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News Items, by Subject

Health plan admin - COBRA

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Change in Premium Payment Method Was a Loss of Coverage for COBRA Purposes
"Defining a loss of coverage for COBRA purposes as 'ceas[ing] to be covered under the same terms and conditions as in effect immediately before the qualifying event,' the court concluded that the change in her premium contribution method (i.e., from payroll deductions to payment from her workers' compensation benefits) was a change in the terms and conditions of coverage." [Morehouse v. Steak N Shake, Inc., No. 16-789 (S.D. Ohio Nov. 6, 2018)] (Thomson Reuters / EBIA)
When Is Medicare Entitlement a COBRA Qualifying Event?
"If a COBRA triggering event, such as Medicare entitlement, does not cause loss of coverage under your plan, there is no qualifying event, and COBRA need not be offered.... [T]he Medicare Secondary Payer (MSP) rules generally prohibit group health plans from making Medicare entitlement an event that causes a loss of coverage for active employees." (Thomson Reuters / EBIA)
Don't Forget to Set Your HRA COBRA Premiums!
"[U]sing a look back to the previous 12-month plan year period and calculating a cost per participant to determine the actual cost is the most common method ... Be prepared to then determine single versus family COBRA HRA rates and how to properly apply those to qualified beneficiaries." (Frenkel Benefits)
COBRA Notice Penalties Awarded in FMLA/Leave of Absence Litigation
"A federal district court has concluded that a change in the payment method of health insurance premiums can constitute a loss of coverage in determining whether an employee has experienced a qualifying event under [COBRA]. The court therefore held that the employer failed to satisfy COBRA's notice obligations, but that it did not breach its fiduciary duties under ERISA. The court awarded the employee compensatory damages, statutory penalties, and attorney's fees." [Morehouse v. Steak N Shake, Inc., No. 16-789 (S.D. Ohio, Nov. 6, 2018)] (Thomson Reuters Practical Law)
[Guidance Overview] Wellness Promotion/Prevention: Overcoming Legal and Compliance Hurdles (PDF)
28 presentation slides. Topics include: [1] HIPAA nondiscrimination requirements; [2] Americans with Disabilities Act (ADA); [3] Genetic Information Nondiscrimination Act (GINA); [4] Age Discrimination in Employment Act (ADEA); [5] ERISA/ACA compliance issues; [6] HIPAA administrative simplification (privacy, EDI, and security); [7] COBRA; [8] ERISA; [9] Income tax; [10] Plan design/integration issues (e.g., HRAs and HSAs); [11] State law. (Alston & Bird)
Avoiding Unexpected Liability for Former Employees' Medical Expenses
"Assuming the allegations as true, one might be inclined to side with Hager, in which case the lesson of the case would be a pedestrian common sense one: don't send notices of plan termination to former employees who have elected COBRA to the wrong address. What makes this case interesting is the tortuous route the Court had to take to get to this result. In so doing, the Court meticulously parsed the statute, thereby, in our view, making it noteworthy." [Hager v. DBG Partners, Inc., No. 17-11147 (5th Cir. Sept. 6, 2018)] (Mintz Levin)
Interaction of COBRA and Medicare: Just How Do Those Rules Work Again?
