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What Has Changed About COBRA Law And How Does My Organization Become Compliant?

On May 26, 2004, the Department of Labor (DOL) finalized changes to the existing COBRA law. The primary impact of these final regulations was to expand the level of detail required in the notices provided to employees and their families. The DOL provided two model notices (Initial Notice and Election Notice) that can be used to comply with these new regulations. The text of the model notices and these final regulations can be obtained from RSI Gallagher or from the DOL directly. The DOL also added the requirement for two new notices that employers must use, but no models were provided.

For administrative simplicity, RSI Gallagher has included our own model notices for your use (Initial and Election Notices, as well as the new Ineligibility and Termination Notices). Please note that the included notices from RSI Gallagher are revised versions of the DOL's models that we believe to be in keeping with the intent of the new regulations. We have made some changes to the DOL's models when we felt that more clarity would be beneficial. You may choose to adopt the DOL-provided models, RSI Gallagher's models or modify your own existing notices.

These changes are effective for plan years beginning on or after November 26, 2004. Following is a brief summary of the changes and the actions employers need to take to ensure compliance.

1. Initial (or General) Notice
   
   What Changed?
   Timing - The new regulations clarify that the Initial Notice needs to be provided to employees and their spouses within 90 days of those individuals becoming covered by the plan.
   
   Content - The DOL has revised the content requirements for the Initial Notice to more clearly explain COBRA entitlements and obligations. For example, it is now more clearly explained when the employee has the obligation to notify the employer of a second qualifying event and how long they have to do so.
   
   What do I need to do?
   Modify your existing Initial Notice to include the new language required by the final regulations or incorporate the DOL or RSI Gallagher Notice (provided) and modify it to be applicable to your organization and plans. RSI Gallagher has highlighted areas of our Initial Notice in blue where text needs to be modified to fit the specifications of each employer.
   
   
2. Election Notice
   
   What Changed?
   The DOL also created additional content requirements for the Election Notice that must be provided to qualified beneficiaries at the time of a qualifying event.
   
   What do I need to do?
   As with the Initial Notice, you will need to modify your existing Election Notice to include the new language or incorporate the DOL or RSI Gallagher Notice (provided) and modify it to be applicable to your organization and plans. RSI has highlighted areas of our Election Notices in blue where text needs to be modified to fit the specifications of each employer.
   
   
3. New Notices: Unavailability Notice & Termination Notice
   
   What Changed?
   Both of these notices are new requirements per the final regulations:
   
   

   If COBRA is unavailable or denied, the employer must provide the Unavailability Notice to an employee or qualified beneficiary within 14 days of receiving a notice of qualifying event, second event or disability determination. If coverage will terminate prior to the end of the applicable COBRA maximum period , the employer must provide a Termination Notice to the affected beneficiary "as soon as practical".

   
   
   What do I need to do?
   The DOL did NOT provide either an Unavailability Notice or a Termination Notice. RSI Gallagher has included samples of these two notices for your use.
   
   
4. Summary Plan Description (SPD)
   
   What Changed?
   
   

   Your SPD must be updated to reflect the changes mentioned above. It is especially important to explain how an employee or qualified beneficiary must notify the employer of a qualifying event, second qualifying event or a disability. The DOL has also clarified that an employer can provide the Initial Notice through the Summary Plan Description given to employees, but unless it is mailed to the home, the spouse will still need to receive a separate Initial Notice.

   
   
   What do I need to do?
   
   

   Update the SPDs for your plans. RSI Gallagher can provide sample language describing COBRA rights that can be inserted into your SPD. Please contact your Benefits Consultant for assistance with this language. As a matter of practicality, continue to send the COBRA Initial Notice to the home to satisfy the requirement to notify both the employee and spouse. (If you are aware that a spouse lives at a separate address, you must also send a separate Initial Notice to that address.)

   
   
   
5. Modification of Disability Notice Requirement
   
   
   What Changed?
   Employees and qualified beneficiaries (QB) must now provide notice of a disability to the employer within 60 days of the latest of
   
   

   the date of Social Security's disability determination, the date of the qualifying event, the date on which the QB would lose coverage, or the date the QB is informed of his/her obligation to provide a disability notice.

   
   What do I need to do?
   Update your procedure for allowing notice from employees and qualified beneficiaries of a disability. Both the RSI Initial and Election Notices have the disability notice requirements clearly explained.
   
   
6. Second Qualifying Events
   
   What Changed?
   The IRS determined that entitlement to Medicare is not a second qualifying event that would extend the normal COBRA period beyond 18 months.
   
   What do I need to do?
   While not included in the final COBRA regulations, your company's COBRA procedures should be updated to reflect the recent ruling from the IRS on second qualifying events. The included RSI Gallagher Initial and Election Notices have been updated to explain that eligibility for Medicare is not a second qualifying event for qualified beneficiaries.

COBRA Initial Notice
COBRA Election Notice
COBRA Rates Sheet (excel file)
COBRA Unavailability Notice
COBRA Termination Notice