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April 1, 2009 | |
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Looming COBRA Deadline
DOL Issues Model Notices
The U.S. Department of Labor ("DOL") has issued four Model Notices to help employers implement the new mandatory COBRA subsidy provisions of the "The American Recovery and Reinvestment Act of 2009," also known as the Stimulus Bill. These notices require immediate attention by employers. Among other things, the Notices modify the current COBRA election notices, include additional subsidy-related forms, and impose an April 18, 2009 deadline for distributing the so-called "Extended Election Period" notice to affected employees and their eligible dependents.
As previously reported, the Stimulus Bill provides a temporary, employer-paid subsidy of 65% for COBRA continuation coverage to employees terminated on or after September 1, 2008 through December 31, 2009. (See CM - 2/24/09). Employers are responsible for paying 65% of the COBRA premium for employees and their eligible dependents, which will be reimbursed through a tax credit taken on IRS Form 941, Employer's Quarterly Federal Tax Return. The employee is only responsible for the remaining 35%.
Significantly, although the premium subsidy applies only to eligible individuals involuntarily terminated between September 1, 2008 and December 31, 2009 and their dependents, the new notice of the subsidy must be given to all COBRA-eligible individuals (and their dependents) who experience a qualifying event during that time period.
The Model Notices provide employers and plan administrators much needed guidance in notifying employees of this significant benefit. Each model notice is part of a notice package tailored to accommodate different types of health plans and individuals. Each distinct notice package includes not only the notice of election of COBRA, but also some or all of the following documents required by the new law: a summary of the new premium subsidy/reduction provisions, questions and answers describing important information about COBRA continuation coverage rights, and informational and administrative forms to use in requesting the premium reduction and (if applicable) electing COBRA coverage.
The four Model Notices are:
General Notice (full version): Group health plans subject to COBRA must send this notice to all COBRA-qualified individuals (including former employees and their covered dependents), who between September 1, 2008 through December 31, 2009, experienced a qualifying event such as a termination, death, divorce, or birth, and who (1) have not yet been provided an election notice or (2) were provided such notice on or after February 17, 2009 [the new law's effective date] that did not include the information required by the new law. Notice: Full Version.
General Notice (abbreviated version): This notice is intended for individuals who (1) experienced a qualifying event on or after September 1, 2008, (2) elected COBRA continuation coverage, and (3) and continue to receive COBRA. This abbreviated version of the General Notice contains only the premium subsidy information and omits the forms concerning COBRA coverage election. Notice: Abbreviated Version.
Notice of Extended Election Period ("Second Chance Election Period"): This notice is for individuals who experienced a qualifying event between September 1, 2008 through February 16, 2009 and who (1) declined COBRA continuation coverage or (2) elected COBRA but subsequently cancelled it. The new law provides these individuals a "second chance" to elect COBRA by giving them an additional 60-day period to elect COBRA continuation coverage with the subsidy. Plans subject to COBRA continuation coverage under federal law must provide this notice by April 18, 2009. Extended Election Period Notice.
Alternative Coverage Continuation Election Notice: This notice is for eligible individuals who work for companies with fewer than 20 employees. For those employers, continuation coverage is governed by state continuation coverage programs or so-called state mini-COBRA laws such as Cal-COBRA. These state laws require small employers to provide continuation coverage similar to that of the Federal COBRA. The Alternative Notice may be modified to conform to the applicable state law and must be provided to all qualified beneficiaries experiencing a qualifying event between September 1, 2008 and December 31, 2009. Alternative Coverage Notice.
Additional Guidance Regarding The Premium Subsidy
Since we first reported about the COBRA premium subsidy, the Department of Labor has issued additional written guidance regarding the implementation of the new subsidy. Some recent clarifications pertinent to the new law's notice and election provisions are summarized below.
No "Second Chance" Election Period Required for State Mini-COBRA Laws.
The new law does not require the "second chance" election period under state continuation coverage provisions, but states may choose to offer it. The California Legislature, however, has recently introduced legislation to enable Cal-COBRA eligible individuals to apply for the subsidy monies. If passed, Assembly Bill 23 would require covered employers to inform individuals who were involuntarily terminated on or after September 1, 2008 of the availability of Cal-COBRA premium assistance and, further to allow those who previously rejected or discontinued that coverage to enroll in the program.