"COBRA can be affected by entitlement to Medicare and the interactions can be confusing -- that starts with the terminology around Medicare 'entitlement.' The question arises most often around an individual's 65th birthday. There is an expectation that COBRA can end automatically at age 65, but that is not necessarily the case." (Lockton)
Marriott Worker Wins Class Status in Health Plan Notice Lawsuit
"A former Marriott International Inc. housekeeper won class status in her lawsuit accusing the hotel chain of violating federal benefits law by providing deficient notices of continued health-care coverage. The worker, who filed the lawsuit a year ago, will represent more than 15,000 individuals who were sent the notices and elected not to continue coverage. One of her main claims is that the international hotel chain failed to provide her the notice of continued health-care coverage in Spanish." [Vazquez v. Marriott Int'l, Inc., No. 17-116 (M.D. Fla. Aug. 7, 2018)] (Bloomberg BNA)
New Rule on Short-Term Health Plans Could Affect COBRA Choices
"New employees typically have a 90-day waiting period before insurance coverage begins or have an extremely expensive COBRA option when they leave a job. That's when short-term health plans, which are structured like major medical health plans, can provide coverage and save consumers about 50 percent or more when compared to ACA plans." (Society for Human Resource Management [SHRM])
Capgemini to Pay $1M to Settle Continued Health Coverage Lawsuit
"A lawsuit filed in 2016 by two Indian former employees of [Capgemini North America Inc.] alleged that the company violated [COBRA] by failing to notify workers of their right to continue health insurance coverage when they were transferred back and forth between the U.S. and India. The workers said the transfer was an employment termination, which should have prompted the company to provide COBRA benefits." (Bloomberg BNA)
Who Is Responsible for COBRA Coverage in an M&A Transaction? (PDF)
"The general rule is that the seller is responsible for providing COBRA coverage to M&A Qualified Beneficiaries to the extent that the seller maintains a group health plan.... If the Seller [controlled] Group ceases to maintain any group health plans, then the responsible party depends upon the type of transaction into which the parties are entering: a stock purchase or an asset purchase." (Boutwell Fay LLP)
Employer Defeats COBRA Claims of Employee Offered Subsidized Coverage in Severance Agreement
"Explaining that employers are not required to ensure that COBRA notices are actually received, the court concluded that the employer and benefits administrator had provided undisputed evidence that they had mailed two COBRA election notices to an address the employee had confirmed was correct, and that the employee had not elected COBRA coverage. A dispute remained, however, as to whether the premium deductions constituted a waiver of the severance agreement's COBRA election requirement, so the court allowed that claim to proceed." [Thorson v. Aviall Servs., Inc., No. 15-571 (N.D. Tex. Mar. 22, 2018)] (Thomson Reuters / EBIA)
Personal Liability for COBRA Penalties Extends Only to ERISA Plan Administrators
"The court noted that the company's benefits brochure provided the name of the health insurer and directed employees to contact the employer's human resources department to provide notice of a COBRA qualifying event. The brochure did not list the owners as contacts, and the employee presented no evidence that the owners were designated as ERISA plan administrators. The court concluded, therefore, that the owners could not be held personally liable for any failure to notify the employee of his COBRA rights." [Abdelmassih v. Mitra QSR KNE LLC, No. 16-4941 (E.D. Pa. Feb. 28, 2018)] (Thomson Reuters / EBIA)
Notice Sent to Employee's Old Address Satisfied COBRA Requirements
"A COBRA notice sent to a former employee's old address satisfied the requirements of ERISA Sec. 606 because the old address was the only one, at the time, that the former employer had on file, according to the [court]. The former employee's COBRA claim was dismissed ... along with his claims for Family and Medical Leave Act (FMLA) violations, negligent infliction of emotional distress, and wrongful termination." [Foruria v. Centerline Drivers, LLC, No. 16-328, (D. Id. Nov. 6, 2017)] (Wolters Kluwer Law & Business)
TPA's Recordkeeping Was Enough to Show Employer Met COBRA Notice Requirements
"The Eleventh Circuit Court of Appeals ... determined that an employer had met its COBRA notification requirements based solely on ample evidence of its established procedures for providing COBRA notices.... The employer had contracted with a third party administrator to provide COBRA notices, and it provided all of its benefit data files, including termination of employment information, to the TPA." [DeBene v. Bay Care Health System, Inc., No. 16-12679 (11th Cir. May 31, 2017)] (The Wagner Law Group)
DOL Extends Relief for Victims of Hurricane Maria and October California Wildfires (PDF)
"DOL will not pursue ERISA violations against plans that are complying with IRS relief in connection with hardship withdrawals and loans of Hurricane Maria and October 2017 California wildfire victims. Additionally, DOL extended certain ERISA deadlines for plan sponsors, participants, and beneficiaries affected by Hurricane Maria -- in some circumstances on a mandatory basis." (Conduent)
No COBRA Notice? No Harm, No Foul, Court Says
"Despite the fact that a software company failed to notify an employee of his COBRA benefits immediately following his termination, it was not liable for statutory penalties because he suffered no prejudice as a result of the COBRA violation ... After the employee was terminated, the company provided him and his family with free health insurance for a 10-month period. The court agreed with the employer that its provision of the free insurance placed the employee in a better position than he would have been in if there had been no COBRA violation." [Sanders v. Temenos USA, Inc., No. 16-63040 (S.D. Fla. Oct. 13, 2017)] (Wolters Kluwer Law & Business)
No Penalties for COBRA Violation Absent Proof of Employee's Harm or Employer's Bad Faith
"Following the employee's termination, the employer provided him with free health coverage for almost a year. But after the coverage expired, the employee filed suit, seeking compensation for emotional distress and uncovered medical expenses due to the employer's failure to provide a COBRA notice.... The court concluded that the lack of prejudice to the employee and the lack of bad faith on the part of the employer weighed heavily against imposing a statutory penalty." [Sanders v. Temenos USA, Inc., No. 16-63040 (S.D. Fla. Oct. 13, 2017)] (Thomson Reuters / EBIA)
How Would End of DACA Affect Employees' Health and Welfare Benefits?
