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A message from NAMB 2005-2006 President Jim Nabors, CRMS

National Mortgage Professional
Jun 24, 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 early. 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 address. 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 that notice. 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 Description. 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 these penalties. 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 jscheurer@patriothr.com.
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