Brigid Anderson

The language of the preamble describing this transition relief seems to envision employers that did not offer coverage before: "Except as otherwise provided in this paragraph (3), during the coverage maintenance period the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014." (emphasis added). The preamble also says this: "The Treasury Department and the IRS understand that application of section 4980H will involve changes for applicable large employers that did not previously offer coverage, or that did not offer affordable, minimum value coverage. A large percentage of those employers are in the smaller size range, such as those with fewer than 100 full-time employees (including FTEs)." (emphasis added)

Perhaps you mean a HSA; but even so, subject to some limited exceptions not applicable here, premiums cannot be reimbursed from an employee HSA. The word is not getting out to small employers about this but, in light of IRS Notice 2013-54 and DOL Tech. Rel. 2013-03 (both issued Sept. 13, 2013), there is really no way for an employer to help employees purchase individual market coverage on a tax-advantaged basis. In addition, while that guidance allows a salary increase, it must not be conditioned on purchasing individual health insurance (in other words, it must be open-ended, leaving the employee free to use the increase for other things); otherwise, the employer will be treated as purchasing the insurance, which is also prohibited even when done after-tax. Employers violating these rules are subject to self reporting of $100-per-day excise taxes on Form 8928, so the adverse consequences are real. Limited transition relief expires June 30, 2015 for certain small employers (generally those that employed an average of fewer than 50 full-time employees, including full-time equivalent employees). [iRS Notice 2015-17 (Feb. 18, 2015)] You should talk to your accountant or attorney (and bring this guidance to his or her attention if need be). Yes, good luck!

Only employees of the employer sponsoring a cafeteria plan may participate, so you are correct that sole proprietors must make after-tax contributions. As to the trust issue, the preamble to the final DOL regulation on when participant contributions become plan assets makes clear that Technical Release 92-01 also applies to after-tax contributions, such as retiree contributions and COBRA contributions, received in connection with a cafeteria plan: t is the view of the Department that the mere receipt of COBRA contributions or other after-tax participant contributions (e.g., retiree contributions) by a cafeteria plan would not by itself affect the availability of the relief provided for cafeteria plans in the technical release. DOL Reg. § 2510.3-102, as reissued in final form on August 7, 1996, 61 Fed. Reg. 41220. The other issue here, however, is that allowing an individual who is not the employee of the employer sponsoring the health plan to participate may make the health plan a MEWA (multiple employer welfare arrangement) and subject it to greater state insurance law regulation than might otherwise apply. But that is another story . . . . ! Regards, Brigid Anderson

I agree with Ray's COBRA conclusion--there has been no qualifying event. Assuming your are subject to HIPAA, certficates of creditable coverage are, for course, another matter. I also generally agree with Ray's concerns about employees not being informed about enrollment procedures. But what did this person know? Had they re-upped in the past? Is the enrollment option explained in the SPD and did this person get a copy? Unless the person can show she was totally in the dark, I wouldn't jump to the conclusion that you've got to retroactively enroll her, but without a whole lot more information about your plan, your procedures, general communications with employees and the facts of this particular case it is very hard to offer specific advice.

As far as we know, the third set of DOL Q&As is the first time the DOL has said that something as little as a 25% interest can create common control. So that's a big change since most practitioners probably have required an 80% interest, analogizing to the Code section 414 test. I'm no common control expert, but common board membership is one of the indicators of common control. Of course, conclusions are difficult because the test is so fact specific.

A dependent child losing eligibility is a qualifying event. Assuming the child was covered while living with the covered employee and lost coverage by moving away, I think that would qualify. It is analogous to an over-age child having continued eligibility while at college full time and then dropping out of school.

I am not aware of anything that would prohibit this under federal law at any rate. I have heard of plans that require a dependent child to be resident with the covered employee to be eligible, but not spouses. Note that the child's loss of coverage (assuming there was a loss) might trigger a COBRA right under the other plan.

In this regard, check out Community Ins. Co. v. Ohayon, 73 F. Supp. 2d 862 (N.D.Ohio 1999), in which the district court enjoined further distribution of insurance company booklets until they were revised to conform with ERISA's SPD requirements. (For reasons that were not explained in the opinion, the insurer in this case was the ERISA "plan administrator" and thus responsible for SPD compliance. In most single-employer plans, the plan administrator will be the employer/sponsor of the plan, and the insurer will technically not be required to comply with the SPD rules. This may be why your insurer is refusing unless the group is big enough--an insurer that includes the required information is agreeing to do more than it is legally required to do.) Many employers use what is also called a "wrap document" that, combined with the insurance company's booklet, constitutes the plan's SPD. The wrap document adds the ERISA-required terms and information often missing from the booklet prepared by the insurer. (A similar wrap document may be combined with the insurer's full policy to constitute the ERISA plan document.) Our publication, ERISA Compliance for Health and Welfare Plans, by Brigid Carroll Anderson, Darcy L. Hitesman & Sophia E. Chrusciel (EBIA 1992-2000) contains two sample wrap documents that may be used as the starting point for drafting by an employer that wishes to use this approach.

