2003 Cobra Handbook

by Golub, I. M.; Chevlowe, Roberta K.; Descherer, Dorinda D.; Myers, Terence M.

• ISBN13: 9780735532199
• ISBN10: 0735532192
• Format: Hardcover
• Copyright: 2002-12-01
• Publisher: Wolters Kluwer

Summary

The COBRA Handbook gives you detailed advice and solutions to everyday COBRA administrative problems. it provides the text of the final COBRA regulations, and offers guidance on how to comply with various new rules addressed in the regulations. Completely updated for 2003, you'll find answers to hundreds of your most complex COBRA questions, including: What type of proof is required to establish that a COBRA notice has been sent? When is a COBRA election considered to be timely made? When is an employer permitted to increase the amount of the required COBRA premium? What remedies are available under ERISA civil enforcement provisions? What are the rules regarding obligations of multiemployer plans when a contributing employer withdraws from the plan? Plus, there are complete citations, planning pointers, and valuable appendix resources.

Table of Contents

Introduction
COBRA	1	(2)
Applicability of COBRA	3	(1)
Covered Group Health Plans	3	(2)
Number of Plans	5	(1)
Covered Employers	5	(1)
Eligibility for COBRA Coverage	6	(2)
What is COBRA Coverage?	8	(2)
Administration	10	(2)
COBRA Premiums	12	(1)
COBRA Enforcement and Penalties	12	(2)
Multiemployer Group Health Plans	14	(1)
Medicare and its Relationship to COBRA	15	(1)
COBRA Issues in Mergers and Acquisitions	15	(2)
State Continuation Coverage Laws	17	(1)
Coordination of COBRA and Other Health Benefits	17	(1)
Practice Aids	18
Covered Group Health Plans
General Rule	2	(1)
``Maintained'' by an Employer or Employee Organization	3	(3)
Noncontributory Plans	3	(1)
Plans in Which the Employer or Employee Organization Has No Administrative Involvement	4	(1)
Insured versus Self-Insured Plans	5	(1)
MEWAs and Multiemployer Plans	6	(1)
Definition of Group Health Plan	6	(6)
What Constitutes a Group?	7	(1)
What Is Health Care?	8	(1)
Definition of Medical Care	9	(3)
Cafeteria Plans and Flexible Spending Accounts	12	(3)
Cafeteria Plans	12	(1)
Flexible Spending Accounts	12	(3)
Employee Assistance Programs	15	(1)
Definition of an Employee Assistance Program	15	(1)
Application of COBRA to EAPs	15	(1)
Medical Savings Accounts	16	(1)
Long-Term Care Plans	16	(1)
Executive Physical Examination Plans	17	(1)
Top-Hat Plans	17	(1)
Health Maintenance Organizations (HMOs)	17	(1)
Self-Insured Plans	18	(1)
Contributory and Noncontributory Plans	18	(1)
Voluntary Employees' Beneficiary Associations (VEBAs)	19	(1)
Collectively Bargained Plans	19	(1)
Multiemployer Plans	20	(1)
Multiple Employer Welfare Arrangements (MEWAs)	20
Notes
Number of Plans
Introduction	2	(1)
Calculating the Number of Plans	3	(7)
The 2001 COBRA Regulations	3	(1)
The Old 1987 Proposed COBRA Regulations	4	(6)
Determining the Number of Employers	10
Covered Employers
Covered Employers: General Rule	2	(1)
Who is the Employer Responsible for Providing COBRA Coverage?	2	(4)
Controlled Groups	3	(1)
Successor Employers and Mergers and Acquisitions	4	(1)
Bankrupt Employers	5	(1)
Foreign Parent Companies of Domestic Employers	5	(1)
Exempt Employers: The 20-Employee Test	6	(11)
Small-Employer Plans: General Rule	7	(1)
Period Used for Calculation	7	(1)
Defining a Typical Business Day	8	(1)
Using Payroll Data	8	(1)
Counting Employees	9	(3)
Plans in Which Two or More Unrelated Employers Participate	12	(1)
Losing or Gaining Exempt Status: The Mechanics of the 20-Employee Test	13	(4)
Exempt Employers: Government Employers	17	(1)
Exempt Employers: Church Plans	17
