O Labor issued final regulations that require separately to each - PDF document

G Employee Benefits Alert June 2004 Final Regulations Require Changes To COBRA Notices and Procedures By Andrew E. Graw , Esq. and Mark Seidel, Esq. n May 26, 2004, the U.S. Department of The General Notice may either be distributed O Labor issued final regulations that require separately to each employee (and his or her employers to change their COBRA spouse), or may be included in the summary plan notices and procedures for administering COBRA description (SPD) of the group health plan (which benefits. The final regulations are substantially also must be distributed to each covered employee similar to proposed regulations issued in 2003. For and spouse within 90 days of participation). The most employers, the final regulations will be notice requirement may be satisfied for both an effective January 1, 2005. employee and spouse by mailing a single General Notice (either alone, or incorporated into a single New Form of Model General Notice Issued SPD) to the home of the employee, assuming that A new model COBRA General Notice form has the employee and the spouse reside together. been issued that is intended to provide employees If an employee gets married and adds his or her and their spouses with general information about new spouse to the group health plan, the General their COBRA rights. Notice should be distributed to the spouse within The model General Notice, as well as a model 90 days following the date the spouse’s coverage Election Notice (discussed below), may be viewed begins. and downloaded at www .lowenstein.com. However, employers will need to modify these New Form of Model Election Notice Notices to conform to the specific terms and costs Issued of their group health plans. A separate notice, called an Election Notice, In most cases the General Notice must be must be provided to each individual who is eligible provided to each employee (and his or her spouse) to elect COBRA coverage (called a “qualified within 90 days after becoming covered by the beneficiary”). The Election Notice informs the employer’s group health plan. However, if an qualified beneficiary of his or her right to elect Election Notice also must be provided to an COBRA coverage and the consequences of that individual within this 90-day period, then the election. If the employer is not the plan Election Notice may be provided to the individual administrator, the employer must notify the plan in lieu of the General Notice. administrator of the qualifying event triggering This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L Roseland, New Jersey Telephone 973.597.2500 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400

G COBRA coverage (e.g., the qualified beneficiary’s conversion right). This notice must be furnished divorce or legal separation) within 30 days after the as soon as practicable following the plan later of the date of the qualifying event or the loss administrator’s determination that coverage will of coverage; thereafter, the Election Notice must be terminate. provided to the qualified beneficiary within 14 days Notice Requirements for Covered after the plan administrator receives notice of the Employees and Beneficiaries qualifying event. If the employer is the plan administrator, the Election Notice must generally Reasonable procedures must be established for be provided to the qualified beneficiary within 44 covered employees and qualified beneficiaries to days after the qualifying event occurs or within 44 provide the following notices to the plan days after the loss of coverage, whichever period is administrator: longer. · Notice of a qualifying event that is the divorce or legal separation of the New Notice Obligations for Plan covered employee from his or her Administrators spouse; Two new notice obligations are created: · Notice of a qualifying event that is a 1. If a plan administrator receives a notice child ceasing to be covered as a of a qualifying event (or a related notice, such as dependent of a participant; a notice of a second qualifying event or a · Notice of a second qualifying event disability extension) from an individual who is occurring after a qualified beneficiary not eligible for COBRA coverage, notice must be becomes entitled to COBRA; provided to the individual that explains why he · Notice that a qualified beneficiary has or she is not eligible for such coverage. This notice must be provided within the same time been determined by the Social Security frame for providing an Election Notice. Administration to be disabled at any time during the first 60 days of COBRA 2. If an individual’s COBRA coverage coverage; and terminates before the maximum COBRA · Notice that a qualified beneficiary has coverage period expires (e.g., due to a failure to timely pay premiums or the discontinuance of been determined by the Social Security the group health plan), written notice must be Administration to no longer be disabled. provided to the individual that specifies the Procedures for providing these notices are reason for the termination, the date of deemed to be reasonable if they are described in the termination, and any alternative coverage that SPD and specify the means to be used to give the may be available to the individual under the notice, who is designated to receive the notice, and group health plan or applicable law (such as a

G the required content of the notice. The employers and plan administrators are required to procedures may require the notices to be submitted operate in “good faith compliance” with either the in a specified form, if the form is easily available proposed or final regulations, and are also required and without cost. to use the model notices set forth in the proposed or final regulations. Continued use of the original If no reasonable procedures are established for model notices (issued by the Department of Labor providing these notices, then notice generally is in 1986) will no longer be considered to be “good deemed to be provided when a written or oral faith compliance.” Accordingly, employers and communication (identifying a specific event) is plan administrators should promptly review made in a manner reasonably calculated to bring COBRA forms and procedures and begin using the event to the attention of the party responsible notices that conform to the model notices in the for group health plan-related matters (e.g., benefits final regulations as soon as possible. personnel). For more information about this or any other employee Recommended Steps benefits issue, please contact Andrew E. Graw, Esq., The final regulations apply to COBRA notice Member of the Firm and Chair of Lowenstein Sandler’s obligations arising on or after the first day of the Employee Benefits and Executive Practice Group at first plan year beginning on or after November 26, 973.597.2588 or agraw@ lowenstein.com, or Mark 2004 (i.e., the date that is six months after the date Seidel, Esq., associate in the Employee Benefits Practice the final regulations are issued). Until that date, Group at 973.597.6190 or mseidel@ lowenstein.com.