COBRA Rules Set To Change

NEW NOTICE AND ELECTION FORM

In 1986, the Department of Labor published the first model notice under COBRA. That notice soon became obsolete because of numerous changes in COBRA law. The proposed regulations include a new "general notice" of COBRA rights that should be given to participants within ninety-days after coverage begins. Under the proposed regulations, a plan administrator can combine the new general notice with summary plan descriptions that are given to enrollees.

The proposed regulations also include for the first time a model election notice designed for distribution to participants at the time a qualifying event occurs.

Under the new regulations, plan administrators are not required to use either the general notice or the election form provided the documents adopted by the plan satisfy the requirements imposed by the regulations.

CLARIFICATION OF PLAN OBLIGATIONS

The proposed regulations also attempt to clarify the obligations of the plan administrator, the employer, and the plan participant concerning the exchange of information. The regulations require plan administrators to develop procedures for participants to use in giving the administrator notice of a qualifying event such as divorce, legal separation, or loss of dependent status. Administrators are also charged with the task of developing procedures for participants to use in the event a second qualifying event occurs during the continuation period, including elections for continuation under the newly added Trade Act of 2002. Finally, the regulations require plan administrators to develop procedures designed to notify COBRA beneficiaries about coverage termination when coverage ends before the maximum coverage period expires such as when a participant fails to make a required premium payment or when the employer ceases to offer group health coverage.

WHAT THIS MEANS TO YOU

Plan administrators that are frustrated with COBRA's complex and often confusing regulations should consider reviewing the proposed rules and making comments before the end of the comment period. Additionally, all plan administrators will want to compare their existing COBRA notices with the new proposed general COBRA notice. Although the new proposed regulations are not calendared to take effect until January 1, 2004, the Department of Labor has announced that it no longer considers the 1986 notice to be in good faith compliance. For this reason, employers should consider adopting the new general notice and election form provided in the proposed regulations immediately.

For more information about the new COBRA rules, contact David T. Barton at 602.230.5526, Catherine Dehlin at 602.230.5547, or your Quarles & Brady attorney.