Notes
Eligibility for COBRA Coverage
Introduction	3	(1)
Who is Eligible for COBRA Coverage?	3	(23)
Qualified Beneficiaries	3	(16)
Individuals Who Have Ceased to Be Qualified Beneficiaries	19	(7)
Which Events Trigger COBRA Eligibility?	26	(24)
Events That Occur When the Plan Is Not Subject to COBRA	27	(1)
Termination of Employment	28	(11)
Reduction in Hours of Employment	39	(6)
Death of the Employee	45	(1)
Divorce or Legal Separation	45	(2)
Ceasing to Be a Dependent	47	(2)
Entitlement to Medicare	49	(1)
Bankruptcy	50	(1)
When is Group Health Plan Coverage Lost?	50
Necessity of Loss	50	(1)
Full versus Partial Loss	51	(1)
Timing of Loss	52	(3)
Causation	55	(2)
Anticipatory Cutbacks	57	(2)
Loss of Coverage in Bankruptcy Context	59
Notes
What Is COBRA Coverage?
General Rule: The Concept of Continuing Coverage under COBRA	3	(1)
What Level of Benefits Must be Continued?	3	(18)
General Rule	3	(2)
Anticipatory Cutbacks	5	(1)
Individual Insurability Requirements	6	(1)
Core Versus Non-Core Coverage	6	(2)
Plan Deductibles	8	(4)
Copayments, Coinsurance, and Plan Limitations	12	(1)
Effect of Medicare Secondary Payer Rules	13	(1)
Conversion Rights	14	(1)
Plan Amendments	15	(1)
Plan Termination	16	(4)
Relocation Out of Region-Specific Plan's Service Area	20	(1)
Rights of Qualified Beneficiaries	21	(6)
Open or Annual Enrollment Periods	22	(3)
Newly Acquired Dependents	25	(2)
How Long COBRA Coverage Must Last	27	(10)
Maximum Required COBRA Continuation Period	27	(1)
Events That Extend the Maximum Continuation Period	28	(7)
Special Rule for Health Care FSAs	35	(2)
Termination of COBRA Coverage Prior to the End of the Maximum Continuation Period	37	(8)
Termination of All Group Health Plans	37	(1)
Nonpayment of Premiums	38	(1)
Coverage Under Another Plan	39	(4)
Entitlement to Medicare	43	(1)
Loss of Social Security Disability Status	44	(1)
Termination for Cause	44	(1)
If the Employer Qualifies for the 20-Employee Exemption	44	(1)
Coverage During the 60-Day Election Period and the 45-Day Grace Period for Initial Premium Payment	45
Risks During the Election Period	45	(2)
Coverage During the Election Period	47	(2)
Payment of Claims Incurred During the Election Period	49	(1)
Withholding Benefits	49	(1)
Coverage After Election but Before Initial Premium Is Paid	50	(2)
Inquiries From Hospitals and Other Service Providers	52	(2)
Revoking a Waiver of COBRA Continuation Coverage	54
Notes
Administration
Required COBRA Notices	3	(7)
Initial COBRA Notice Upon Commencement of Plan Coverage	3	(1)
Notice to Qualified Beneficiaries Upon the Occurrence of a Qualifying Event	4	(2)
Summary Plan Description	6	(2)
Certification of COBRA Coverage	8	(2)
Content of COBRA Notices	10	(5)
Initial COBRA Notice	10	(2)
Second COBRA Notice Upon the Occurrence of a Qualifying Event	12	(3)
When a Qualifying Event Occurs: Who Must Notify Whom?	15	(7)
Employer's Notice to Plan Administrator	15	(3)
Qualified Beneficiary's Notice to Plan Administrator	18	(2)
Notice Requirement for Disabled Qualified Beneficiaries	20	(1)
Plan Administrator's Obligation to Provide Notice of COBRA Rights Upon the Occurrence of a Qualifying Event	21	(1)
Sending COBRA Notices	22	(12)
In What Manner Must COBRA Notices Be Provided?	22	(5)
Notice to Spouses	27	(2)
Notice to Dependent Children	29	(1)
Notice to Disabled Individuals: Requirements of the Americans with Disabilities Act of 1990	29	(1)
Notice Under the Family and Medical Leave Act	30	(1)
Notice Pursuant to Qualified Medical Child Support Orders	31	(1)
COBRA Notices Sent in Error	31	(2)
Effect of the Uniformed Services Employment and Reemployment Rights Act	33	(1)
