A message from NAMB 2005-2006 President Jim Nabors, CRMS
National Mortgage Professional
Jun 23, 2005
COBRA revisions take effectJulie ScheurerCOBRA, employee healthcare, insurance, compliance
Now that you've finally finished updating your payroll policies
to comply with the new overtime regulations, it's time to tackle
yet another favorite government mandate: the Consolidated Omnibus
Budget Reconciliation Act (COBRA). If you have more than 20
employees, COBRA requires you to offer continued healthcare
insurance coverage to those who would otherwise lose it due to
certain "qualifying events" (termination of employment, death of or
divorce from the employee enrolled in the plan, etc.). The
Department of Labor recently revised the regulations to clarify the
timing and content of required COBRA notices. The revisions take
effect on the first day of your next plan year that begins on or
after Nov. 26.
If your company administers your healthcare plan, here's what
you have to do:
1. Update your general and election notices. COBRA requires you
to issue a general notice (notifying participants of their COBRA
rights when they first enroll in the plan) and an election notice
(explaining how to elect COBRA following a qualifying event). Up
until now, it was anyone's guess as to what those notices were
supposed to say. But now, there are model notices detailing exactly
what must be included. You must either adopt those models or make
sure your current notices have the necessary information.
2. Create two new notices. The new rules will require you to
provide notices to participants if their requests for COBRA
coverage are denied or if COBRA coverage will be terminated
3. Comply with new timeframes for issuing notices. COBRA
regulations were vague as to when notices had to be provided. The
revisions set specific deadlines for issuing all notices.
4. Ensure that all plan participants receive notices. Just handing
your employee notices at work is not enough if that employee's
spouse is also enrolled in the health plan. Your best bet is to
send the notices to their home. Just make sure they share the same
5. Create procedures for participants to notify you of a qualifying
event. The new rules state that the participants must notify you if
they have a qualifying event. Your Summary Plan Description must
contain "reasonable procedures" for how and to whom they must give
6. Notify employees of a possible second election period. The
recently passed Trade Act gives tax credits for healthcare premiums
to those who have been laid off or had hours cut due to trade. A
second election period is available to employees who become
eligible for this assistance but did not elect COBRA coverage
during their first election period. You must include information
about a possible second election period in your Summary Plan
Failing to comply with COBRA may cost you up to $110 a day for
each violation. Worse yet, you could end up paying any medical
expenses COBRA would have covered! So, even though it may not be
fun, revising your COBRA policies is essential if you want to avoid
Julie Scheurer is the human relations communications
specialist for Patriot HR Inc., a Canton, Ohio-based human
resources outsourcing firm. She may be reached at (877) 986-7147 or
e-mail [email protected]
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