"Nothing in the law or regulations would cause a qualified beneficiary to lose the right to COBRA coverage by being deported.... [S]ponsors of health care FSAs are required to offer continuation coverage through the end of the year of the termination.... Sponsors of HRAs must offer COBRA upon termination and so would face the same issues that arise in other COBRA-covered plans.... In both funded and unfunded long-term disability plans, a terminated DACA recipient might continue to receive payments, although it's less clear whether the payments would continue following deportation." (Willis Towers Watson)
[Official Guidance] Text of IRS and DOL 'Extension of Time Frames' for Employee Benefit Plans, Participants and Beneficiaries Affected by Hurricane Maria
12 pages. "With respect to plan participants, beneficiaries, qualified beneficiaries, or claimants directly affected by Hurricane Maria ... group health plans, disability and other welfare plans, pension plans, and health insurance issuers offering coverage in connection with a group health plan must disregard the period from September 17, 2017 through March 16, 2018 for such plan participants, beneficiaries, qualified beneficiaries, or claimants located in Puerto Rico, and must disregard the period from September 16, 2017 through March 15, 2018 for such plan participants, beneficiaries, qualified beneficiaries, or claimants located in the United States Virgin Islands, when determining any of the following time periods and dates:
  • The 30-day period (or 60-day period, if applicable) to request special enrollment under ERISA section 701(f) and Code section 9801(f);
  • The 60-day election period for COBRA continuation coverage under ERISA section 605 and Code section 4980B(f)(5);
  • The date for making COBRA premium payments pursuant to ERISA section 602(2)(C) and (3) and Code section 4980B(f)(2)(B)(iii) and (C);
  • The date for individuals to notify the plan of a qualifying event or determination of disability under ERISA section 606(a)(3) and Code section 4980B(f)(6)(C);
  • The date within which individuals may file a benefit claim under the plan's claims procedure pursuant to 29 CFR 2560.503-1;
  • The date within which claimants may file an appeal of an adverse benefit determination under the plan's claims procedure pursuant to 29 CFR 2560.503-1(h);
  • The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination pursuant to 29 CFR 2590.715-2719(d)(2)(i) and 26 CFR 54.9815-2719(d)(2)(i), and
  • The date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete pursuant to 29 CFR 2590.715-2719(d)(2)(ii) and 26 CFR 54.9815-2719(d)(2)(ii)....
