After a 13-year wait, the Internal Revenue Service has just released its comprehensive regulations covering COBRA health benefits continuation coverage. The new regulations-which are a complex mix of final and so-called proposed rules-clarify several gray areas of the law but don’t change the basic COBRA mandates, including the detailed notice requirements. Even though the rules aren’t technically in effect yet, you should start making an effort to comply now.
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Key Provisions Of New Regulations
Here are the highlights:
- Calculating the small employer exemption. In determining whether you have fewer than 20 workers and are therefore exempt from COBRA, the final regulations state that you only have to count common-law employees, including workers outside the U.S., but not independent contractors or directors-even if they are covered by your plan. (Note, however, that contractors or directors may still be eligible for COBRA benefits if your plan covers them.) The new proposed rules also say part-time workers only count toward the 20-employee threshold as a fraction of an employee, equal to the number of hours worked by the person divided by the number of hours (not to exceed 8 a day or 40 a week) worked by full-timers.
- Interaction of COBRA and family leave. The proposed regulations reiterate IRS guidelines announced several years ago which say that taking family leave doesn’t trigger an employee’s right to COBRA benefits. Instead, your COBRA obligations come into play only when an employ- ee who was covered under your health plan immediately before taking family leave doesn’t return to work at the end of the leave. And an employee’s failure to pay insurance premiums while on family leave doesn’t affect their right to COBRA benefits unless they fail to return.
- Electing COBRA coverage. Gen-erally, employees or beneficiaries have the right to elect COBRA coverage within 60 days after the later of the following: the date on which they would lose coverage due to a qualifying event or the date on which you provide them notice of their right to elect COBRA benefits. The final regulations provide that for purposes of determining whether an election is timely, the election is considered to be made on the date it is sent to the employer or plan administrator.
- Core coverage and flexible spending accounts. The final rules state that beneficiaries no longer have to be given the choice of electing only medical coverage or both core and noncore coverages under a plan that includes multiple benefits, such as medical/dental/vision. And, the new proposed regulations spell out when flexible spending arrangements will not be subject to COBRA. In most cases, COBRA will not apply if the amount of the required COBRA payments would exceed the maximum benefit available under the flexible spending account.
- Open enrollment. The final rules clarify that if you allow active employees to select from several health plans during an open enrollment period, you must extend those same options to individuals on COBRA.
- Premium payments. If an employee’s COBRA premium payment is short by an amount that is “not significantly less than” the actual amount due, the final rules require you to either write off the deficiency or give the employee at least 30 days to pay the correct amount.
Other Provisions
The new rules also make several other technical changes, such as: providing that anyone, including a hospital, can make COBRA payments on behalf of a beneficiary; allowing the buyer and seller of a business to decide who will be responsible for COBRA coverage; clarifying when multiple “qualifying events” will extend the length of COBRA coverage; and adopting the recent Supreme Court ruling that you can’t deny COBRA coverage because an individual who elects the benefits is also covered under another health plan, or under Medicare, before making the COBRA election.
When The Rules Take Effect
The final regulations technically won’t take effect until January 1, 2000. And there’s no set date for when the new proposed rules will become law. But Ina L. Potter, a partner with the employee benefits law firm of Trucker Huss in San Francisco, points out that the government expects employers to immediately begin making a good-faith effort to comply with both sets of rules.
For More Information
If you have questions about the new rules, call the IRS at (202) 622-4695.