Did You Know COBRA Notices Make Good Wedding Gifts?

COBRA Administrators: No need to order gifts off a wedding registry for soon-to-be-married employees — just print out and present to the couple a copy of the general/initial notice for COBRA continuation coverage, according to COBRA expert Paul M. Hamburger, Esq.

Well, before you take this too seriously, some context is necessary. Hamburger, contributing editor of Mandated Health Benefits – The COBRA Guide, was giving valuable tips on complying with COBRA’s notice rules and disclosures at a Thompson Interactive webinar. One tip was not forgetting to provide COBRA’s general notice of continuation coverage rights when an employee, and spouse, first become covered under a group health plan. He noted that employers and plan administrators often forget the importance of this notice, which “sets the stage” of providing notice of a qualified beneficiary’s rights and obligations (like notifying the plan administrator of a divorce within certain time frames). But if you failed to send this notice to a covered employee and spouse, you “can’t penalize” them later if they fail to notify you of a qualifying event, he added. So Hamburger explained that this notice should be provided “at the time of commencement of coverage under the plan” or within 90 days of becoming covered. And that does not just include when a new employee joins the company, but when an existing single employee gets married and adds his or her spouse to the plan. That new spouse should receive a general notice, and that’s when Hamburger joked about using it as a wedding gift.

But he was very serious about other COBRA compliance tips, such as:

1. Don’t just copy the government model notices. The U.S. Department of Labor (DOL) has “generic” model notices that must be modified for actual plan provisions. “You don’t want to just copy what the Department of Labor provided because there is a lot of opportunity for changes based upon your individual plan design,” Hamburger said. For example, your company likely has specific procedures for premium payment or other issues that need to be in the general notice.
2. Make sure your notice language is up-to-date. The old DOL notice from 1986 “needs to be tossed” but some employers are still using it, Hamburger noted. If you have a model DOL notice that says on top “Very Important Notice” it’s the old one. Get rid of it and use an updated one.
3. Make sure your contact information is up to date. For example, Hamburger said that third-party administrators (TPAs) do a terrific job at running group health plans but may use their own model notice language. “If you change your TPA you need to make sure your notice gets updated,” he recommended. He has seen notices referring to prior TPAs, which can cause problems when a qualifying event occurs. Also, beware of just saying to contact the “plan administrator” – the contact information should specify a specific committee, location, TPA, etc. so that any random notice from a qualified beneficiary mailed to a company is not treated as a COBRA notice.
4. Don’t make assumptions when you contract with a third party for COBRA services. One problem that Hamburger sees is employers making assumptions that all they have to do is fulfill their end of the COBRA function. “TPAs do a great job but can only do as good of a job as you let them do based upon the information you give them,” he said. So if an employer provides incomplete information on its COBRA processes, or for example, provides late notices of qualifying events, it can’t expect the TPA to do its best job.
5. Conduct an overall COBRA compliance review. Don’t just stop at drafting your language, setting up your procedures and contracting with a COBRA administrator. You have “to see how things work in practice,” Hamburger noted. He added that IRS excise taxes for COBRA violations can be waived if any COBRA errors are due to reasonable cause and not willful neglect, and in making this determination, the IRS looks at a number of factors, including the extent to which an employer/plan administrator reviews its COBRA procedures.

I’ll share a few more tips tomorrow from COBRA Notices and Disclosures: How to Do it Right and How to Fix It When Things Go Wrong, If you want them all, the entire webinar is on CD or on demand.