"With respect to group health plans, and their sponsors and administrators, that are directly affected by Hurricane Maria ... the period from September 17, 2017 through March 16, 2018 for those located in Puerto Rico, and the period from September 16, 2017 through March 15, 2018 for those located in the United States Virgin Islands, shall be disregarded when determining the date for providing a COBRA election notice under ERISA section 606(c) and Code section 4980B(f)(6)(D)." (Employee Benefits Security Administration [EBSA], Department of Labor [DOL]; Internal Revenue Service [IRS], Department of the Treasury)
Court Considers Whether Employee Who Refused Drug Test Was Terminated for Gross Misconduct for Purposes of COBRA
"Because gross misconduct terminations tend to involve disputed facts, there is an increased risk of a court challenge, and the factual disputes often preclude either side from obtaining judgment without a costly trial. In addition, an employer that is wrong about gross misconduct can face not only an award of retroactive COBRA coverage but also an imposition of penalties of up to $110 per day for failure to provide the election notice that would otherwise be required." [Knight v. General Telecom, Inc., No. 16-218 (N.D. Ala. Sept. 27, 2017)] (Thomson Reuters / EBIA)
Equitable Tolling of COBRA Election Applies Only for Period Beneficiary Is Incapacitated
"Just before the 60 day election period ran out, employee was in an accident and was admitted to UC Davis Medical Center, where he received treatment for 10 days.... The hospital argues that the employee was not provided adequate time to elect for continued coverage due to the employee's 10-day incapacitation. While the court agreed that the employee's incapacitation might trigger equitable tolling, the court did not agree with the hospital's application of equitable tolling to this situation." [Regents of the Univ. of Cal. v. Stidham Trucking, Inc. No. 16-2835 (E.D. Cal. Sept. 1, 2017)] (Wolters Kluwer Law & Business)
District Court Holds That Incapacity Can Extend, But Not Re-Start, COBRA Election Period
"The court recognized that an incapacity could deprive the qualified beneficiary of the opportunity to have at least 60 days during which to make an election.... However, the court ruled that 'the [60-day] clock stops running when extraordinary circumstances first arise, but the clock resumes running once the extraordinary circumstances have ended.' " [Regents of the Univ. of Cal. v. Stidham Trucking, Inc. No. 16-2835 (E.D. Cal. Sept. 1, 2017)] (The Wagner Law Group)
Court Cases Challenge English-Only COBRA Election Procedures
"There is no explicit requirement to provide COBRA notices in languages other than English, and, to date, courts have not required it. In fact, prior decisions have specifically held that there is no requirement that COBRA notices be translated into a foreign language. However, two pending cases ... could reveal situations in which employers with a significant multilingual workforce should provide translated versions of their COBRA election materials. The cases also expose the potential employee relations issues (and corresponding class action risk) associated with English-only COBRA communications." (McDermott Will & Emery)
[Guidance Overview] More Hurricane Relief and Expansion of DOL Relief for Irma Victims
"Leave donation program was extended [by IRS] to assist victims of Hurricane Irma ... [The DOL] extended the Harvey guidance to victims of Hurricane Irma ... Deposit of payroll deductions ... Blackout notice requirement relief ... ERISA plan claim procedure deadlines and COBRA election deadlines." (Winstead PC)
Court Rejects Hospital's Attempt to Elect COBRA for Patient Years After His Period of Incapacity
"The patient, who had been covered under his employer's group health plan prior to his termination of employment, was hospitalized for 10 days toward the end of his 60-day COBRA election period. The medical center (to whom the patient had assigned all insurance rights upon admission) contended that the 10-day hospitalization was grounds for equitable tolling of his election period and asked the plan's COBRA administrator -- almost two years after the patient's termination of employment -- to issue a new COBRA notice with a new 60-day election period.... The court dismissed the lawsuit, however, concluding that, even if the patient's election period had been tolled for the 10 days he was hospitalized (making the election period, at most, 70 days), the medical center did not attempt to elect coverage on the patient's behalf until almost two years after the patient received his election notice." [Regents of the Univ. of Cal. v. Stidham Trucking, Inc., No. 16-2835 (E.D. Cal. Sept. 1, 2017)] (Thomson Reuters / EBIA)
[Guidance Overview] IRS and DOL Provide Relief for Plan Sponsors and Participants Affected by Hurricane Harvey
"[T]he IRS issued Announcement 2017-11, which provides easier access to 401(k), 403(b) and 457(b) funds for individuals affected by Hurricane Harvey. For a list of locations, click here. On the same day, the [DOL] issued a news release giving relief to the timing rules for depositing participant contributions and loan repayments, and the requirement to issue blackout notices in the event investment trading in retirement plans was or is interrupted by Hurricane Harvey." (Seyfarth Shaw LLP)
[Guidance Overview] First Round of Hurricane Harvey Relief Guidance
"A retirement plan will not be disqualified if it ... disregards procedural requirements of plan loans in its document ... However the plan is required to attempt to gather the required documentation for loans as soon as possible; such documentation would include spousal consents to the distribution or loan. There is a discussion of the alternatives in the event a spouse is represented to be deceased without providing a death certificate.... The DOL also recognized that they will emphasize compliance assistance, grace periods and relief where appropriate when physical disruption to a plan or its service provider makes timely compliance with requirements, including disclosures impossible." (Winstead PC)
[Guidance Overview] Agencies Provide Guidance for Plans and Participants Affected by Hurricane Harvey
"A hardship distribution is still limited to the maximum amount permitted by IRS rules but can be provided for any hardship, not just those listed in the IRS regulations, and no post-distribution contribution restrictions are required.... Plan loans can be made without following the procedural requirements imposed by the plan at the time of the loan.... The filing date for Form 5500 filings due on or after August 23, 2017 and before January 31, 2018 is automatically extended to January 31, 2018.... The DOL requests welfare plans make reasonable accommodations for participants and beneficiaries who are unable to timely file benefit claims or make COBRA elections ... Under an emergency PTO sharing plan, employees can donate some of their PTO to a PTO bank that is administered by the employer." (Haynes and Boone, LLP)
[Official Guidance] DOL Issues Compliance Guidance for Employee Benefit Plans Impacted by Hurricane Harvey
"The Department is working with the IRS to provide relief regarding certain verification procedures that may be required under retirement plans with respect to plan loans to participants and beneficiaries, hardship distributions and other pension benefit distributions....

