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A Service of OnQue Technologies, Inc. |
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The Trade Act of 2002 & COBRA
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November 7, 2002
Santa Rosa, CA |
Congress recently passed
legislation known as the Trade Act of 2002, which, among other things, extends
COBRA benefits to certain workers who lose their jobs due to trade-related
reasons. Although it is too early to know precisely how the federal government
will implement all the features of this complex legislation, we think it is
important to advise you of the main points at this time.
What is the
TAA and how does it affect COBRA?
In August 2002, President Bush signed
into law the Trade Act of 2002. This legislation expands existing trade
adjustment assistance (TAA) to workers who lose their jobs due to trade-related
reasons, such as competition from foreign imports or shifts of production to
other countries. Qualified workers will have a second opportunity to elect
COBRA continuation coverage and will receive a 65 percent tax credit to help
pay for the premiums. Under the advance tax credit program to be implemented
next year by the federal government, the amount of the tax credit may be paid
directly to the employer or health plan.
The TAA COBRA amendments are
complex and raise many as yet unanswered questions. Employers and
administrators may need to seek professional guidance to decide how best to
comply with this new legislation.
Here are some of the basics:
Who is
entitled to a second COBRA election period?
Workers who become certified as
eligible for TAA benefits by the Department of Labor (DOL) or designated state
agencies will have a second chance to elect COBRA and to receive a 65 percent
tax credit toward the payment of premiums. The legislation creates no new COBRA
rights: Only former employees who were eligible originally to elect COBRA but
chose not to, and who receive TAA certification, may take advantage of the
second election period.
Employers may apply for certification for a group
of eligible workers, or a worker may apply for individual certification. The
DOL certification process determines whether the former employee's job was lost
due to trade-related reasons. Once certified as eligible to receive trade
assistance, workers who failed to elect continuation coverage during the
regular election period will be offered a second election period. Only former
employees may take advantage of this option--spouses and dependents cannot
independently elect COBRA during this second election period. However, former
employees who choose to elect COBRA most likely will be permitted to elect
continuation coverage for eligible family members.
Is notice of TAA rights required?
No. The law does not require disclosure of the right to a
second COBRA election period, but it may be prudent for employers and
administrators to amend COBRA notifications and plan documents such as Summary
Plan Descriptions (SPDs) to reflect the new legislation.
When does the
TAA second COBRA election period begin?
The second election period begins on the first day of the month in
which the former employee becomes certified as eligible for TAA assistance.
However, the employee must elect COBRA coverage within six months after
initially losing health care coverage. Once COBRA is elected, continuation
coverage becomes effective on the first day of the second election
period.
When does the new law take effect?
TAA-certified workers who filed petitions for
certification on or after November 4, 2002, will be entitled to a second chance
to elect continuation coverage. Tax credits will be available beginning
December 2002, and the advance tax credit payment program must be implemented
by the U.S. Treasury Department no later than August 1, 2003. |
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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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