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New COBRA Notice Rules Proposed By Labor Department
May 28, 2003
Santa Rosa, CA
The U.S. Department of Labor (DOL), on May 28, 2003, issued proposed regulations designed to bring uniformity and clarity of content to the various notices required by COBRA. The proposed rules, which include two new notices, are presented in four parts and affect employers, plan administrators, workers and their family members: The General Notice, Employer's Notice of Qualifying Event, Qualified Beneficiary's Notice Obligations and Plan Administrator's Notice Obligations.

Part 1 - The General Notice
The general notice (or initial notice, as it is often called) covers the basic information about COBRA coverage that employees and their families need to know in order to protect their rights before a COBRA qualifying event occurs.

CAUTION: The Model Notice issued by the Department of Labor in 1986 has been out-of-date for some time due to amendments to COBRA, and the DOL has now officially declared it to be obsolete. In fact, in the proposed rules, the DOL warns plans that continued use of the old model notices will not conform to the good faith compliance standard of COBRA law. Although the DOL offers two new model notices - a general notice and an election notice - their use is not required. The DOL anticipates that other notices can satisfy the new notice requirements.

Content of General Notice. The general notice must be written in language that can be understood by the average plan participant. At a minimum, it must contain:

  • The name of the plan under which coverage is available and the name, address and phone number of the person responsible for administration of COBRA benefits.

  • A general description of: continuation coverage under the plan, including identifying who may become qualified beneficiaries; the types of qualifying events that may give rise to the right to COBRA; the employer's obligation to notify the plan administrator of the occurrence of certain qualifying events; the maximum period for which continuation coverage may be available; when and under what circumstances coverage may be extended beyond the maximum period; and the plan's requirements for the payment of premiums.

  • An explanation of the plan's requirements regarding the responsibility of qualified beneficiaries to notify the administrator of qualifying events, such as divorce, legal separation, or a child's ceasing to be a dependent under the terms of the plan, including a description of the plan's procedures for providing such notice.

  • An explanation of the plan's requirements regarding the responsibility of qualified beneficiaries who are receiving continuation coverage to provide notice to the administrator of the occurrence of: a second qualifying event such as divorce or legal separation, death of the covered employee, the covered employee's enrollment in Medicare, and a child's loss of dependent child status; as well as notification of a determination by the Social Security Administration of disability of a qualified beneficiary. A description of the plan's procedures for providing such notices should be included.

  • An explanation of the importance of informing the administrator of the current addresses of all participants under the plan who are or may become qualified beneficiaries.

  • A statement that the notice does not fully describe continuation coverage or other rights under the plan and that more complete information regarding these rights is available from the plan administrator and in the plan's summary plan description.
Timing of general notice. The general notice must be provided within 90 days of the date on which the covered employee or spouse first becomes covered under plan. However, if it becomes necessary to provide a COBRA election notice within that 90-day period, then the general notice must also be provided at that earlier time.

Single notice rule. A single notice may be delivered to a covered employee and spouse at the last known address of both. A single notice would not be sufficient if a spouse's coverage begins at a different time from the covered employee's coverage, unless the spouse's coverage begins before the date on which the notice must be provided to the covered employee.

Notice in Summary Plan Description. The general notice may be included in the summary plan description (SPD) so long as the SPD is provided during the required time period. But, if a plan chooses to furnish both the SPD and a COBRA general notice in one document, then the document must satisfy the legal requirements of both.

CAUTION: In-hand delivery of the general notice at the workplace of the employee is adequate notice to the employee, but not to the employee's spouse.

Part 2 - Employer's Notice of Qualifying Event
The employer must provide notice to the plan administrator of a COBRA qualifying event no later than 30 days after the date of the event. But, if the plan's continuation coverage begins with the loss of coverage date, then the 30-day period begins on that date, rather than the date of the event. The employer must provide sufficient information to enable the plan administrator to determine the identity of the plan, the covered employee, the nature of the qualifying event and the date of the event.

Part 3 - Qualified Beneficiary's Notice Obligations
Covered employees and qualified beneficiaries are responsible for notifying the plan administrator of certain qualifying events: divorce, legal separation, a dependent's becoming ineligible to be covered as a dependent under the plan, and a determination of disability. Such notices must be provided within 60 days after the occurrence of the qualifying event, or the loss of coverage date, whichever is later. The proposed rules provide:

  • Plan administrators must establish "reasonable" procedures for the furnishing of notices by covered employees and qualified beneficiaries. The procedures would be considered reasonable if they are described in the plan's SPD, and specify the person who is to receive notices and the means that must be used for giving notice, as well as the required contents of the notice.