The Department recognizes that some employers and service providers acting on employers' behalf, such as payroll processing services, located in identified covered disaster areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed timeframe. In such instances, the Department will not -- solely on the basis of a failure attributable to Hurricane Harvey -- seek to enforce the provisions of Title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practical under the circumstances....

With respect to blackout periods related to Hurricane Harvey, the Department will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination....

The Department recognizes that plan participants and beneficiaries may encounter an array of problems due to the hurricane, such as difficulties meeting certain deadlines for filing benefit claims and COBRA elections. The guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes."

(Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Sound Process and Good Recordkeeping Demonstrate Compliance with COBRA Notice Requirements
"This decision serves as a reminder of the benefit to employers of having established procedures in place for providing notices required under COBRA and similar laws.... [E]mployers should review their agreements with third-party administrators, make sure they include performance guarantees regarding COBRA notice procedures, and keep records (or make sure the administrator keeps records) demonstrating those procedures are followed." [DeBene v. BayCare Health System Inc. No. 16-12679 (11th Cir. May 31, 2017)] (Verrill Dana LLP)
COBRA and Severance Agreements: A Gift or a Curse?
"If the individual is left enrolled as an active employee, fully-insured employers may risk violating the medical plan eligibility requirements in their insurance contract. Similarly, self-funded employers may violate the coverage provisions of their stop-loss agreement. Consequently, failure to offer COBRA can expose an employer to significant financial liability for claims not paid by an insurance carrier or stop-loss insurer.... If the severance agreement includes an employer contribution toward the cost of COBRA coverage, minimize tax consequences by paying the COBRA premium directly to the plan instead of reimbursing the former employee." (Hill, Chesson & Woody)
Loss of COBRA Subsidies: A Marketplace Conundrum
" currently provides in a couple of different spots that loss of an employer-provided COBRA subsidy does entitle an individual to a [special enrollment period (SEP)].... [No] change has occurred to the underlying regulations, nor has there been any formal communication from any of the agencies that are responsible for administering the ACA acknowledging or explaining this change.... [R]epresentatives at [HHS] ... indicated confusion over the change on the website and stated that their enrollment system is still not set up to provide a SEP to an individual in such circumstances." (Jackson Lewis P.C.)
