The Federal Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA, requires group health plans of employers with 20 or more employees to offer employees and their families continued medical coverage after the employment relationship ends, under certain circumstances. For the first time since 1985, the U.S. Department of Labor has issued final rules regarding COBRA obligations. These requirements are in addition to the longstanding regulations issued by the Department of the Treasury. We have summarized some of the significant features of the new final regulations for your convenience.
- Effective Date of New Regulations
The final regulations, which will become effective on July 26, 2004, impose the new notice requirements for plan years after November 26, 2004. Thus, for plans on a calendar year, the new notice requirements take effect on January 1, 2005. Plans with different year cycles will have different effective dates. COBRA notices that meet the new requirements automatically will meet the existing requirements so there is every reason to update COBRA notices now.
- Content of the COBRA Notice and Election Forms
Most COBRA notices will need to be revised to comply with the new final regulations. For example, COBRA notices now must advise plan participants to keep the plan informed of their address changes. Other requirements include explaining the obligations of qualified beneficiaries to keep the plan informed of certain events, giving detailed plan contact information, and describing, in detail, all COBRA continuation rights. COBRA election forms also must meet certain content requirements. The U.S. Department of Labor has available model notices and election forms that can be used or tailored to meet these requirements.
- Model: General Notice of COBRA Continuation Coverage Rights
- Model: COBRA Continuation Coverage Election Notice
- Other New requirements
Plan administrators now must provide notice of termination of COBRA coverage if COBRA coverage ends before the full period available, such as when there is a failure to pay premiums timely.
Also new is the requirement to send written notice of the unavailability of COBRA coverage if a plan administrator receives notice of a qualifying event from an individual not eligible for COBRA. The unavailability notice is due within 14 days after the plan administrator receives notice from the individual.
Under the new final regulations, plan administrators will be permitted to address a COBRA notice to both the plan participant and covered spouse if, on the basis of the most recent information available to the plan, the covered employee’s spouse resides at the same location as the employee. Separate COBRA notices are not required for dependent children who share a residence with the employee or covered spouse.
- Using Summary Plan Descriptions
Updated COBRA notices can be published in the summary plan description (SPD) of the group medical plan as a convenient means of meeting the initial notice requirements provided that SPDs are distributed timely. Now is also a good time for employers to update SPDs for other new laws affecting their health plans.
- Take Action Now
To ensure compliance with the new final rules, employers should review existing COBRA notices, election forms, SPDs and procedures for tracking and notifying COBRA participants. Employers should also put into place procedures for complying with the new rules Use of the model notices under the regulations will help streamline compliance. As with all “model” documents, they may be tailored to fit particular plans. Our attorneys are available to assist you in reviewing, preparing and implementing the new COBRA requirements.
If you have questions regarding this Update, please contact Evelyn A. Haralampu at eharalampu@burnslev.com or 617-345-3351.
This Client Update provides general information and does not constitute legal advice.
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