2010, and who received a COBRA notice that did not address TEA’s changes. This notice must be sent to all individuals who:
- experienced a qualified event that was a termination of employment (voluntary or involuntary) at some time on or after March 1, 2010;
- were provided notice that did not inform them of their rights under ARRA, as amended by TEA; and
- either did not elect COBRA at that time OR elected COBRA but subsequently discontinued that coverage.
This notice must be provided within the original period during which the employer is required to provide a COBRA election notice. The notice provides for a new 60-day election period measured from the date of the new notice, if the individual’s qualifying event was the employee’s involuntary termination.
Model Updated Alternative Notice
The DOL has also updated the notice that must be sent by insurance issuers that offer group health insurance which is subject to State continuation coverage requirements (such as Cal-COBRA). Please note that some insurance issuers may shift certain notification obligations to employers. If you are an employer that has undertaken this responsibility, please be sure that current notifications include TEA’s changes.
The updated model alternative notice must be sent to all qualified beneficiaries (not just employees) who experienced a qualifying event through March 31, 2010. This notice must be modified to reflect the requirements of the applicable State law where the qualified beneficiary resides. It also must be provided within the original period during which the employer is required to provide a COBRA election notice.
All five new model COBRA notices are available online from the DOL.
COBRA Premium Reduction Fact Sheet
The revised COBRA Premium Fact Sheet is four-page summary of the continuously growing body of COBRA premium assistance law. It is a welcome synthesis of the relevant provisions ARRA, as modified by the DOD Act and TEA. It includes sections on:
- the eligibility requirements for premium assistance;
- the period of coverage for which premium assistance applies; and
- the applicable notice requirements.
The fact sheet is available online from the DOL.
Legislation to Further Extend Premium Assistance
Congress is considering a number of bills that would further extend the COBRA premium assistance eligibility period beyond March 31, 2010. Recently introduced H.R. 4851 would extend the eligibility period to the end of April. Also, the House of Representatives is expected to soon revisit H.R. 4213, recently passed by the Senate, which would extend the premium assistance eligibility period to December 31, 2010. Stay tuned for further updates.