On May 26, 2004 the U. S. Department of Labor (DOL) published final regulations on the content, timing, and delivery method for all COBRA notice requirements. The final regulations include a model general notice and a new model election notice. The regulations impose notification requirements for the rejection of coverage and for the early termination of coverage. The regulations apply starting with the first day of the first plan year beginning after November 25, 2004 (e.g., January 1, 2005, for calendar year plans). Until the effective date, employers can rely on the earlier proposed regulations or the final regulations and the model notices to demonstrate good faith compliance with COBRA.
General COBRA Notice.
COBRA requires employers to provide employees with a general notice about COBRA within the first 90 days of coverage under a health plan. The DOL model general notice reflects changes in the general notice since COBRA was enacted. The notice must have plan-specific identification such as the name of the plan and the name, address, and telephone number of the person or organization that will provide, upon request, information about the plan and COBRA. The regulations allow electronic delivery of the general notice and explain when a single notice may be sent to an employee and his or her spouse if they live at the same location and coverage commences at the same date as the employee's coverage. There is no requirement to furnish a general notice to dependent children. The general notice does not need to be furnished to a qualified beneficiary who experiences a qualifying event, and receives an election notice, during the 90-day period. The regulations allow employers to satisfy the general notice requirement by including the required information in the summary plan description ("SPD"). However, the DOL emphasized that SPDs must include both the COBRA information required by the general notice requirements and the information required by the SPD content regulations.
Qualified Beneficiaries' Notices.
Qualified beneficiaries are generally required to notify the plan administrator within 60 days after divorce, legal separation, loss of dependent status, disability, or second qualifying events. The regulations require a plan to impose reasonable notification procedures for qualified beneficiaries. The notification procedures must be described in the SPD, specify who is designated to receive the notices and specify the means that qualified beneficiary must use for giving notice and the required content of the notice. If a plan does not have reasonable notification procedures, a qualifying beneficiary can provide oral notice of the qualifying event to the person or organization unit (e.g., HR or benefits department) that customarily handles employee benefit matters. The regulations note that the plan administrator cannot reject a qualified beneficiary's notice as untimely if it is filed with incomplete information, as long as it contains certain basic information. Following a request for more information, the plan can reject the notice if the qualified beneficiary fails to provide the requested information within a reasonable period of time. Even if the plan has reasonable notification procedures for a qualified event notice, the time limit for providing the notice does not begin until the plan has satisfied the general notice requirement. The regulations clarify that plans may require qualified beneficiaries to provide a disability notice within 60 days after the latest of: (1) date on which the qualifying event occurs, (2) date on which the qualified beneficiary loses coverage, (3) date of the Social Security Administration's disability determination, or (4) date on which the qualified beneficiary is informed of the obligation to provide the disability notice.
Employer and Plan Administrator's Notices.
1. Qualifying Event. An employer must notify the plan administrator within 30 days after employment termination, reduction in hours, employee's death, employee's entitlement to Medicare, or employer's bankruptcy.
2. Rejection Notice. Plan administrators must notify individuals who erroneously file a qualifying event notice of the reason why they are not entitled to elect COBRA. This notice must be furnished regardless of the reason for denying the coverage, and regardless of whether the qualifying event notice involves a first qualifying event, second qualifying event, or a request for a disability extension. The timing deadlines that normally apply to election notices also apply to rejection notices. There is no model rejection notice.
3. Election Notice. Within 14 days after receiving the qualified event notice, the plan administrator must provide a COBRA election notice to the qualified beneficiary. The regulations state that if the employer is also the plan administrator an election notice must be furnished not later than 44 days after the date of the qualifying event or if the plan states that COBRA starts on the date of loss of coverage, the date coverage is lost under the plan. The DOL model election notice describes the qualified beneficiary's right to elect COBRA, available health plan options, premium payment requirements, the consequences of failing to elect COBRA, and how COBRA coverage could be extended due to disability or a second qualifying event. Alternative coverage information and conversion rights do not need to be described in the notice. An election notice does not identify each qualified beneficiary by name. The election notice may reference qualified beneficiaries by their status (e.g., employee, spouse, dependent child). As with the general notice, the regulations also explain when a single election notice may be sent to family members, including dependents, residing at the same location.
4. Early Termination Notice. The final regulations have also imposed a notice requirement whereby plan administrators must notify qualified beneficiaries if their coverage will be terminated before the end of the maximum continuation coverage period. This early termination notice must be furnished "as soon as practicable." The DOL does not provide a model early termination notice because of the event-specific nature of the notice.
Standards for Furnishing Notices.
A plan administrator is deemed to have furnished a COBRA notice as of the date of mailing if mailed by first class mail, certified mail, or Express Mail. If transmitted electronically, a notice is deemed furnished as of the date of electronic transmission. In the absence of written plan procedures to the contrary that are communicated to plan participants, the same standards would apply to notices that must be provided by qualified beneficiaries to the plan administrator.
Employers should review and revise their COBRA and ERISA compliance communications, including SPDs, notices, and forms to ensure compliance before the new regulations apply. Employers also should obtain verification from any applicable service providers that they will administer the plan in compliance with the final regulations.
John E. Rich, Jr. is a Director of McLane, Graf, Raulerson & Middleton, Professional Association. Mr. Rich is a frequent speaker on employee benefit plan and pension, estate planning, and tax-related topics, and can be contacted directly at (603) 628-1438, or by email at [email protected]. The McLane Law Firm is the largest full-service law firm in the state of New Hampshire, with offices in Concord, Manchester and Portsmouth.