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Amend Cobra Notice


Guest Jill41402

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Guest Jill41402

A COBRA notice was sent to the ex-spouse of an employee and the amount was incorrectly calculated. The correct premium is only a small amount more than what was quoted (approximately $5.00). The former spouse has already made 2 payments. Can an amended notice be sent with the correct premium and a letter requesting payment of the balance for the two months already paid?

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Guest Sieve

I don't think you send an amended Notice (that raises all sorts of issues). I think you simply send a letter indicating that the premium was incorrectly stated on the Notice, that the monthly premium is now $X,XXX from here on out, and you owe $XX X 2 for prior months' coverage. If premium shortfall is not paid, you probably cancel coverage (probably also refunding the earlier payments and cancelling retoractively if no claims have been processed)--which is another can of worms. But, it's the approach I would take.

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Interesting. You would advise a client to ask for the missing $10 and cancel coverage if the individual doesn't pay the $10?

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Guest Sieve

I would assume that the individual doesn't want the coverage, and would not have purchased it in the first place, if they do not pay the extra $10--and if they do not pay going forward. Of course, I would warn that failure to pay will result in cancellation. If the full premium is not paid timely--whether $100 is not paid or $10--COBRA permits concellation, correct? And, here, the premium was not paid if some of it remains outstanding (assume the appropriately sufficient itme period to make payment is given).

What would you do as an employer if the premium was $1,510, and the COBRA continuee only paid $1,500. Continue coverage? Pay the extra $10 yourself? What if the individual was still working?

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The regs on short payments:

54.4980B-8

(d) If timely payment is made to the plan in an amount that is not significantly less than the amount the plan requires to be paid for a period of coverage, then the amount paid is deemed to satisfy the plan's requirement for the amount that must be paid, unless the plan notifies the qualified beneficiary of the amount of the deficiency and grants a reasonable period of time for payment of the deficiency to be made. For this purpose, as a safe harbor, 30 days after the date the notice is provided is deemed to be a reasonable period of time. An amount is not significantly less than the amount the plan requires to be paid for a period of coverage if and only if the shortfall is no greater than the lesser of the following two amounts:

(1) Fifty dollars (or such other amount as the Commissioner may provide in a revenue ruling, notice, or other guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii) of this chapter)); or

(2) 10 percent of the amount the plan requires to be paid.

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Guest Sieve

Thanks, orie. (For those looking for the quoted material, it's in the reg cited, at Q&A-5(d).)

So, the short payment is not deemed to satisfy the payment requirement if the plan gives notice of the shortfall and gives a reasonable time period (at least 30 days) to correct. From that language, it appears that a deficient payment can, in fact, result in no COBRA coverage if handled properly--so, I assume a refund of the amount paid would also be appropriate.

Of course, there's a question as to whether paying what originally is requested is treated as a deficient payment if, later, the plan indicates that there was an error. I suspect so.

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