Coverage of Newborns and Adoptees.
The DOL has provided clarification about premium subsidy rights for children of eligible individuals born or adopted after the employee's involuntary termination. Such newborns and adoptees would have the same rights as someone who had coverage at the time of the qualifying event and, thus, are eligible for COBRA continuation coverage.
Notice to COBRA-Eligible Individuals.
The new law requires that a general notice be sent to all qualified beneficiaries (i.e., affected employees and their eligible dependents), whether currently receiving COBRA coverage or not, who have a qualifying event between September 1, 2008 and December 31, 2009 - not just those who were involuntarily terminated.
Coverage Under a Spouse's Health Plan.
An individual is ineligible for the new premium reduction provisions if the individual is eligible for coverage under any other group health plan. The "other" health plan may be a new employer's plan or a spouse's existing health plan.
Defining an Involuntary Termination.
Although the COBRA subsidy is limited to individuals who are involuntarily terminated, the DOL has provided little written guidance for determining what constitutes an "involuntary termination." The DOL has characterized a "lay-off" as an involuntary termination and, in a Q & A issued by the House Ways and Means Committee, the Committee stated that "involuntary termination is a termination that is at the direction of the employer." Formal guidance on this issue is expected soon.
Appealing Denial of a Premium Reduction Application.
Employees may appeal a former employer's decision denying the terminated employee's request for the COBRA subsidy. The DOL will handle the appeals of claims under group health plans covered by federal COBRA, while the Department of Health and Human Services will handle appeals for plans covered by state mini-COBRA laws. Determinations on appeals must be made within 15 days of receipt.
What Must Employers Do Now?
- If you have not already done so, prepare a list of all employees who experienced a COBRA qualifying event on or after September 1, 2008.
- Review the Model Notices and decide whether to utlize these notices with modifications for your group health plan or to revise existing COBRA notices by incorporatimg the new provisions and forms from the Model Notice packages. If you are working with a third party administrator, check with the company to be sure they are able to timely complete all of the required communications.
- No later than April 18, 2009, be sure to provide the required "second chance" election notice to employees (and their dependents) who became COBRA eligible between September 1, 2008 and February 16, 2009, but did not elect COBRA continuation coverage, and those who elected but subsequently cancelled the coverage.
- Existing COBRA notice requirements continue to apply, i.e., employers must notify plan administrators of a qualifying event within 30 days and, within 14 days of receiving the notice, plan administrators must send eligible individuals an election notice. However, there is no statutory deadline for providing the abbreviated general notice to employees who experienced a qualifying event between September 1, 2008 and February 16, 2009 and have elected COBRA. If you have not already done so, we recommend that by April 18, 2009, you provide the abbreviated general notice to these COBRA-eligible individuals.
- If you are an employer with fewer than 20 employees and are covered by Cal-COBRA or some other state's mini-COBRA law, check with your insurance carrier and the responsible state agency to determine your notice responsibilities to employees who experience a qualifying event between September 1, 2008 and December 31, 2009.
- If you use a third party administrator for your COBRA notice, confirm that they are updating their COBRA notices consistent with the new Model Notices and meeting the new notice deadlines.
- If you do not use a third party administrator, confer with your insurer or broker to determine whether they will prepare and/or distribute the notices.
- If your group health plan provides more than one coverage option, e.g., PPO, HMO, etc., decide whether to offer COBRA-eligible individuals the option to select a different, less expensive coverage option.
- Update your payroll system practices to accommodate payment of the new 65% premium subsidy.
- Confirm that the company's 65% share of an eligible individual's subsidy is being reported as a payroll tax credit on IRS Form 941.
Your contact at the Firm is ready to assist you if you have any questions about this topic or wish to arrange for a review of your updated COBRA election notices.
For more information, call us today at (818) 508-3700,
or visit us on the web, at www.brgslaw.com.
Sincerely,Richard S. RosenbergPartnerBRG&S, LLP | |
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