Client Bulletin #410
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The U.S. Department of Labor released yesterday model notices and additional guidance to assist employers in meeting their new COBRA obligations under the American Recovery and Reinvestment Act of 2009 (also known as the “stimulus package”), which became effective February 17, 2009.
For the last month, employers have known about the changes to COBRA premiums and coverage availability required by the ARRA. These changes generally apply to employees who experience an involuntary termination from employment between September 1, 2008, and December 31, 2009, and any covered spouses and dependents. Constangy issued a Client Bulletin about the COBRA changes on February 17.
Model Notices. Yesterday, on March 19, the Employee Benefits Security Administration of the United States Department of Labor issued four model notices that incorporate the new requirements of the ARRA, including the premium subsidy available to COBRA participants and the opportunity to elect COBRA coverage for qualified beneficiaries who previously declined coverage or discontinued it. Although employers are not required to use these notices, we recommend that they follow them as closely as possible because the Department of Labor deems them to comply with the requirements of the ARRA.
The four notices may be used immediately after the employer inserts certain employer-specific information. The notices cover four situations:
• A general notice to all COBRA-qualified beneficiaries (including spouses and dependents) who have experienced or will experience a qualifying event between September 1, 2008, and December 31, 2009. This notice applies to all qualifying events, not just involuntary terminations.
• An abbreviated version of the general notice, which may be used for active COBRA-qualified beneficiaries (who elected COBRA and are currently covered because of an involuntary termination occurring on or after September 1, 2008) to advise them of the reduced premium and related information.
• A notice regarding extended election periods, which may be used for former employees (and their spouses and dependents) who experienced an involuntary termination between September 1, 2008, and February 16, 2009, and (1) could have elected COBRA coverage but declined to do so or (2) elected COBRA coverage and subsequently discontinued it.
• A notice that may be used by employers who are not covered by COBRA but are covered by similar state laws, often known as “mini-COBRA” laws. This notice will require some revision to make it consistent with the “mini-COBRA” law in the state in which the employer operates.
If an employer is uncertain whether an individual is entitled to additional COBRA rights under the ARRA because it is unsure whether the employee was terminated involuntarily, the employer should still send the applicable notice and allow the individual to state his or her position as to whether the termination was involuntary.
In addition to the notices, the Department of Labor has issued several supporting documents that should be provided along with the appropriate notice. These documents include a continuation coverage election form, a summary of the premium reduction rules, a form to request eligibility for the premium reduction (as an “Assistance Eligible Individual”), a form to allow qualified beneficiaries to switch coverage options (if the plan normally allows such changes), and a form that qualified beneficiaries can use to notify the plan if they become eligible for coverage under another group health plan or Medicare.
Compliance Deadline. The Department of Labor has identified April 18, 2009, as the date by which employers must provide the appropriate notices and supporting documents to affected and potentially affected individuals. The individuals then have 60 days to return any election form(s) that may apply to them.
Additional Guidance. The Department of Labor has also released a series of frequently asked questions to assist employers, employees, and qualified beneficiaries in determining their rights and obligations under the ARRA. This guidance was expanded on March 19, 2009. Questions related to the premium reduction, notice requirements, and certain appeals by employees are addressed. There is also a link to guidance from the Internal Revenue Service on the payroll tax credit available under ARRA.
Employers should familiarize themselves with this latest information from the Department of Labor so that they will continue to be in compliance with the COBRA changes imposed by the ARRA. The model notices and accompanying documents are very useful tools that can make compliance easier and less costly.
If you need assistance in interpreting or applying the COBRA changes in the American Recovery and Reinvestment Act of 2009, please contact any member of Constangy’s Employee Benefits practice group, or the Constangy attorney of your choice.
Mike Malfitano and David Pearson assisted in writing this article.
Constangy, Brooks & Smith, LLP has counseled employers on labor and employment law matters, exclusively, since 1946. A “Go To” Law Firm in Corporate Counsel and Fortune Magazine, it represents Fortune 500 corporations and small companies across the country. Its attorneys are consistently rated as top lawyers in their practice areas by publications such as Chambers USA, Super Lawyers, and Top One Hundred Labor Attorneys in the United States. More than 100 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Georgia, Florida, South Carolina, North Carolina, Tennessee, Alabama, Virginia, Missouri, Illinois, Wisconsin, Texas and California. For more information, visit www.constangy.com.