  • Plans may require notices to be submitted in a specific form, if that form is easily available to qualified beneficiaries without cost.

  • Plans may not reject a qualified beneficiary's notice of a qualifying event even if the notice is incomplete, so long as it is made within the required time period and contains sufficient information to enable the administrator to identify the plan, the covered employee, the qualified beneficiaries, the qualifying event or disability determination with the date on which it occurred. The administrator can require that missing information be supplied.

  • The 60-day time period for the submission of qualified beneficiaries' notices is a minimum period and plans may provide for longer notice periods.

  • The qualified beneficiary notification requirement may be satisfied by any one person who represents all the beneficiaries affected by a single qualifying event.

  • A notice of disability determination must be provided within 60 days of the date of the determination of disability by the Social Security Administration, and before the 18-month COBRA period expires. Under the proposed rules, failure to provide the disability notice within these time limits could be a basis for concluding that notice was not timely. But plans may refuse to provide the disability extension for failure to provide a timely disability notice only if the affected qualified beneficiaries were adequately notified in advance of their notice obligations.
CAUTION: If a plan does not have reasonable procedures in place for the submission of notices to the plan administrator, a notice will be deemed to have been properly provided if it contains adequate information to any person who would customarily be considered in charge of the plan.

Part 4 - Plan Administrator's Notice Obligations
Under COBRA law, a plan administrator is required to provide notice of COBRA election rights to qualified beneficiaries within 14 days after the administrator is notified of a qualifying event. Under the proposed regulations, the election notice must:

  • Contain the names and contact information for plan administrators; identify qualified beneficiaries; describe the qualifying event and type of continuation coverage being offered; and set out the manner in which the qualified beneficiaries' COBRA rights must be exercised. The notice must clearly state that each qualified beneficiary has an independent right to elect continuation coverage.

  • Explain the plan's payment requirements, payment schedule and payment policies, including grace periods and the consequences of late payment or nonpayment.

  • Describe the alternate coverage or conversion options that the plan may provide, and explain how choosing them would affect continuation coverage rights.

  • Specifically state that it does not fully describe continuation coverage or other rights under the plan, and that more complete information is available in the plan's summary plan description or from the plan administrator.

  • Inform qualified beneficiaries of the consequences of not electing continuation coverage under the plan.

  • Provide information regarding the possible extension of coverage due to disability or second qualifying events, including detailed instructions on the notices that must be provided by qualified beneficiaries
New Required Notices
The proposed rules require two new notices to be provided to qualified beneficiaries:

Ineligibility for continuation coverage notice. If a plan administrator is notified of a qualifying event by an employee or family member who is not eligible to receive continuation coverage, the proposed rule requires the administrator to provide notice to the individual explaining why he or she is not entitled to COBRA.

Early termination notice. A specific notice must be provided to qualified beneficiaries when the administrator terminates COBRA before the end of the maximum coverage period. For example, the proposal would require plan administrators to notify qualified beneficiaries when coverage is terminated due to nonpayment of the COBRA premium or because payment is received after the last day of the grace period.

The proposal requires that notice of early termination be provided as soon as practicable after the termination decision is made. It must explain why and when the coverage is being terminated and describe any rights to other coverage that may be available. The early termination notice may be combined with the certificate of creditable coverage.

Effective Date
The proposed regulations set minimum standards for the timing and content of notices required under the laws governing the administration of COBRA continuation coverage. When they become final, the rules will affect administrators of group health plans, participants and qualified beneficiaries of group health plans, and the sponsors and fiduciaries of those plans. The Department of Labor plans to make the proposed regulations effective and applicable on the first day of the first plan year that occurs on or after January 1, 2004.

For the Department of Labor fact sheet on the proposed regulations, click here: DOL Fact Sheet

For the complete copy of the proposed regulations as published in the Federal Register, May 28, 2003, click here: Proposed Regulations on COBRA Notices
This information is provided by OnQue Technologies, Inc. for educational purposes only and does not constitute legal advice. If legal advice or other professional assistance is required, the services of a competent professional should be sought.
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