Need more information. At a minimum: How many participants are covered by the plans in question? Is there a cafeteria plan for the payroll deductions? What do you mean "premiums" are paid for claims as they are incurred?

It may be that you can properly terminate this individual's COBRA because of the other group health plan coverage--I don't think it matters that the other coverage began while the individual was still in his election period. However, I must assume a few things about the other coverage. First, that it was actual coverage: mere eligibility for coverage isn't enough. Second, that the other coverage began AFTER the COBRA election. (This appears to be so from the order of your facts.) Third, that the other coverage had no pre-existing coverage limitation, e.g., because of the individual's HIPAA creditable coverage, that would prevent you from terminating COBRA. Last, I assume that the reason for the termination was the other coverage. Because of the potential for administrative difficulties in applying the preX limit mentioned above, some plans don't cut off COBRA due to other coverage (it is discretionary not mandatory). I assume that your plan has a practice of doing so: you might run into difficulties if you cut it off for this reason for some individuals and not for others. Note that in the absence of the other coverage, it may not be enough that the individual elected and then waived COBRA (assuming he was still in the grace period for payment of the second month's COBRA premium). [This message has been edited by Brigid Anderson (edited 01-26-2000).] [This message has been edited by Brigid Anderson (edited 01-26-2000).]

I apologize that, due to time constraints in the last two weeks, I haven’t been carefully reading all the posts in this topic. Now that I have, I would suggest (as moderator of this message board) that we don’t need to hear any more on the "how large is large" issue. mls: thank you for your remarkable self-restraint in not responding to comments from Gburns. I hope it continues to hold . . . Everyone else: please be polite when posting messages on this board. We must disagree with each other, of course. That is what makes it a useful exercise. But our focus here is on content not personalities. Therefore, please confine your disagreement to what is being said—do not characterize the person saying it or question their motives. Also note that I have edited or deleted the posts that prompted this message. [This message has been edited by Brigid Anderson (edited 11-23-1999).]

Seems okay to me from a legal point of view. Morale, public relations--well that's another story maybe. But don't do any payroll deductions without employee's consent. It'll probably violate state law, and I think a lot of judges would say those sort of state laws aren't preempted. ------------------

Hell hath no fury . . . . Based just on what you say, if he terminates all the plans and just goes out and buys an individual policy for himself taking no business tax deduction for it, etc. then I think he can do it. But criminy, how long can he keep that up? How many group health plans did this guy maintain? For how many employees? If he puts them back in place again in the future (i.e., before the end of what would have been the spouse's 36 month COBRA period), I think you can argue that he is manipulating the rules to evade the COBRA rules and the new plans might be considered part of the old plans and liable to provide COBRA to the ex. See Prop Treas Reg. § 54.4980B-2, Q/A-6©("if a principal purpose of establishing separate plans is to evade any requirment of law, then the separate plans will be considered a single plan to the extent necessary to prevent the evasion." Also remember that if the group health plans were insured, the covered employees and dependents whose coverage will be terminating (including the ex's) may have rights under the insurance policy to individual "conversion" policies. Depending on the state law that applies to the insurer, these won't be as favorable (in benefits or cost) to COBRA coverage but they would typically be better than getting separate individual coverage. ------------------

Hell hath no fury . . . . Based just on what you say, if he terminates all the plans and just goes out and buys an individual policy for himself taking no business tax deduction for it, etc. then I think he can do it. But criminy, how long can he keep that up? How many group health plans did this guy maintain? For how many employees? If he puts them back in place again in the future (i.e., before the end of what would have been the spouse's 36 month COBRA period), I think you can argue that he is manipulating the rules to evade the COBRA rules and the new plans might be considered part of the old plans and liable to provide COBRA to the ex. See Prop Treas Reg. § 54.4980B-2, Q/A-6©("if a principal purpose of establishing separate plans is to evade any requirment of law, then the separate plans will be considered a single plan to the extent necessary to prevent the evasion." Also remember that if the group health plans were insured, the covered employees and dependents whose coverage will be terminating (including the ex's) may have rights under the insurance policy to individual "conversion" policies. Depending on the state law that applies to the insurer, these won't be as favorable (in benefits or cost) to COBRA coverage but they would typically be better than getting separate individual coverage. ------------------

