New COBRA Notice Guidance

07/01/2003

On May 28, 2003, the U.S. Department of Labor ("DoL") issued proposed regulations on COBRA continuation coverage notice requirements. The proposed regulations include content standards for each type of required notice and provide sample forms for certain of the required notices.  This Alert focuses on the significant changes applicable to single employer health plans. 

Even though they are only proposed, the regulations are important for a number of reasons.  First, the preamble clearly indicates that the use of the form of  “general notice” that was issued in June, 1986, is no longer good faith compliance with the those notice requirements of the statute. A new sample notice is included in the regulations.

Second, the proposed regulations require delivery of the initial COBRA rights notice within 90 days of when the individual is first covered or when the plan is first covered, whichever is later.  The specific timing requirement for this notice is new.

Third, the regulations contain detailed information regarding what must be included in each of the other notices required under COBRA and the impact of not providing certain information in the notices.   For example, if the appropriate notice does not have specified procedures for delivering notice of a qualifying event to the plan administrator, the proposed regulations permit qualified beneficiaries to give notice of a qualifying event orally or in writing to any one of a broadly defined group of persons, including many not normally responsible for the operation of the employer’s welfare benefits.

Fourth, the regulations add requirements that there be a notice of termination of continuation coverage, as well as a notice of unavailability of continuation coverage in the event someone is not eligible for continuation coverage, and provide new timing requirements on responding to requests for continuation coverage.

The new notice requirements require documentation and coordination between the plan provisions, the summary plan description, the COBRA notification notices and election forms and the plan's operating procedures. While the regulations are not currently effective, the DoL has proposed to make the regulations final and effective no later than the first plan year that occurs on or after January 1, 2004.  Accordingly, as employers prepare for the next open enrollment period, it is a good time to review the initial COBRA notices, the plan’s terms, the summary plan description provisions, the plan’s operating procedures and employee communications on COBRA.  In addition, new forms and procedures will be required for notices of COBRA coverage denial or unavailability, and new forms and procedures will be required to notify qualified beneficiaries when their coverage terminates and about alternatives for coverage available under HIPAA’s portability provisions or the plan’s terms for conversion coverage.

If you should have any questions regarding the new proposed COBRA regulations, you may contact any of the above members of the Employee Benefits / Executive Compensation Practice Group.

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