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Employer Law Report

Model COBRA Notices From the Department of Labor

Posted in Employee Benefits/ERISA, Traps for the Unwary, Workforce Strategies

The U.S. Department of Labor (DOL) has released four model notices for use by employers in connection with requirements of the American Recovery and Reinvestment Act (ARRA) (see Employment Law Alert – “Broad COBRA Changes in 2009 Stimulus Bill – What Should You Be Doing Now?” – March, 2009). The model notices are available on the DOL web site: http://www.dol.gov/ebsa/COBRAmodelnotice.html. Employers and plan administrators should use the model notices as a guide, but those notices will require customization to meet the circumstances of particular employers and plans. Also, in the Model election forms there is a technical error in the way the election period is described. The Model election forms state that an election must be made within 60 days of notice. In fact, COBRA regulations allow for elections within 60 days of the date of notice or the date that coverage will end due to the qualifying event, whichever is later. Employers and plans using the Model Notices as a guide should correct that error.

The DOL and Internal Revenue Service have posted on their websites answers to common questions regarding the COBRA changes: http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html and http://www.irs.gov/newsroom/article/0,,id=204708,00.html.

 

Here is a summary of how the model notices are to be used:

 

Model General Notice (Full Version)

This is a comprehensive COBRA notice covering all the basic requirements of a COBRA notice as well as explaining the COBRA premium subsidy and other related aspects of ARRA. The notice includes election forms, general information, and a form to be used by COBRA-qualified beneficiaries to ask to be treated as an Assistance-Eligible Individual (AEI) and to receive the COBRA premium subsidy.

 

The Model General Notice (full version) is to be used for all COBRA-qualifying events – not just involuntary terminations – occurring from now until December 31, 2009. This same notice is to be issued to all persons who had a qualifying event on or after September 1, 2008 but have not yet received an election notice or received an election notice that did not include information about ARRA. While there is conflicting information, the safest course of action is to treat April 18, 2009 as the deadline to distribute the Full General Notice.

 

Model General Notice (Abbreviated Version)

The Model General Notice (abbreviated version) is to be given to persons who had COBRA-qualifying events on or after September 1, 2008 and are currently enrolled in COBRA. This notice includes an abbreviated general description of COBRA rights, apparently with the idea that persons who are already enrolled in COBRA do not need as full an explanation as those who have not enrolled. The Model General Notice (abbreviated version) includes a summary of the COBRA subsidy provisions under ARRA and a form for request by the qualified beneficiary to be treated as an AEI and to receive the subsidy. Again, the safest course of action is to treat April 18, 2009 as the deadline to distribute the Abbreviated General Notice.

 

Model Notice in Connection With Extended Election Periods

This notice is to be issued by April 18, 2009 to persons with qualifying events that occurred on or after September 1, 2008 through February 16, 2009 (the effective date of ARRA) who did not elect COBRA or elected COBRA but suffered a discontinuation of coverage because, for example, they failed to pay premiums. This notice gives those persons a new opportunity to elect COBRA and receive the premium subsidy. If elected, the COBRA coverage will take effect retroactive to February 17 for those with a qualifying event date before then. However, for persons with a qualifying event date before February 17, 2009, the 18-month total period of COBRA eligibility dates back to the original qualifying event date.

 

Model Alternative Notice

The Model Alternative Notice is for use by employers and plans not covered by federal COBRA but covered by state “mini-COBRA” laws. Because the rights and requirements under various state mini-COBRA laws differ, the Model Alternative Notice requires substantial revision consistent with the specific state law. The notice includes an election form and an application for treatment as an AEI.

 

Ohio has a mini-COBRA statute that applies to most employers that are not covered by federal COBRA. The Ohio Department of Insurance has published guidelines specific to Ohio’s mini-COBRA on its web site at:

http://www.ohioinsurance.gov/ConsumServ/COBRAStimulusSmallEmployers.pdf.

 

The Ohio Department of Insurance has adapted the DOL model notices for use under Ohio’s insurance continuation statute: http://ohioinsurance.gov/ConsumServ/COBRAContinuationCoverageElectionNotice.pdf. For employers in Ohio, the Model Alternative Notice is to be sent to persons who are eligible for Ohio insurance continuation coverage and were terminated after February 17, 2009. The notice is also to be sent to former employees terminated on or after September 1, 2008 who either elected and are still receiving continuation coverage or who are still eligible to elect continuation coverage. Ohio law does not require offering an extended election opportunity to persons who were given a COBRA notice before February 17, 2009 and failed to elect coverage during the election period. Insurance continuation under Ohio law is for a maximum of six months currently. However, there is legislation pending in Ohio that would change the maximum continuation period to 12 months in order to coincide with the available premium subsidy under ARRA.