Plans may charge up to 102% of the "applicable premium" for COBRA coverage. Code § 4980B(f)(2)©. The applicable premium is the cost to the plan of providing coverage and, for insured plans like yours, the cost to the plan is the premium charged by the insurance company to the employer (less any experience refunds or dividends). See, e.g., Draper v. Baker Hughes Inc., 892 F. Supp. 1287 (E.D. Cal. 1995). The applicable premium must be fixed for a 12-month "determination period." ERISA § 604(3); Treas. Reg. § 54.4980B-8, Q/A-2(a). Therefore, a mid-period increase in insurance rates will not permit a mid-period increase in the COBRA premium charged to QBs. However, if you set the determination period for each of your plans to match the insurance company's contract period, you will be okay. The determination period does not have to match the plan year. It can be any period of 12 consecutive months so long as it is applied consistently from year to year.Treas. Reg. § 54.4980B-8, Q/A-2(a). So the ultimate question is: How have you been doing it? Have you been following the contract year for COBRA determination period purposes? If not, it would appear to be necessary to change your determination period. Unfortunately, I don't know of any direct authority on how a plan properly changes its COBRA determination period. You should consult your attorney if this is your situation. ------------------

Nope. DOL Technical Release 92-01 reflects the DOL's nonenforcement policy with respect to the ERISA trust requirement. It provide relief for plans under which the sole reason for application of the trust requirement is the presence of participant contributions. Without 92-01, a plan with participant contributions has plan assets (under DOL regulations) and is, therefore, clearly subject to the trust requirement. Consequently, the participant contributions would have to be placed in trust as soon as they can be segregated from employer general assets (i.e., where participant contributions are made by wage withholding). Sorry. ------------------

In addition to the laws Hilary mentions in her post, the Code imposes discrimination testing requirements--to prevent discrimination in favor of highly compensated employees--as a condition of favorable tax treatment for certain plans and benefits including DCAPs (§ 129), group term life (§ 79), self-insured medical reimbursement plans (§ 105(h)), benefits provided through a VEBA (§ 501©(9) and 505(B)), and cafeteria plans (§ 125)(although a cafeteria plan is not, by itself, an ERISA plan). HIPAA prohibits discrimination on the basis of health status under group health plans. Our book ERISA Compliance for Health and Welfare Plans (EBIA 1992-1999) discusses eligibility restrictions under ERISA (mostly found in case law) in detail. Our book Cafeteria Plans (EBIA 1991-1999) addresses the tax side discrimination testing.Our book HIPAA Compliance for Group Health Plans (EBIA 1997-1999) discusses the HIPAA health status rules in detail. [Note: This message has been edited by Brigid Anderson]

Oh boy, that's a big question. The rules on COBRA in mergers and acquisitions have just been substantially revised in proposed IRS regulations issued in February. Prop. Treas. Reg. §§ 54.4980B-10, 64 Fed. Reg. 5237 (Feb. 3, 1999). What plan has the liability depends on the kind of sale involved (stock or asset) and whether the selling entity continues to maintain any group health plan. Without more facts about your particular situation, I couldn't start to answer your question in the space allowed for responses. ------------------

I assume by maternity benefits you mean coverage for medical expenses incurred in connection with pre-natal care and childbirth (as opposed to maternity leave benefits). In that case, the Newborns' and Mothers' Health Protection Act requires certain minimum hospital stays after childbirth for both mothers and children. However, the law expressly does not require a group health plan to provide maternity benefits. Nevertheless, without violating federal anti-discrimination laws, including Title VII's general rules against sex discrimination and the Pregnancy Discrimination Act's more specific prohibitions, it would very difficult--probably impossible--for a group health plan that generally covered hospitalization, etc. to exclude benefits for maternity and childbirth. If you mean maternity leave benefits (to recover from childbirth or care for the child), the Family and Medical Leave Act requires employers to which it applies to provide unpaid leave for this and other reasons. Hope that helps. ------------------ [Note: This message has been edited by Brigid Anderson]

