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HR MATTERS E-TIPS
THIS WEEK'S TIP: Your Guide to COBRA Compliance (Part 2 of 2)
Published by Personnel Policy Service, Inc.
"Your Policy and Compliance Experts Since 1972"
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THIS WEEK'S TIP: Your Guide to COBRA Compliance (Part 2 of 2)
Do you know how long you have to offer COBRA and what type of
coverage beneficiaries can elect? Follow the quick guide below to make
sure your organization is in compliance. |
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THIS WEEK'S TIP: Your Guide to COBRA Compliance (Part 2 of 2)
In last week's E-Tips, you got an overview of the requirements
regarding
how long you have to offer COBRA coverage. (If you missed that
issue,
click here for a copy:
http://www.ppspublishers.com/ez/html/022205txtb.html
In this week's E-tips, you'll find out the actual COBRA coverage you
must make available.
* Type of Coverage *
Many employers are confused about what coverage must be offered to
qualified beneficiaries who have elected COBRA continuation. Simply
stated, COBRA coverage generally must be identical to the coverage
provided under the group health plan for similarly situated plan
beneficiaries who have not experienced a qualifying event.
However, you do not have to offer separate COBRA elections for
different health benefits, such as medical, dental, and vision, if
you
provide health benefits under a single governing plan document. In
that
case, you may offer an "all or nothing" election, so that a person
electing
COBRA coverage cannot pick and choose between separate benefits.
This result can be accomplished even if benefits are provided
through
different insurers, or third-party administrators, by utilizing a
"wrap"
plan document. However, the all or nothing election is not available
if
the medical, dental, or other benefits are treated as separate
plans.
For example, say you sponsor a major medical plan, a dental plan,
and a
vision plan, all of which are maintained under separate plan
documents.
In this situation, you must offer separate COBRA coverage for each
plan.
However, if you combine all three plans into one by adopting a
single
wraparound plan document covering all three benefits, you do not
have
to offer separate COBRA elections for each benefit.[tpl/inc/free-access.htm]
The IRS regulations have special rules for the provision of
identical
coverage when employers offer the coverage under a region-specific
health plan, such as an HMO plan or on-site clinic. These special
rules
apply when the qualified beneficiary moves to a location outside the
coverage area. In that case, even though the coverage may appear to
be of no value to the relocating beneficiary, it still must be
offered.
Further, when dealing with relocation, you must give the beneficiary
an
opportunity to elect any alternative coverage available to active
employees. This requirement applies if the alternative coverage can
be
extended to the area to which the beneficiary is relocating, even
though
the beneficiary did not initially participate in that coverage.
However,
you are not required to make any other coverage available to the
relocating
beneficiary if the only coverage offered to active employees is not
available in the area to which the beneficiary relocates.
Finally, if the group plan has an open enrollment period while the
qualified beneficiary has COBRA coverage, that qualified beneficiary
must be given the same opportunity to elect to change coverage as an
active employee is given. |
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*************************** F-r-e-e Download
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COBRA Quick Guide - from your E-Tips Editors
If you're in charge of your health plan, this information is a
must-have.
http://www.ppspublishers.com/ezcobraguide.htm
Topics include:
* Basic Definitions
* Qualifying Events
* Notice Requirements
* Duration of COBRA Coverage
* Electing COBRA Coverage
* Termination of COBRA Coverage
And more! |
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* Conversion Option *
If your group health plan offers a conversion option to similarly
situated
active employees, you also must extend this option to qualified
beneficiaries. The option must be offered during the 180-day period
immediately preceding the date the maximum period of COBRA
coverage ends. The statute does not specify how notice must be
given.
Most plan administrators give a separate notice of conversion rights
within 30 to 60 days before continuation coverage expires in order
to
prevent confusion about when coverage actually ends. (Note, however,
that at least one court has ruled that the notice obligation is met
when
the plan document itself actually sets out the conversion option. In
O'Brien v. Rivkin, Radler & Kremer, 1996 U.S. Dist. LEXIS 1047 (N.D.
Ill.
1996), the court determined that the employer complied with the
plain
language of the statute, which clearly does not use the words
"notice" or
"notify, since the plan wording actually provided for the conversion
option.) If the plan does not offer a conversion option, the option
does
not have to be offered to qualified beneficiaries.
* COBRA Compliance Can Be Difficult *
For years, employers have complained that the COBRA rules are
complex and not well explained, that they cause undue administrative
burdens, and that they result in adverse insurance underwriting
experience. These are all valid concerns.
Still, you must comply with the rules, or face potential penalties
of up to
$110 per day, per qualified beneficiary. And, just to make the
penalties
more interesting, if you are the plan administrator, you can be
personally
liable for the penalties and violations. So, make sure that you
understand and comply with these COBRA requirements. The stakes
are too high not to take your compliance responsibilities seriously. |
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Subscribers to the Personnel Policy Manual and HR Policy Answers on
CD can find more information on COBRA in Termination of Employment,
Chapter 211, Appendix A.
Not a subscriber? If you would like to order one of our policy
chapters,
go to:
http://www.hrpolicyanswers.com.
If you have any questions, please call us at 1-800-437-3735. We'll
be
happy to help you. |
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YOU CAN TRUST PPS
Information provided in HR Matters E-Tips is researched and reviewed
by the HR experts at Personnel Policy Service as well as employment
law attorneys. However, it is not intended as legal advice. Readers are
encouraged to seek appropriate legal or other professional advice.
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