If you have been confused about who should be receiving notices concerning the new COBRA subsidy and extended election rights, you’re not alone. Fortunately, the Department of Labor seems to be clearing up some of the uncertainty.
Under the American Reinvestment and Recovery Act (ARRA), individuals who lose group health plan coverage because of an involuntary termination of employment that occurs between September 1, 2008, and December 31, 2009, may receive a 65 percent subsidy of their COBRA premiums for up to nine months. Also, individuals who were offered COBRA and would be eligible for the subsidy but had declined or dropped their COBRA coverage are entitled to a "second chance" period to elect COBRA at the subsidized rate.
ARRA requires employers to notify individuals of their COBRA subsidy and second chance election rights. To help with the notification process, the DOL made available model notification forms on its Web site at www.dol.gov/cobra. (See http://www.wnj.com/dol_releases_model_cobra_subsidy_notice_forms_3-19-2009 for March 19 bulletin "DOL Releases Model COBRA Subsidy Notice Forms")
Contrary to earlier information on its Web site and elsewhere, the DOL is now clarifying that not everyone who has experienced a qualifying event since September 1, 2008, necessarily needs to get a notice of the subsidy. Here are the three notice requirements*:
1. General Notice** (Full Version). Should be sent to all COBRA-qualified beneficiaries (including spouses and dependents) with a qualifying event between 9/1/08 and 12/31/09 and either:
They have not yet been provided a COBRA election notice or
A COBRA election notice was sent on or after February 17, 2009, without the required information on the ARRA subsidy
2. General Notice** (Abbreviated Version). Should be sent to COBRA-qualified beneficiaries (including spouses and dependents) who experienced a qualifying event on or after September 1, 2008, elected COBRA and are currently on COBRA.
3. Extended Election Period Notice. Must be sent to COBRA-qualified beneficiaries (including spouses and dependents) whose qualifying event was involuntary termination of employment that occurred between September 1, 2008, and February 16, 2009, and either:
- Did not elect COBRA or
- Elected COBRA but dropped it (for example, failed to pay the premium)
The Extended Election Period Notice must be sent by April 18, 2009. There is no ARRA-imposed deadline for the other notices; however, the General Notice (Full Version) should be sent to new qualified beneficiaries within the normal COBRA notice timeframes and should be provided as soon as possible to those whose COBRA election notice was sent on or after February 17 without the required subsidy information. The General Notice (Abbreviated) should also be sent promptly since the COBRA subsidy it describes is already in effect.
In a teleconference presentation on March 24, DOL representative Amy Turner recommended that companies should err on the side of being over-inclusive in deciding who should receive a notice, because if an employer fails to provide notice to someone who qualifies for the subsidy, the company could potentially be subject to penalties of up to $110 per day per person.
There will be cases in which an employer and a former employee may disagree whether a termination was voluntary or involuntary for purposes of the Extended Election Period Notice. To reduce the risk of penalties, you may want to make sure that if a person's COBRA qualifying event was a reduction of hours or a termination of employment (for any reason) on or after September 1, 2008, and before February 17, 2009, an Extended Election Period Notice is sent.
Some employers have criticized the DOL's model notices as being confusing. Therefore, we've developed cover letters that you can send with the model notices that help explain the subsidy and the various forms that are included with the notices. If you'd like a copy of the cover letters, or if you have any questions about the model COBRA subsidy notices or about other COBRA issues, please contact any member of Warner's Employee Benefits Practice Group.
*A fourth notice, the Alternative Notice, is required only in states that have state COBRA-like requirements (Michigan does not) and will generally be provided by the insurance company.
**Do not confuse this General Notice with the General Notice (formerly called the Initial Notice) that must be provided to covered employees and spouses within 90 days of joining the health plan.