COBRA Notices Due by April 18, 2009; IRS and DOL Provide Helpful Guidance
Each employer with a group health plan should quickly (by April 18) verify that it has provided (or shortly will provide) the required notice informing eligible former employees (and their qualified beneficiaries) of their second chance to elect COBRA continuation coverage. To assist employers, the Department of Labor (DOL) has issued model notices, and both the DOL and the Internal Revenue Service (IRS) have provided recent additional guidance, all of which is accessible on the Web.
This advisory provides an overview of who is entitled to the extended election period, a guide for the model notices and an action item list for employers.
Approaching April 18 Deadline
As summarized in prior advisories and our recent teleconference broadcast, April 18, 2009, is the deadline for providing notices to former employees (and their qualified beneficiaries) who have an extended COBRA election right. As required by the American Recovery & Reinvestment Act of 2009, this extended election is available to employees (and their qualified beneficiaries) who:
- Experienced an involuntary termination of employment between Sept. 1, 2008, and Feb. 17, 2009;
- Had the right to elect COBRA continuation coverage; and
- Either did not elect COBRA at that time, or elected but let the coverage lapse by Feb. 17, 2009.
Similarly, employees who experienced a COBRA-qualifying event between Sept. 1, 2008, and Feb. 17, 2009, should also have received (or should shortly receive) a notice describing the potential for a subsidized COBRA premium.
DOL Model Notices and Guidance
To assist employers with their notice obligations, the DOL has issued model notices. The DOL has also issued a series of answers to frequently asked questions and held two webcasts to assist employers in complying with the new COBRA rules. All of this information is available on the DOL Web site.
The following chart should prove helpful as a quick guide as to which DOL model notice to use:
| For all plans subject to federal COBRA | |
| Recipients | Notice |
|
Qualified beneficiaries who (i) experienced a qualifying event at any time from Sept. 1, 2008, through Dec. 31, 2009 (regardless of the type of qualifying event), and (ii) who either (a) have not yet received a COBRA election notice, or (b) received a COBRA election notice on or after Feb. 17, 2009, that did not include the additional information related to the premium reductions. |
Model General Notice (full version) This notice advises recipients of the availability of the premium reduction and how to elect COBRA coverage. |
| Qualified beneficiaries who (i) experienced a qualifying event on or after Sept. 1, 2008, (ii) have already elected COBRA coverage, and (iii) are currently enrolled in COBRA. |
Model General Notice (abbreviated version) The notice advises recipients of the availability of the premium reduction. |
| Qualified beneficiaries who would be assistance-eligible individuals if a COBRA continuation coverage election were in effect and who (i) had a qualifying event that was (or may have been) an involuntary termination of employment at any time from Sept. 1, 2008, through Feb. 16, 2009, (ii) are not currently enrolled in COBRA, and (iii) who at the time of the qualifying event, either (a) did not elect COBRA continuation coverage, or (b) elected but subsequently discontinued COBRA. |
Model Notice in Connection with Extended Election Periods The notice informs recipients about their extended COBRA election period and the availability of the premium reduction. |
| For all plans subject to state continuation coverage laws | |
| Recipients | Notice |
| Qualified beneficiaries (i) who experienced a qualifying event at any time from Sept. 1, 2008, through Dec. 31, 2009 (regardless of the type of qualifying event), and (ii) whose coverage is subject to a state’s “mini-COBRA” continuation law. |
Model Alternative Notice (for use by insurers) This notice advises recipients of the availability of the premium reduction and how to elect COBRA coverage. |
IRS Also Provides Additional Guidance
The IRS has issued Notice 2009-27, which includes 58 questions and answers that address many of the concerns employers have raised about the new law.
For example, the Notice makes it clear that, for purposes of the new COBRA rules, an “involuntary termination” of employment is based on all the facts and circumstances of the situation. Therefore, even if a termination is designated as “voluntary” or as a “resignation,” if the facts and circumstances indicate that, absent resignation, the employer would have terminated the employee’s services, and the employee was aware of those circumstances, then the termination is considered “involuntary” for purposes of the new COBRA rules.
Action Items for Employers
Each employer that sponsors a group health plan should quickly do the following:
- Satisfy April 18, 2009, deadline: Make sure someone (an individual in the human-resources department, a third-party administrator, etc.) is on target to issue the required COBRA notices by the April 18, 2009, deadline.
- Update COBRA notices: For COBRA-qualifying events after Feb. 17, 2009, make sure that COBRA notices contain the appropriate language for the premium subsidy, either by amending existing notices or using one of the model notices.
- Monitor subsidy compliance: For qualifying terminated employees (and their qualified beneficiaries), a payment of only 35 percent of the COBRA premium entitles them to full COBRA coverage for up to nine months. Employers should ensure that processes are in place to make that happen.