Employer Faces Class-Action Lawsuit Because of Vague Language in COBRA Notice
"Roberto argued that [1] Cushman & Wakefield failed to include in the notice the specific date coverage will end, and [2] Roberto cannot determine whether this monthly coverage would end at the beginning or the end of the 18th month and whether it would end on the day that was exactly 18 months in the future. The notice stated that coverage may generally last for up to 18 months, and Cushman & Wakefield contended that the notice need not specify the day on which coverage ends. The court noted that Roberto stated a plausible claim because the regulation's inclusion of the phrase 'termination date' suggests that the employer must identify the day on which coverage ends." [Valdivieso v. Cushman & Wakefield, Inc., No. 17-118 (M.D. Fla. May 18, 2017)] (HR Daily Advisor)
Theft Was Gross Misconduct, But Inconsistencies May Make COBRA Ineligibility Less Clear
"An employer argued that COBRA coverage was not provided due to a qualified beneficiary's gross misconduct. However, the former employee countered that the real reason behind his termination and the COBRA coverage denial was the high cost of his medical expenses.... [T]he court denied a request to rule in the former employee's favor on a COBRA notice claim.... Given that the gross misconduct determination is based on the facts and circumstances, plan administrators considering whether to deny COBRA coverage should follow certain steps before making a final determination." (HR Daily Advisor)
Recordkeeping Evidence Leads Eleventh Circuit to Conclude That Former Employer Met COBRA Obligations
"Evidence of routine processes by BayCare and Benefits Concepts regarding the preparation and mailing of COBRA elections notices, and of how those processes were followed, along with a copy of DeBene's COBRA letter containing his premium amount and enrollment form were highlighted by the court as reasons for its decision. A report from Benefits Concepts showing when the letter was sent and successful election of coverage by other employees who received notices mailed the same day led the court to conclude that BayCare met its obligations under COBRA." [DeBene v. Baycare Health System, Inc., No. 16-12679 (11th Cir. May 31, 2017; unpub.)] (Wolters Kluwer Law & Business)
Undisputed Evidence of COBRA Notice Procedures Defeats Claim of Non-Receipt
"The employer (in its role as health plan administrator) maintained that an election notice was timely sent, producing evidence that the employee was coded into the employer's database as 'COBRA-eligible,' that this information was transferred to the employer's [TPA], and that a notice was generated and printed within the required time period. In addition, the employer provided evidence of the TPA's mailing procedures, a copy of the employee's notice, and a report from the TPA showing the date on which the notice was mailed. Finally, the employer demonstrated that other recipients of notices mailed on the same day were able to successfully elect coverage and had not reported missing notices." [DeBene v. Baycare Health System, Inc., No. 16-12679 (11th Cir. May 31, 2017)] (Thomson Reuters / EBIA)
Court Finds No Obligation to Provide COBRA Notice in Language Other Than English
"The 68-year-old employee -- who spoke Spanish as his native language -- objected that the notice was written in English ... The court dismissed [this] claim, explaining that, at 68 years old and with English as a second language, the employee was not an average plan participant within the meaning of the COBRA regulations.... In contrast, language assistance or translation services are required for certain other benefits-related documents." [Valdivieso v. Cushman & Wakefield, Inc., No. 17-118 (M.D. Fla. Mar. 16, 2017)] (Thomson Reuters / EBIA)
[Guidance Overview] COBRA and Second Qualifying Events
"If the initial qualifying event that triggers an individual's COBRA rights is terminating employment or reducing hours of employment, subsequent qualifying events may result in an extension of the maximum COBRA coverage period for certain qualified beneficiaries.... Note that a covered employee is not a qualified beneficiary with respect to any 36-month qualifying event. Therefore, the expanded period that applies in connection with a second qualifying event will not apply to a covered employee but only to the spouse or a dependent child of a covered employee." (Willis Towers Watson)
Duration of COBRA Election Period When Beneficiary Is Incapacitated
"[C]ase law shows that when a qualified beneficiary is incapacitated... 'equitable tolling' ... allows COBRA timeframes to be 'tolled,' or held in abeyance, until a legal representative is appointed to act for the qualified beneficiary. Generally, this doctrine can apply to both the election and premium payment periods." (HRDailyAdvisor)
Including COBRA Coverage in a Severance Package May Be Too Much of a Good Thing
"[A]lthough losing a job IS a qualifying event, losing a COBRA subsidy from your former employer IS NOT. Therefore, by paying the individual's COBRA for a month or two the employer may actually be hurting the terminated employee, as the following month when the COBRA subsidy from the severance is no longer being paid he/she will no longer be able to purchase coverage through the exchange." (Frenkel Benefits)
Over 30 Years Later, COBRA Still Has Fangs
