Model COBRA Notices Under ARRA

 
Client Advisory
March 27, 2009

The Department of Labor has just issued model notices relating to the COBRA provisions of The American Recovery and Reinvestment Act ("ARRA") that were discussed in our recent advisory. ARRA provides a federal subsidy for COBRA continuation coverage for certain involuntarily terminated employees and covered family members and, in some cases, provides for special enrollment election rights. In addition, ARRA requires that notices regarding these provisions be sent to certain qualified beneficiaries.

There are four model notices available on the Department of Labor's website. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice requirements.

Full General Notice. The full version of the general notice contains COBRA subsidy information and election information. It should be sent to qualified beneficiaries who had a COBRA qualifying event for any reason from September 1, 2008 through December 31, 2009 and had not yet received a COBRA notice, or were given a COBRA notice that did not contain information about ARRA on or after February 17, 2009. To the extent COBRA notices sent out after February 16, 2009 do not contain information about the COBRA subsidy as required under ARRA, those notices are not considered to be complete, and the 60 day period for electing COBRA continuation coverage will not end until after this model general notice is sent. The notice therefore should be sent as soon as administratively practicable.

Abbreviated General Notice. The abbreviated version of the general notice contains COBRA subsidy information, but not COBRA election information. It can be sent in lieu of the full version to qualified beneficiaries who are currently enrolled in COBRA continuation coverage and had a COBRA qualifying event for any reason on or after September 1, 2008. It should be provided as soon as administratively practicable.

Notice in Connection with Extended Election Periods. This notice contains information about the COBRA subsidy and special election right information. It should be sent to qualified beneficiaries who were involuntarily terminated from September 1, 2008 through February 16, 2009, and were sent a COBRA notice, but are not currently enrolled in COBRA continuation coverage. It must be sent out by April 18, 2009. (The Department of Labor did not provide additional guidance on what it means to be “involuntarily terminated” beyond clarifying that anyone who is told not to come back to work until further notice is considered to be involuntarily terminated. We understand the IRS is finalizing guidance that will clarify this definition.)

Alternative Notice. The Department of Labor has also released a model notice for state “mini-COBRA” purposes. Generally, state mini-COBRA laws apply to employers with fewer than 20 employees that are not subject to federal COBRA provisions. As ARRA is a federal law, and the various state continuation of coverage laws are administered by the individual states, each state may release guidance pertaining to its own mini-COBRA statute. It is our understanding that in most New England states legislation is in the works, or state agencies have issued regulatory notices, providing guidance on the extent to which the state law will be amended to reflect the COBRA subsidy, special enrollment rights and notice requirements of ARRA.

Additional Guidance Forthcoming
We expect formal guidance from the IRS to be released soon that clarifies issues that remain outstanding, including: the amount of the government subsidy available where the employer currently subsidizes COBRA coverage, the extent to which the subsidy is available where COBRA continuation coverage covers individuals who are not qualified beneficiaries under federal COBRA laws (such as, domestic partners), and guidance on how to claim the subsidy for insured plans where employers are required to collect and pay over the full COBRA cost of coverage to insurance companies. In addition, we expect the Departments of Labor and Health and Human Services to provide guidance on the expedited review process for handling claims of eligibility for the premium reduction.