Employers scrambling to comply with the COBRA premium assistance and second-chance election provisions of the American Recovery and Reinvestment Act of 2009 (also referred to as the “federal stimulus bill”) have some useful guidance in the form of eagerly-awaited model notices and other informal guidance from the Department of Labor (DOL).
The DOL released four separate model notices, each designed to apply specifically to a different group of recipients, to help employers meet their obligations under the Act (see Ogletree Deakins’ February 17 E-Alert). “Model” notices would not usually have to be followed, and DOL officials in the past have spoken of these models as mere safe harbors. No such reassurances were found in the model notices or related guidance, however. In any event, employers will want to examine them closely to see how the DOL approaches some challenging issues.
The four separate notices are:
- General Notice (full version) – for all qualified beneficiaries who experience any qualifying event from September 1, 2008 through December 31, 2009, including information on the premium reduction and required COBRA election information.
- General Notice (abbreviated version) – for qualified beneficiaries who had a qualifying event on or after September 1, 2008, but who have already elected COBRA and still have it. The notice covers premium reduction, but does not have election materials.
- Alternative Notice – to be sent by insurers to individuals who became eligible for continuation coverage under state law. The notice will need to be modified for state differences.
- Notice in Connection with Extended Election Periods – for assistance eligible individuals (or those who would be if they had elected COBRA already) who had a qualifying event between September 1, 2008 and February 16, 2009, and either did not elect COBRA initially or elected it and later discontinued the coverage. This notice includes information on the additional election opportunity, as well as premium reduction. This notice must be provided by April 18, 2009.
Among the other key points for employers from the model notices and some related informal guidance:
- The DOL notices would require an individual already on COBRA to affirmatively elect to receive the premium reduction. Many employers and COBRA administrators prefer a sort of negative-election approach where these individuals would be treated as eligible for the premium reduction unless they notify the plan otherwise.
- One question that a number of employers have considered: Is death an “involuntary termination” for COBRA premium reduction purposes? A Q&A issued by the House Ways and Means Committee and distributed by the DOL provides the expected answer: No, death of an employee is a separate qualifying event from the termination of an employee.
- The DOL has stated that it is developing an online form and process for employees to appeal to the DOL a finding by their employer that they are not eligible for the COBRA premium reduction. The DOL’s latest informal guidance does not clarify whether or how employers will be able to participate in this process.
Finally, the single most vexing question for employers dealing with the COBRA changes – what exactly is an “involuntary termination” – is touched on only briefly in the latest informal guidance. The DOL provides only this minimal guidance – that a layoff (“being told not to come back to work until further notice”) is a “termination” for purposes of the COBRA changes.
To discuss the DOL’s guidance or other employee benefit issues, contact a member of the firm’s Employee Benefits and Executive Compensation Practice Group, or the Client Services Department at 866-287-2576 or via e-mail at firstname.lastname@example.org.
Note: This article was published in the March 20, 2009 issue of the Benefits eAuthority.