"Some plan administrators and fiduciaries may presume that COBRA notices and other documents are compliant because a reputable source provided them or the documents have not caused any issues for years. However, the threat of class action litigation over misleading and inaccurate plan documents and communications serves as a reminder -- it is important to review routine plan documents." (Michael Best & Friedrich LLP)
Why COBRA Might Be Making a Comeback
"[W]e're facing a landscape where the complexity of COBRA remains a part of every employer's benefits program while the ACA gets a makeover from the Republican White House.... Most likely, it just means that the majority of employers will continue to outsource COBRA administration. It also could mean eligible employees go back to just having COBRA as their only choice for 'transitional' coverage. But even if the option remains to enroll in Obamacare plans, COBRA could still win as the most attractive option for employees who qualify." (Benefitfocus)
Employers Should Beware of the COBRA Bite
"[R]ecent lawsuits for COBRA administrative failures have resulted in court-approved settlements of up to $1 million. Periodic self-audits and consistent documentation efforts will help your company avoid costly COBRA mistakes. The foundation for successful COBRA administration lies in the proper distribution of the Initial COBRA notice, or 'General Notice', which informs health plan participants of their COBRA rights and responsibilities." (Marsh Consulting Group)
The American Health Care Act: Key Takeaways for Employers and Plan Sponsors
"Individuals enrolled in group health plans would not eligible for the tax credit, unless they are enrolled in COBRA coverage that is not subsidized by the employer. Importantly, in order to receive the credit, the coverage (whether individual market or COBRA) cannot cover services related to abortion (subject to certain exceptions). This arrangement would likely create administrative headaches for plan sponsors and COBRA administrators. The new tax credit scheme appears to require monthly reporting by eligible coverage providers, so COBRA administrators would have to develop procedures to comply with this requirement." (Proskauer's ERISA Practice Center)
How COBRA Intersects with Medicare and Retiree Health Plans
"If an employer offers retiree health coverage that is a non-COBRA alternative to COBRA coverage for eligible retirees, then the retirees are still considered 'covered employees' for COBRA purposes." (HR Daily Advisor)
Avoiding COBRA's Bite: Measures to Counter COBRA Class Actions
"Wal-Mart is just one of several companies that have faced putative class action complaints as a result of allegedly inadequate COBRA notices.... Among the allegations listed was that the required information was 'piecemealed' throughout Wal-Mart's notice, and the notice did not provide contact information for the plan administrator; the notice did not explain that a covered employee's spouse may elect continuation coverage on behalf of all other qualified beneficiaries; and the notice did not explain how electing continuation coverage would affect the qualified beneficiaries' future group health coverage rights." (Perkins Coie LLP)
COBRA Administration: Back to Basics
"Over the past two years, courts have approved settlements for COBRA violations that range from $290,000 to $1 million.... Much of the recent COBRA litigation pertains to whether qualified beneficiaries have been given the initial COBRA notice (sometimes referred to as the General Notice) and/or the COBRA Election Notice in a timely manner, or whether the contents of these notices were adequate." (Morgan Lewis)
New Broker Rules Might Help Employers
"In recent years, many employers sought to control costs by turning to companies that promote individual medical plans to certain employees, like... Those eligible for COBRA [or] Part-time workers not eligible for the employer's group plan.... Now, new regulations bar insurers from discouraging sicker people from enrolling through the practice of altering broker commissions for mid-year enrollments." (bswift)
How COBRA Intersects with Medicare and Retiree Health Plans
"If an employer offers retiree health coverage that is a non-COBRA alternative to COBRA coverage for eligible retirees, then the retirees are still considered 'covered employees' for COBRA purposes. Furthermore, the Medicare statutory rules allow employer-sponsored group health plans to reduce or terminate coverage if retired employees become entitled to Medicare. Thus, if a covered retiree becomes entitled to Medicare, and that entitlement would cause a loss of coverage for his or her spouse and dependents under the terms of the employer's retiree coverage, then a qualifying event has occurred." (HR Daily Advisor)
Non-Compliant COBRA Election Notices May Be Costly
"Earlier this year, an employer was sued in a class action ... for violating the notice provisions ... with respect to its COBRA election notice.... After failing to convince the court that the case should be dismissed, the employer agreed to establish a settlement fund for the affected employees and to correct the alleged deficiencies in its COBRA election notice. Since then, two similar lawsuits have been filed in Florida courts by employees who claim that the election notices provided by their respective employers were deficient and non-compliant with COBRA." (Benefits Bryan Cave)
Can Employer Recover Health Coverage Costs If Employee Doesn't Return from FMLA Leave?
