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Winter 2004-11 U.S. Department of Labor proposes rules on notices for COBRA continuation

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Number 54
Winter 2004

U.S. Department of Labor proposes rules on notices for COBRA continuation

On May 23, 2003 the U.S. Department of Labor announced proposed rules clarifying the requirement notices under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for employees, employers and plan administrators.

The rule, which became final on January 1, 2004, provides guidance and model notices for workers and family members to continue their group health care coverage.

20 employees

Under COBRA, employers with more than 20 employees and a group health plans must give employees and their families the opportunity to elect a temporary continuation of their group health coverage, when coverage otherwise would be lost for reasons such as termination of employment, eligibility for Medicare coverage, divorce or death. COBRA requires that certain individual notices be given before individuals can elect COBRA coverage.

Notice of rights

Section 606(a)(1) requires group health plans to provide a written notice containing general information about COBRA rights to each covered employee and his\her spouse, when coverage under the plan commences. Also it is required that the Summary Plan Description of all covered group health plans include a notice of COBRA rights.

Notice of qualifying event

Sections 606(a)(2) and 606(a)(3) require the plan administrator to be notified when a qualifying event occurs. The nature of the qualifying event determines whether it is the employer, or the covered employee or qualified beneficiary, who must give this notice to the plan administrator. Section 606(a)(4) requires that a plan administrator who has received such a notice provide each qualified beneficiary with the notices of his or her beneficiary rights under COBRA.

Election period

Providing the election notice starts running the 60-day period during which qualified beneficiaries may elect continuation coverage. Section 605 (b) provides an additional 60-day election period for certain individuals eligible for trade adjustment assistance.

Extended coverage

For COBRA extended coverage (for disability or a second qualifying event), Sections 602(2) and 606(a) (3) require that notice of a disability be. The right of a coverage extension based on the occurrence of a second qualified event requires notice of such event pursuant to Section 606 (a) (3).

Loss of rights

Failure to meet notice requirements may cause a qualified beneficiary to lose COBRA rights, or may conversely cause a plan administrator to be subject to fines or other penalties.

The proposed regulation advances the view of the Department of Labor, that the establishment of regulatory guidance with clearer standards for the administration of the COBRA notices processes would reduce the risk of non-compliance for both the plan and the beneficiaries.

Model forms are included in the proposed regulation for two administrator notices: the general notice and the election notice.

Employer duty

Employers are required to operate in good faith and comply with a reasonable interpretation of COBRA substantive rules and notice requirements.


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