Guest Article

From Mandated Health Benefits--The COBRA Guide, published by Thompson Publishing Group, Inc.

Final SPD Regulations Explain COBRA Language That Must Be in SPDs

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Summary: Final regulations governing the content and specific language in summary plan descriptions (SPDs) also explain the required COBRA disclosures for group health plan SPDs.

(Dec. 6, 2000) - SPDs for group health plans must include specific language on the COBRA rights of participants and beneficiaries, including qualifying events, qualified beneficiaries, premiums, notice and election requirements and the duration of coverage, according to final regulations issued by the U.S. Department of Labor (DOL).

The COBRA requirements in § 2520.102-3(o) of the final rules, which were published in the Nov. 21, 2000 Federal Register (65 F.R. 70226), are identical to those in proposed regulations issued in September 1998. The final rules also adopt other SPD content requirements (for pension plans and welfare benefit plans) that appeared in the proposed rules. The new SPD regulations are effective on Jan. 20, 2001. They apply as of the first day of the second plan year beginning on or after Jan. 22, 2001 (Jan. 1, 2003 for calendar year plans; earlier for fiscal year plans with 2001 years beginning after Jan. 22, 2001).

In addition to these final SPD regulations, the DOL has indicated that other COBRA-related rules can be expected. The DOL is "currently considering the issuance of additional guidance, in form of regulations," that would clarify COBRA's disclosure and notification requirements. The DOL has been planning to issue COBRA notice regulations for the last two years.

COBRA Comments

In the rules' preamble, the DOL noted several questions or concerns that commenters had about the COBRA-related requirements.

Two commenters expressed concern about having to provide detailed COBRA information in the SPD. One commenter suggested that the information should be allowed to be included in a separate document (like a general COBRA notification) and simply be referenced in the SPD. This approach was used by the DOL in the context of qualified medical child support orders (QMEDs) and qualified domestic relations orders (QDROs).

However, the DOL stated that the "COBRA provisions confer important substantive rights upon participants and beneficiaries" affecting their ability to continue group health plan coverage. Therefore, the agency believes that participants and beneficiaries should be fully informed about their COBRA rights and obligations in the SPD.

One commenter requested a clarification on whether the COBRA notice in the SPD should be provided when the participant first becomes covered under the plan or eligible for COBRA coverage. The DOL indicated that an SPD must be distributed within 90 days of an individual becoming a plan participant or beneficiary. However, an initial COBRA notice must be provided when employees and spouses begin coverage. The DOL then reiterated that the requirement under COBRA is that an initial notification of rights must be provided to covered employees and their spouses upon becoming covered by the group health plan. This obligation can be met, according to the DOL, by providing an SPD with COBRA information to the covered employees and spouses when coverage commences.

Two commenters raised issues on delivery of spousal notices. One commenter asked whether hand delivery of an SPD with COBRA information to a participant at a worksite with written instructions to share the SPD with the spouse would satisfy COBRA's notice requirements. The other commenter was concerned that including COBRA information in the SPD may lead some to conclude that spousal notification is not required.

The DOL emphasized that the mere fact that COBRA information is required to be in the SPD does not relieve administrators from their obligation to provide a spousal COBRA notice. However, the DOL noted that in Technical Release 86-2, it provided where a spouse's last known address is the same as the covered employee's, a single mailing (which could be an SPD), addressed to both the employee and the spouse will constitute good faith compliance with COBRA's notice requirements. Therefore, in-hand SPD delivery to an employee at a worksite would not be considered adequate notice under COBRA, according to the DOL.

Excerpted from the January 2001 supplement to Mandated Health Benefits--The COBRA Guide, ©Thompson Publishing Group, Inc., 2000. All rights reserved.

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