"[T]he employer can try to recoup its cost of group health plan coverage for the unpaid portion, if any, of the FMLA leave period. For this purpose, 'returning' means returning to work for at least 30 calendar days, For self-insured plans, this amount is limited to the employer's share of allowable COBRA premiums, not including the 2-percent administrative fee.... The employer's responsibility to provide health coverage (and, for self-insured plans, to pay claims incurred) during the period of FMLA leave does not change." (Wolters Kluwer Law & Business)
Did You Consider the COBRA Implications of Your Severance Arrangement?
"[T]wo examples ... will help illustrate the risk: [1] Under the employer's severance program, covered employees are entitled to six months of company-paid health premiums.... [2] Employer enters into a severance agreement with an employee, which provides for three months of paid 'garden' leave, after which employment is terminated. The agreement provides that during the leave period, the company will pay the health premiums. In both cases, the terms of the arrangement do not address COBRA. This leaves open the question of whether the applicable COBRA period begins at severance/leave commencement, or after." (Thompson Coburn)
IRS Letter Affirms Notice Obligation of Qualified Beneficiary Seeking Disability Extension
"A plan that does not establish and communicate reasonable notice procedures faces an indefinite notice period and risks being bound by oral or informal notices from covered employees and qualified beneficiaries, even if notice is given to individuals within the employer's or insurer's organization who do not ordinarily handle COBRA matters for the plan." (Thomson Reuters / EBIA)
Warning for Employment, Severance, and Change in Control Agreements and Plans
"Employers that pay for all or a part of a terminated employee's COBRA coverage should consider providing notice to terminating employees that electing to receive subsidized COBRA coverage could affect their ability to elect coverage under the public health exchange or 'Marketplace' established under the [ACA]." (Winston & Strawn LLP)
[Guidance Overview] Can We Allow Laid-Off Employees to Spend Down Their Health FSAs Without Electing COBRA?
"No. Under the cafeteria plan rules, health FSA participants can only be reimbursed for eligible medical expenses incurred while their health FSA coverage is in effect, and coverage stops when the participant stops making contributions. Furthermore, any amounts remaining when coverage stops are subject to the 'use-or-lose' rule, which generally requires forfeiture of health FSA contributions not used to reimburse expenses incurred during the coverage period." (Thomson Reuters / EBIA)
[Guidance Overview] DOL Permits Additional ACA Marketplace Information as Part of COBRA Election Notice (PDF)
"DOL clarified in an FAQ that plans may provide their qualified beneficiaries with more information on ACA marketplace coverage than the current COBRA model election notice contains. This information could explain how to get help with marketplace enrollment, the availability of financial assistance, and/or any other aspect of marketplace coverage that could help qualified beneficiaries choose between COBRA and marketplace alternatives." (Xerox HR Services)
Is Healthcare FSA COBRA Continuation Really Required?
"[T]here are specific circumstances where employers may either have the option to limit the timeframe for coverage, or may even not be required to offer the option at all. For example, if the employee has 'overspent' their FSA account by the time the qualifying event has occurred (in this case, termination of employment), the employer is not required to continue coverage in the Healthcare FSA account." (Frenkel Benefits)
[Guidance Overview] Health Insurance Marketplace Information Can Be Included in COBRA Notices
"[S]hould employers or their COBRA administrators opt to amend their COBRA notice election forms to include additional information about ACA Marketplace coverage options, they need to ensure the amended election notice meets all COBRA requirements, and is easily understood by the average plan participant." (Lockton)
[Official Guidance] Text of Agency FAQs on ACA Implementation, Set 32: Notice of Coverage Options -- COBRA and Health Insurance Marketplace Coverage (PDF)
"[P]lan administrators may include with the COBRA election notice other information about the Marketplaces, such as: how to obtain assistance with enrollment ... the availability of financial assistance, information about Marketplace websites ... general information regarding particular products offered in the Marketplaces, and other information that may help qualified beneficiaries choose between COBRA and other coverage options.... COBRA election notices may be tailored to particular groups like young adults aging out of dependent coverage on their parents' health plan. In all cases, they are required to be 'easily understood by the average plan participant' and, therefore, information should not be too lengthy or difficult to understand." (U.S. Department of Health and Human Services [HHS]; U.S. Department of Labor [DOL] and U.S. Treasury Department)
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