What is a notice of a qualifying event?

When a qualifying event occurs, employers, plan administrators and employees may all have notification obligations under COBRA.

Employers

Employers must notify a group health plan administrator within 30 days of the date of one of the following four qualifying events:

• a covered employee dies;

• a covered employee is terminated (other than for gross misconduct) or has working hours reduced below the level at which coverage is provided;

• a covered employee becomes entitled to Medicare; or

• an employer initiates bankruptcy proceedings.

An employer must provide proper notice sufficient to inform a plan administrator that a qualifying event has occurred. Failure to give such notice can result in the employer's liability for the employee's medical expenses that would have been covered under the health plan if the employee had received COBRA coverage. A plan administrator is not responsible for notifying a terminated employee of COBRA rights when the employer fails to sufficiently indicate that the small employer exception no longer applies following a company merger.

Final regulations. Under regulations issued by EBSA in May 2004, an employer must also provide the plan administrator sufficient information to enable the administrator to determine the identity of the plan, the covered employee, the qualifying event, and the date of the qualifying event.

Employees or qualified beneficiaries

Employees or qualified beneficiaries must notify the employer or plan administrator within 60 days of any qualifying event that the employer or administrator would otherwise not know of, such as:

• divorce or separation of the covered employee, or

• date a dependent child ceases to be dependent.

A plan will not be required to offer a qualified beneficiary the opportunity to elect continuation coverage if the required notice is not sent to the employer or plan administrator within 60 days after the later of:

• the date of the qualifying event; or

• the date on which the qualified beneficiary would lose coverage because of the qualifying event.

• the date on which the qualified beneficiary is informed, through the plan’s SPD or the general COBRA notice, of his or her obligation to provide notice and the procedures for providing such notice.

Final regulations. Under regulations issued by EBSA in May 2004, plans must establish reasonable procedures for the furnishing of notices by covered employees and qualified beneficiaries. The regulations set general standards for what will be considered reasonable. A plan's procedures generally will be deemed reasonable if they:

• are described in the plan's SPD;

• specify who is designated to receive notices; and

• specify the means qualified beneficiaries must use for giving notice and the required content of the notice.

The regulations further provide that, if a plan does not have reasonable procedures for qualified beneficiaries' notices, notice will be deemed to have been provided if certain information adequately identifying a specific qualifying event is communicated to any of the parties that would customarily be considered in charge of the plan. Plans may require notices to be submitted via a specific form, if the form is easily available to qualified beneficiaries without cost, and may require specific information to be provided.

A plan may not reject an incomplete notice as untimely if the notice is provided within the plan's time limits and contains enough information to enable the plan administrator to identify:

• the plan;

• the covered employee;

• and qualified beneficiaries;

• the qualifying event or disability determination, and;

• the date on which it occurred.

However, if a timely notice fails to supply all of the information required under the plan's procedures, the plan administrator can require qualified beneficiaries to supply the missing information.

The regulations also provide that a plan that begins the period of continuation coverage with the date of loss of coverage, rather than the date on which a qualifying event occurs, must provide that the 60-day period for qualified beneficiaries' notices also begins with the date of loss of coverage. Any of the qualified beneficiary notice obligations can be satisfied with respect to all qualified beneficiaries affected by a single qualifying event through a single notice.

Plan administrators

Plan administrators have 14 days after receiving the notice of a qualifying event from the employer to send an election notice to the affected beneficiary explaining the right to elect COBRA. Where the employer serves as plan administrator, the employer may have 44 days to provide notice of a qualifying event to the beneficiary. However, some courts have ruled that the employer/administrator has only 14 days to notify the beneficiary.

Final regulations. The regulations set forth the information that must be included in an election notice. In addition to identifying significant pertinent facts, such as the names and contact information for COBRA administrators and the qualified beneficiaries and qualifying event, the election notice must describe the continuation coverage being made available and the manner in which the qualified beneficiaries' COBRA rights must be exercised, making clear that each qualified beneficiary has an independent right to elect continuation coverage. The notice must explain the plan's payment requirements, payment schedule, and payment policies (including grace periods and the consequences of late payment or non-payment). The notice must also specifically state that it does not fully describe continuation coverage or other rights under the plan and that more complete information is available in the plan's summary plan description or from the plan administrator.

The notice must inform qualified beneficiaries of the consequences of not electing continuation coverage under the plan, (e.g., limitations on pre-existing condition exclusions, guaranteed right to purchase individual coverage without a pre-existing condition exclusion, special enrollment rights). In particular, the notice must include an explanation of the effect of electing or not electing continuation coverage on rights guaranteed under HIPAA.

If continuation coverage is offered for only a maximum of 18 months, the notice must also provide information on possible extensions of that period due to disability or second qualifying events, including detailed instructions on any notices required to be given by qualified beneficiaries.

Regs create new notice obligations. Under the regulations, if a plan administrator receives a notice of a qualifying event from a participant or beneficiary not eligible to receive continuation coverage under the plan, the regulations require the administrator to provide notice to the individual explaining why he or she is not entitled to such coverage.

In addition, a specific notice must be provided to qualified beneficiaries in the event that the administrator terminates a period of continuation coverage before the end of its maximum duration (the COBRA provisions permit early termination of continuation coverage in a number of circumstances, such as when the employer ceases to offer group health coverage to its employees or when the required premium payment is not timely paid). Such notice must be provided as soon as administratively practicable after the termination decision is made, must explain why and when the continuation coverage is being terminated, and must describe any rights to other coverage the qualified beneficiaries will have upon termination.

Model notice. The regulations contain a model election notice for plan administrators to use in discharging their notice obligation. The model election notice, like the model general notice, allows for inclusion of plan-specific information and provides alternatives, where appropriate, to tailor specific notices to reflect specific plan design. Use of an appropriately completed model election notice under final regulations will be considered by the DOL compliance with the content requirements of the regulation. However, the DOL does not intend to require use of the model election notice and anticipates that plans could satisfy the requirements of the regulation through other types of notices.

The model election notice can be found at ¶15,870 .