On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the "Act"). The Act provides a subsidy for COBRA premiums for assistance eligible individuals for up to nine months and imposes additional notice requirements. These changes are effective immediately. Baker Hostetler previously distributed an alert entitled COBRA Change Under the American Recovery and Reinvestment Act of 2009 to highlight these changes. On Thursday, February 19, the U.S. Department of Labor published new model COBRA notices to make it easier for employers and administrators to comply with the new COBRA provisions. In addition, the Department of Labor has issued guidance to help employers better understand their new COBRA (and COBRA-related) rights and obligations.
The information below briefly describes the four new model notices, helps identify which notice should be sent to which types of individuals, and summarizes the additional information employers must now include in their COBRA notices as a result of the Act.
The Four Model Notices: Who Gets A Notice and Which Notice Should Be Sent?
- The General Notice (Model COBRA Continuation Coverage Election Notice)Employers must send a General Notice to every qualified beneficiary who has experienced any type of qualifying event occurring from September 1, 2008, through December 31, 2009. The General Notice provides the information required under the Act and all of the other information needed for a COBRA election notice.
- The Abbreviated General Notice (Model COBRA Continuation Coverage Supplemental Notice) Employers may send an Abbreviated General Notice, in lieu of the General Notice, to any qualified beneficiary who experienced a qualifying event on or after September 1, 2008, and who currently is enrolled in COBRA continuation coverage. This Notice advises individuals in this category of the circumstances under which the COBRA premium reduction program is available and provides the general information the Act prescribes.
- Notice in Connection with Extended Election Periods (Model COBRA Continuation Coverage Additional Election Notice) Employers must use a Notice in Connection with Extended Election Periods to notify any individual who became a qualified beneficiary as a direct result of a plan-covered employee's involuntary termination of employment occurring from September 1, 2008, through February 16, 2009, but either did not elect COBRA continuation coverage or is no longer receiving COBRA continuation coverage. An individual in this position must be offered a second chance to elect COBRA continuation coverage and pay the reduced premium the Act prescribes. This Notice must be distributed no later than April 18, 2009.
- The Alternative Notice (Model Continuation Coverage Election Notice) The Alternative Notice is designed to be used by insurance issuers who offer group health insurance that is subject to a state law continuation coverage requirement. Generally, it should be sent by an insurer to any individual who became (or becomes) eligible for continuation coverage under a state continuation coverage law between September 1, 2008, and December 31, 2009. This Alternative Notice should be modified, as needed, to reflect the coverage requirements of the applicable state. Insurers can choose between sending an Alternative Notice or sending an Abbreviated General Notice, as appropriate.
Required Contents for All Notices
An employer is not required to use the model notices. Instead, an employer can either modify the COBRA continuation coverage election notices already in use to include the information required by the Act or provide the information in a separate, supplemental notice that the employer would issue when issuing its COBRA election notice. Regardless of which approach is adopted, employers need to develop appropriate COBRA election notices that accurately reflect the COBRA procedures being followed and contain the information COBRA requires as modified by the Act. The Act requires each notice to contain:
- A conspicuously displayed description of the opportunity to qualify for the COBRA premium reduction, and the eligibility requirements;
- The forms an assistance eligible individual will need to establish eligibility for the premium reduction;
- The name, address, and telephone number of the plan administrator and similar contact information for any other party an individual would need to contact to obtain relevant information concerning the new premium reduction opportunity;
- A description of the obligation an individual who received the premium reduction has to notify the plan if he or she becomes eligible for other group health coverage or Medicare, and a description of the penalty imposed if the individual fails to notify the plan; and
- Any right an assistance eligible individual may have to elect a different coverage option if offered by the employer.
Also note: Any notice provided to an individual, to inform him or her of a second chance to elect COBRA continuation coverage because of the extended election period, must include a description of the second election period and describe the rules applicable to assistance eligible individuals who are being provided with that second chance.
Failure to Issue Notices
Those responsible for distributing the required notices within the required time period but who fail to do so are subject to penalties of up to $110 per day per notice under ERISA and penalties under the Internal Revenue Code.