Written by: Tiffanie Mosey
Date published: January 12, 2017
Reading time: 7 Minutes
Employers that have twenty or more employees and offer a group health plan to their employees are subject to the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Surprisingly, these regulations even apply to employers that offer only dental or vision insurance. COBRA regulated employers must provide participating employees and their dependents with the opportunity to continue their coverage under these group plans for a certain amount of time after these individuals would otherwise lose coverage. To ensure proper administration of COBRA coverage, employers and plan administrators are required to distribute specific notices and disclosures to these affected individuals both when (1) they enroll in the plan and (2) when a “qualifying event” would cause them to lose coverage. In this blog, we will briefly discuss these notices and when each must be sent to covered individuals.
General Notice to Covered Individuals
The plan administrator, often the employer, must send a General Notice of COBRA rights to each covered employee and spouse within 90 days of their enrollment in the employer’s group health plan. This notice must include information regarding plan coverage, who may become a qualified beneficiary, and an explanation of the obligations and rights of qualified beneficiaries under COBRA. Additionally, it must provide the contact information for the party administering COBRA coverage and other relevant details.
The General Notice may be incorporated into the group health plan’s summary plan description (SPD) if the employer wishes to reduce the amount of notices employees receive at enrollment. However, if this method of distribution is chosen, delivery of the SPD must be accomplished in compliance with the rules for COBRA notices. COBRA GENERAL NOTICES ARE OFTEN OVERLOOKED BY EMPLOYERS and failure to distribute them can expose employers to tremendous penalties and fines from regulators and disgruntled employees.
Notice of Qualifying Events
The party who is responsible for providing notice that a qualifying event has occurred depends upon the type of event and the administrative structure of the plan. If the plan administrator is not the employer, the employer must provide notice of the following qualifying events to the plan administrator:
- Death of a covered employee;
- Termination of a covered employee’s employment (for reasons other than gross misconduct);
- Reduction in the hours of a covered employee’s employment;
- A covered employee’s entitlement to Medicare; or
- The employer’s Chapter 11 bankruptcy filing.
This notice must be provided within 30 days of the date of the qualifying event or the date the qualified beneficiary would lose coverage, whichever is later. If the employer is the plan administrator, this notice requirement does not apply.
Certain qualifying events require the covered employee or qualified beneficiary to provide notice to the plan administrator, including:
- Divorce or legal separation of the covered employee from his or her spouse
- A covered child’s loss of dependent status
This notice must be provided to the plan administrator within 60 days of the date of the qualifying event, the date the qualified beneficiary would lose coverage, or the date which the qualified beneficiary was first notified of the obligation to provide notice, whichever is latest. Additionally, plan administrators must have reasonable procedures in place for covered employees or qualified beneficiaries to provide notice of these events.
Notice of Continuation Coverage Election Rights
Once the plan administrator has received notice of a qualifying event from either the employer or a qualified beneficiary, it must provide the qualified beneficiaries with notice of their rights to elect COBRA continuation within 14 days. However, when the employer is also the plan administrator, it will have 44 days from the latter of either the qualifying event or the date the qualified beneficiary would lose coverage to provide the election notice to any qualified beneficiaries.
Notice of COBRA Ineligibility
Should the plan administrator determine after receiving notice of a qualifying event that an individual is not eligible for continuation coverage, it must notify that individual of the reasons he or she is ineligible. This notice must be provided in the same time frame as the election notice would be.
Notice of Early Termination
If a qualified beneficiary elects COBRA continuation and the plan administrator determines that his or her coverage will terminate before the end of the maximum period for continuation coverage, the qualified beneficiary must be notified as soon as is practicable. This notice must include the reason the coverage will terminate early, provide the date coverage will terminate, and describe any right there may be to elect other coverage.
Accurate COBRA administration requires plan administrators to keep track of many details and timelines.
COBRA administration is often tedious and more difficult than employers think. Numerous strange circumstances can occur that complicate the notice and eligibility decisions. Infinity strongly recommends putting a third party between you, the employer, and a potentially disgruntled employer. As such, Infinity offers COBRA administrative services as an in-house service to our clients. If you have questions about how COBRA affects your company, or would like further information regarding how to ease your administrative burden, the Infinity Benefit Solutions team is here to help. Contact us by calling (414) 271-2887 or sending us a message here.