COBRA Series Part 1: A Quick Overview of Required Notices

 
 

 

Regulatory compliance is complex. With legislation changing rapidly, it can be challenging to stay current on the latest compliance issues.

However, you don’t have to tackle those issues on your own. When you partner with industry experts and vendors, some of that pressure can be relieved.

Educating yourself on compliance topics relevant to you can help get you one step closer to achieving compliance. 

If you have 20 or more employees, this article is for you.

 

What is COBRA?

As explained by the U.S. Department of Labor (DOL), the Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that “gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.” Under COBRA, employers with 20 or more employees in the previous calendar year who sponsor group health plans must offer the option of continuing this coverage to individuals who would otherwise lose their benefits due to the reasons outlined above.

Note: Individual states may also have specific state continuation requirements. 

 

COBRA Notices

Organizations with 20 employees or more that sponsor a group health plan are required to provide employees and their beneficiaries with several important notices when coverage begins under the plan and upon the occurrence of a qualifying event.

 

The Initial Notice

The initial notice informs covered employees and his/her beneficiaries of the availability of continuation coverage (if a qualifying event occurs) and the rights and obligations of COBRA coverage.

The initial notice must be provided within 90 days of the date the employee’s group health plan coverage began or the date the plan became subject to COBRA.

The initial notice must contain the following information:

  • Name and contact for the plan and for more information relating to COBRA.

  • General description of the continuation coverage available under the plan.

  • Outline of what qualified beneficiaries must do to notify the plan of qualifying events or disabilities.

  • Explanation of why it’s critical to keep the plan administrator up-to-date on participant and beneficiary addresses.

  • Statement that the general notice does not completely define COBRA or the plan, and that more detailed information may be obtained from the plan administrator or found in the summary plan description.

 

Qualifying Event Notice

If the employer is not also the plan administrator, a qualifying event notice must be sent upon the occurrence of certain events. According to the U.S. Department of Health & Human Services, “Employers must notify plan administrators of a qualifying event within 30 days after an employee's death, termination, reduced hours of employment, or entitlement to Medicare (when an employee's Medicare entitlement results in loss of plan coverage for the employee's dependents).”

For other qualifying events (such as divorce from the covered employee), it is the responsibility of the covered employee or other qualified beneficiary to notify the plan administrator, generally within 60 days of the qualifying event. In this case, the qualifying event notice does not apply and the plan administrator should instead send the election notice (see below) after receiving notice of a qualifying event from the covered employee or other qualified beneficiary. 

 

The Election Notice

The election notice must be sent to employees within 14 days of the plan administrator’s receipt of notice of the qualifying event or within 44 days of the date the qualifying event occurred (for events that are the responsibility of the employer to notify the plan administrator and the employer is also the plan administrator). For most plans, the employer is also the plan administrator. 

The election notice must include several specific items such as the following:

  • Name and contact for the plan and COBRA administrator.

  • Explanation of the qualifying event.

  • Identification of who is entitled to coverage.

  • Plan termination date unless continuation coverage is elected.

  • How qualified beneficiaries may elect COBRA coverage.

  • Details of consequences of failing to elect or waiving continuation coverage.

  • Description of available continuing coverage, maximum coverage period and possible continuation coverage extensions.

  • Payment information, including cost and due dates.

  • Explanation of why it’s critical to keep the plan administrator up-to-date on participant and beneficiary addresses.

  • Statement that the election notice does not completely define COBRA and additional information may be obtained from the plan administrator or found in the summary plan description

 

Additional resources for employers.

The DOL put together an informational guide titled “An Employer’s Guide to Group Health Continuation” which includes information on COBRA notices and election procedures. Click the below link to view this resource for additional information to what is outlined above:

Another great resource can be found on the DOL’s website at the following link:

 

How the American Rescue Plan Act of 2021 (ARPA) affects COBRA

The American Rescue Plan Act of 2021 (ARPA) COBRA premium assistance provisions took effect on April 1, 2021.  Even small employers who are exempt from federal COBRA regulations may have to comply with the ARPA COBRA premium assistance as State continuation coverage that is comparable to Federal COBRA is included.

An “Assistance Eligible Individual” does not owe any part of the COBRA premium for the period of coverage starting April 1, 2021 and ending September 30, 2021.

Click here to read more about the implementation of certain provisions of the ARPA as it applies to COBRA. 

 

This blog article is the first of a series.

Stay tuned for part two of our COBRA series where we cover the top mistakes employers make when it comes to COBRA compliance, and how you can avoid them.

Want to educate yourself on compliance topics relevant to you? Subscribe to our blog below! 

 

Disclaimer: Please note that this is not all-inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding the specific application of the information to your own plan.

Editor’s Note: This post was originally published to PrimePay’s blog and has been updated for freshness, accuracy, and comprehensiveness.

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John Cuellar

John Cuellar

John is responsible for SyncHR’s product, engineering, and system operations teams. He is focused on streamlining the business processes related to HCM and finance by distributing SyncHR to all members of the workforce and by using patented security and workflow to control these developments. John is also responsible for delivering SyncHR as a cloud based application with “extreme ratio” financial metrics.

He has a background in engineering, workplace applications, and business administration, bringing over 25 years of experience deploying strategic HCM applications. Prior to co-founding SyncHR, John was the CEO of Harbor Technologies, since acquired by Mellon Financial Corporation. Previous to Harbor Technology Group, he spent an internship with the Swiss Bank Corporation in their derivatives pricing and trading group and also worked as a senior manager for the US Navy. John received his Bachelor of Science degree in Electrical Engineering from the University of California at Santa Barbara, and his Master of Business Administration from the Haas School of Business at the University of California at Berkeley.

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