In Part 1, we defined COBRA and told you who’s eligible for it, and how they become eligible. Now, in Part 2, we’re doing a deep dive into the various notices required under COBRA. Group health plans, under COBRA, must provide covered employees and their families with specific notices that explain their COBRA rights. These are the notices group plans must furnish.
Summary of Plan Descriptions
You must describe COBRA rights provided under your firm’s health plan, like other vital plan information, in the plan’s Summary Plan Description (SPD). The SPD is a written document which gives essential information about the policy. ERISA requires group health plans to provide each participant with an SPD within 90 days of becoming a plan participant. Or, within 120 days after the plan is first subject to ERISA’s reporting and disclosure provisions.
Additionally, if there are any material changes to the plan, the plans must give participants a Summary of Material Modifications (SMM) no later than 210 days after the end of the plan year in which the changes become effective. If the change is a material reduction in covered services or benefits, the plan administrator must furnish the Summary of Material Modifications within 60 days after the reduction is adopted.
Also, if a covered participant or beneficiary requests, in writing, a copy of these or any other plan documents, the plan administrator must provide them within 30 days.
COBRA General Notice
Group health plans must give employees and their spouses a general notice describing COBRA rights within the first 90 days of coverage. Group health plans can satisfy this requirement by including the general notice in the plan’s Summary Plan Description and giving it to the employee and spouse within this time limit.
The general notice must include:
- The name of the plan, and the name, address, and telephone number of someone the employee and spouse can contact for more information on COBRA and the plan.
- A general description of the continuation coverage provided under the policy.
- An explanation of what eligible beneficiaries must do to notify the plan of qualifying events or disabilities.
- A statement that the general notice doesn’t fully describe COBRA or the plan and more complete information is available from the plan administrator and in the summary plan description.
- An explanation of the importance of keeping the plan administrator informed of addresses of the participants and beneficiaries.
COBRA Qualifying Event Notice
A group health plan must offer continuation coverage if a qualifying event occurs. Note, the employer, employee, or beneficiary must notify the group health plan of the qualifying event, and the plan isn’t required to act until it receives an appropriate notice. Who must give notice depends on the kind of qualifying event.
The employer must notify the plan within 30 days if the qualifying event is:
- Termination or reduction in hours of employment of the covered employee
- Death of the covered employee
- Covered employee becoming entitled to Medicare, or
- Employer bankruptcy
The covered employee or one of the qualified beneficiaries must notify the plan if the qualifying event is:
- Legal separation, or
- A child’s loss of dependent status under the plan
Additionally, group health plans must have procedures for how a covered employee or qualified beneficiaries can provide notice of these types of qualifying events. The plan can set a time limit for providing this notice, but the time limit cannot be shorter than 60 days, starting from the latest of:
- The date the qualifying event occurs
- The date the qualified beneficiary loses (or would lose) coverage under the plan as a result of the qualifying event, or
- The date the qualified beneficiary is informed, through the furnishing of either the summary plan description or the COBRA general notice, of the responsibility to notify the plan and the procedures for doing so.
Your procedures must describe how, and to whom, notice should be given and what information must be included in the qualifying event notice. If one person gives notice of a qualifying event, the notice should cover all qualified beneficiaries affected by that event.
COBRA Election Notice
After receiving notice of a qualifying event, the plan must provide the qualified beneficiaries with an election notice within 14 days. The election notice describes the beneficiaries rights to continuation coverage and how to make an election.
This election notice should include:
- The name of the plan, and name, address, and telephone number of the plan’s COBRA administrator
- Identification of the qualifying event
- Identification of qualified beneficiaries (by name or by state)
- An explanation of the qualified beneficiaries’ right to elect continuation coverage
- The date coverage will terminate, or has terminated, if continuation coverage isn’t elected
- How to elect continuation coverage
- What will happen if continuation coverage isn’t elected or waived
- What continuation coverage is available, for how long, and how it can be extended for disability or second qualifying events
- How continuation coverage might terminate early
- Premium payment requirements, including due dates and grace periods
- A statement on the importance of keeping the plan administrator informed of the addresses of qualified beneficiaries; and
- A statement that the election notice doesn’t fully describe COBRA, or the plan and that more information is available from the plan administrator and in the summary plan description.
COBRA Notice of Unavailability of Continuation Coverage
Group health plans may sometimes deny a request for continuation coverage or for an extension of continuation coverage when the plan determines the requester isn’t entitled to receive it. When a group health plan denies a request, the plan must give the denied individual notice of unavailability of continuation coverage within 14 days after the request is received. This notice must explain the reason for denial of the request.
COBRA Notice of Early Termination of Continuation Coverage
Continuation coverage must, typically, be available for a maximum period (either 18,29, or 36 months). Though, the group health plan may terminate continuation coverage early, for any number of specific reasons. When a group health plan decides to terminate continuation coverage early for any of these reasons, the plan must give the qualified beneficiary a notice of early termination.
The notice must be given as soon as practicable after the decision is made, and it must describe the date coverage will terminate, the reason for termination, and any rights the qualified beneficiary may have under the plan or applicable law to elect alternative group or individual coverage.
Use this article as a reference when it comes time to send out your various COBRA notices. These notices are vital to your company’s compliance with COBRA and ERISA writ large. In fact, failure to provide these notices could potentially cost your firm thousands of dollars.
And be sure to check back at The Olson Group blog tomorrow for our final article covering COBRA. Part 3 will detail election procedures and benefits. See you then!