Two experts recently discussed how to comply with the notice requirements of the Consolidated Omnibus Budget Reconciliation Act (COBRA).

Melanie K. Curtice and Timothy G. Verrall presented a BLR audio conference called COBRA Employee Notice Update: Do Your Procedures Comply?

Curtice is a principal in the employee benefits section of the business services group Stoel Rives in Seattle. Verrall is an associate at Morrison & Forester in Irvine, California.

They discussed the six types of health-continuation coverage notices, which include the general/initial COBRA notice, employer's notice of qualifying event, qualified beneficiaries' notice of qualifying event, election notice, notice of early termination of COBRA coverage, and notice of unavailability of COBRA coverage.

The notice of early termination of COBRA coverage and the notice of unavailability of COBRA coverage are relatively new.

General/Initial Cobra Notice

Verrall said that the general COBRA notice must be furnished to each covered employee and each covered spouse within 90 days of the date the individual is first covered under the plan.

The notice must be in writing and written in "in a manner calculated to be understood by the average plan participant" (that is, in plain-English).

The notice must provide the name of the plan and the name, address, and telephone number of the person form whom the individual can obtain more information about the plan and continuation coverage.

The notice must also contain a general description of continuation coverage under the plan.

In addition, the notice must:

• Explain the plan's requirements regarding the qualified beneficiary's duty to notify the plan administrator of certain qualifying events.
• Explain the importance of keeping the administrator informed of the current addresses of participants and beneficiaries
• Contain a statement that the general notice does not fully describe continuation coverage or other rights under the plan and that more complete information regarding such rights is available from the plan administrator and in the Summary Plan Description (SPD).

He noted that the Department of Labor has created a model general notice.

Employer's Notice of Qualifying Event to Plan Administrator

Curtice said the employer must notify the plan administrator in the event of qualifying events, including:

• A covered employee's death
• Termination of employment (other than for gross misconduct)
• Reduction in hours
• Medicare entitlement
• Chapter 11 proceeding (with respect to retiree coverage)

She said the deadline for this notice depends on when qualifying event would cause loss of coverage.If loss of coverage occurs on the date the qualifying event occurs, the notice must be provided no later than 30 days after the qualifying event. If loss of coverage occurs after the qualifying event, the notice must be provided no later than 30 days after the loss of coverage

The notice must contain sufficient information to allow the plan administrator to determine the plan involved, the covered employee, the qualifying event, the date of the qualifying event

Qualified Beneficiaries' Notice of Qualifying Event

A plan may require a covered employee/qualified beneficiary to provide timely notice to the plan administrator in the event of :

• Divorce/legal separation causing a loss of coverage
• Child's loss of dependent status causing a loss of coverage
• A second qualifying event
• Social Security Administration disability determination

The plan itself must provide a deadline for this type of notice and must establish the plan administrator's authority to deny election rights based on a failure to meet the deadline.

The plan must establish "reasonable" procedures for the furnishing of these notices.

The period for providing a notice of a qualifying event must run to at least 60 days following the qualifying event. If the plan provides that COBRA begins when coverage is actually lost, the 60 days begins then.

The plan may require that notice be written, and/or the use of a specific form, if the form is readily available and free.

Election Notice

The plan administrator must provide an election notice to each qualified beneficiary within:

• 14 days of plan administrator's receipt of an employer's or a qualified beneficiary's qualifying event notice
• 44 days of the qualifying event (or, in some cases,the loss of coverage), if the employer is also the plan administrator and the employer was required to send the qualifying event notice

The election notice must be in writing and written in a manner calculated to be understood by the average plan participant.

The election notice must contain:

• Identification of the qualifying event
• The name of the plan
• The name and contact information of the person responsible for administering continuation benefits
• The name (or status) of the qualified beneficiaries
• The date on which coverage under the plan will terminate (or has terminated) unless continuation coverage is elected
• Independent right to elect continuation coverage
• Covered employee or spouse of covered employee may elect continuation coverage on behalf of all other qualified beneficiaries
• An explanation of the plan's procedures for electing continuation coverage
• An explanation of the consequences of failing to elect or waiving continuation coverage
• A reference to where a qualified beneficiary may obtain additional information about HIPAA rights that could be affected by a COBRA election
• A description of the plan's procedures for revoking a waiver of the right to continuation coverage before the date by which the election must be made
• A description of the continuation coverage that will be made available under the plan, if elected, and the maximum period of such coverage
• An explanation of the continuation coverage termination date and any events that might cause coverage to be terminated early
• An explanation of any circumstances under which the maximum period of coverage might be extended and the length of any such extension
• In the case of a notice that offers continuation coverage with a maximum duration of less than 36 months, a description of the plan's requirements regarding the responsibility of the qualified beneficiaries to provide notice of a second qualifying event and notice of a disability determination by the SSA, along with a description of such notice procedures
• A description of the amount, if any, that each qualified beneficiary will be required to pay
• A description of the due dates for payments and other information relating to payments
• An explanation of the importance of keeping the administrator informed of the current addresses of all current and potential participants/beneficiaries
• A statement that the notice does not fully describe continuation coverage or other rights under the plan and that more complete information regarding such rights is available in the plan's SPD or from the plan administrator.

Curtice noted that the Department of Labor has created a model election notice that includes all the required content.

Unavailability Notice

Verrall said that if the plan administrator receives from an individual notice of a qualifying event, second qualifying event or SSA determination, but determines that the individual is not entitled to continuation coverage (or an extension of such coverage), the plan administrator must furnish the individual with a notice that continuation coverage (or an extension) is unavailable.

The unavailability notice must contain an explanation as to why the individual is not entitled to continuation coverage.

The deadline for this notice is the same as the deadline for sending an election notice had the plan administrator's decision been favorable (14 days).

The notice must be in writing and written in a manner calculated to be understood by the average plan participant

The notice must be furnished in a manner consistent with the regulations governing delivery of SPDs and other disclosure items that must be furnished to participants.

Early Termination Notice

The early termination notice must be furnished when plan administrator determines that continuation coverage will end earlier than the end of the applicable maximum period of continuation coverage

The notice must be in writing and written in a manner calculated to be understood by the average plan participant.

It must explain why coverage is being terminated early, the date of termination, any rights the participant may have to elect alternative group or individual coverage.

The notice must be furnished "as soon as practicable" after the plan administrator's decision

Audit Notices and Procedures for Compliance

Both experts recommended that employers review and update notices and procedures. They said employers would ensure that their general notice is up to date with latest DOL regulations. In addition, employers should review their notices against the department's model notices.

Order a CD recording of the audio conference.