Not only the spouse, but quite possibly the retiree too. They are both qualified beneficiaries under COBRA having both lost coverage under the plan for actives by reason of the retiree's termination of employment (retirement is a termination of employment same as anything else). See new (2/99) Treas. Reg. § 54.4980B-3, Q/A 1(a)(i) and -4, Q/A-1, example 2 As noted in the other post, if the retiree became entitled to Medicare after the date of the COBRA election, then COBRA may be terminated for the retiree. However, if the retiree was entitled to Medicare before the election date, then it has no impact. In that case, offering alternative coverage (the Medicare supplement which is different from coverage under the active plan) to the retiree does not change the obligation to offer the retiree COBRA. Treas. Reg. § 54.4980B-5, Q/A 1(a). If to become covered under the Medicare supplement plan, the retiree must waive COBRA coverage under the active plan, then when the alternative coverage ends, the retiree need not be offered COBRA again (even if, e.g., the alternative coverage ends before the end of what would have been the retiree's COBRA period.) Treas. Reg. § 54.4980B-6, Q/A 7. In our view, Medicare entitlement will rarely be a qualifying event because it will not cause a loss of coverage under most plans due to the Medicare secondary payer rules. I assume your plan is one of these. So the Medicare entitlement shouldn’t create any additional qualifying event. However, (keep your eye on the ball here now) if the retiree's spouse becomes covered under the alternative coverage and a subsequent divorce from or death of the retiree would cause the spouse to lose that coverage under the terms of the alternative plan, then the spouse will have experienced a new qualifying event that gives her the COBRA right to elect an additional 36 months of the alternative coverage! Treas. Reg. § 54.4980B-6, Q/A 7 and -3, Q&A-1(h), examples 4 and 5. ------------------

Even before there was an affirmative requirement to tell providers about a QB's COBRA status, there were cases by providers who had been misled by employers and TPAs. The results have been mixed (compare Nat'l Expert Care Consultants v. United Air Lines, 13 EBC 1670 (SDNY 1991), where the court held that ERISA did not preempt a claim by a prvoider against an employer that certified incomplete coverage information, with Lincoln Gen Hosp. v. Blue Cross/Blue Shield of Nebraska, 963 F.3d 1136, 15 EBC 1361 (8th Cir. 1992), where the court was less receptive, finding that the TPA's duty not to mislead ran only to participant and beneficiaries not service providers). I expect that many judges will be impressed by the inclusion of this new affirmative duty. Even though it seems designed to protect QBs rather than service providers, the existence of the requirement might give misled providers a leg up. It raises some interesting preemption issues too. Now that the disclosure requirement is part of IRS regulations, it might tip the scale in favor of finding such claims preempted by federal law? But that leaves the misled provider between a rock and a hard palce since ERISA allows only participants and beneficiaries to sue to enforce its requirements. I think the resolution of this one is wide open for the courts. I agree and disagree with Kip's comments. COBRA does not impose any requirement on TPAs to make these kinds of disclosures. The "plan administrator" is the responsible party and is usually the employer as plan sponsor (although a TPA could be designated as plan administator in the governing documents). However, a TPA could assume the responsibility, by contract with the plan administrator, to make these disclosures. While this will not relieve the plan administrator of ultimate liability in the event the TPA screws up, it should give the plan administrator a claim for reimbursement under the contract against the TPA. ------------------

See Treas. Reg. 54.4980B-8, Q/A-3, which says a group health plan must allow that payment for COBRA be made in monthly installments but MAY allow for additional alternative intervals (for example, weekly, quarterly or semiannually). That seems to address your situation--you don't need to offer anything but monthly payments. ------------------

Just came across a case, Kaelin v. Kaelin, 1999 Mo. App. LEXIS 454 from the Missouri State Court of Appeals that deals with a beef between two ex-spouses about COBRA obligations imposed in the divorce decree on the husband. The wife claims the husband screwed up by not paying COBRA premiums on time and sues him, but not the plan. ------------------

Example 8 under the new proposed Treasury regulation at § 54.4980B-9, Q/A-6 deal with substantially similar fact situation. I think the answer kind of ducks the question of who the M&A qualified beneficiaries are (in particular whether the employees retained by the seller for winding up purposes would be included). However, it seems to contemplate that the buyer will have the obligation to cover these folks. (I assume the example applies to you because it seems that the seller in your case would qualify as a successor employer in the sense of continuing the business of the sold assets without substantial change or interruption.) As to whether the IRS has the statutory authority to create this rule when the law says the qualifying event is the termination, there's probably an argument they don't. However, they might tie into the anticipation of a qualifying event rule to justify the result (even though under that principle, the COBRA entitlement wouldn't be effective until the subsequent termination actually occurs.) Note, these are only proposed regulations at this point. Compliance with them does, however, constitute good faith compliance with a reasonable interpretation of the Code. They aren't necessarily binding in a court case, of course. ------------------