Receipt of COBRA Notice	34	(5)
When Is the COBRA Notice ``Received''?	34	(3)
Importance of Documentation	37	(2)
Failure to Receive a COBRA Notice	39	(1)
The Election Period	39	(3)
Timely COBRA Elections	39	(2)
When the Election Period Ends	41	(1)
Tolling the Election Period	42	(1)
Electing or Waiving COBRA Coverage	42	(5)
When an Election Is ``Made''	42	(1)
Who Can Make the COBRA Election?	43	(1)
Effect of a Failure to Make a Timely Election	44	(1)
What Constitutes a Valid Waiver of COBRA Coverage?	44	(2)
Right to Revoke a Waiver of COBRA Coverage	46	(1)
Termination of COBRA Coverage: Required Certification of Plan Coverage	47
Notes
COBRA Premiums
Calculation of COBRA Premiums	2	(13)
Maximum Allowable Premium	2	(3)
Determination Period	5	(1)
Insured Plans	5	(3)
Self-Insured Plans	8	(1)
Charging the Appropriate Premium Rate to the Qualified Beneficiary	9	(3)
Midyear Premium Changes	12	(1)
Effect of Family and Medical Leave Act	13	(1)
Effect of Uniformed Services Employment and Reemployment Rights Act	14	(1)
Timing of Premium Payments	15	(11)
Mandatory Monthly Payment Option	15	(1)
Grace Period for Premium Payments	16	(5)
Effect of Nonpayment of Premiums	21	(2)
Deficient Premium Payments	23	(1)
Late Premium Payments: Tolling the Grace Period	23	(3)
Who Makes the Premium Payments?	26	(1)
Qualified Beneficiary's Legal Representative	26	(1)
Divorced Spouses	27	(1)
State Assistance for Payment of COBRA Premiums	27	(1)
Erroneous Acceptance of COBRA Premium Payments	27
Notes
COBRA Enforcement, Penalties, and Remedies
Overview of COBRA Remedies and Sanctions	3	(1)
Division of Enforcement Authority	4	(1)
Guidance Issued to Date	4	(1)
Effect of Complying with Proposed COBRA Regulations	5	(2)
The Good Faith Compliance Standard	6	(1)
Failure to Comply with Proposed COBRA Regulations	6	(1)
Tax Penalty for COBRA Violations: Current Rule	7	(10)
Amount of Excise Tax	7	(1)
Persons Liable for Excise Tax	8	(2)
Maximum Excise Tax for Single-Employer Plans	10	(1)
Maximum Excise Tax for Multiemployer Plans	11	(1)
Maximum Excise Tax for Persons Providing or Administering Benefits	12	(1)
Noncompliance Period	12	(1)
How COBRA Violations Are Corrected	13	(2)
30-Day Grace Period for Certain COBRA Violations	15	(1)
Inadvertent Failure Rule	15	(1)
Special Audit Rule	15	(2)
IRS Waiver of Excise Tax	17	(1)
Tax Penalty for COBRA Violations: Old Rule	17	(1)
Excise Tax for HIPAA Violations	18	(2)
Corrections of Violations	18	(1)
Discovery Rule	18	(1)
30-Day Correction Rule	18	(1)
Mandatory Minimum Tax	18	(1)
Maximum Excise Tax	19	(1)
Inadvertent Failure Rule	19	(1)
Exception for Small Employers	19	(1)
Erisa Penalty for Failure to Issue COBRA Notices	20	(6)
Prejudice as a Prerequisite to an Award of Penalties	21	(4)
Awards of Less Than the Maximum Penalty	25	(1)
Period of Noncompliance	25	(1)
Fiduciary Liability Under Erisa	26	(4)
Indemnification Under Erisa	29	(1)
Other Civil and Criminal Penalties Under Erisa	30	(11)
Persons Liable Under ERISA for COBRA Violations	30	(4)
Discrimination for Exercising COBRA Rights	34	(1)
Violations That Could Result in Criminal Penalties	34	(1)
Judicially Created Theories of Recovery	34	(5)
Attorneys' Fees	39	(2)
Enforcement Actions Under Erisa	41	(7)
Actions by Participants and Beneficiaries	41	(6)
Actions by the Department of Labor	47	(1)
COBRA Violations Under the Public Health Service Act (PHSA)	48	(1)
Violations of the Uniformed Services Employment and Reemployment Rights Act (USERRA)	49
Notes
Multiemployer Group Health Plans
What Constitutes a Multiemployer Plan?	2	(3)
Definition of a Multiemployer Plan	3	(1)
Applicability of COBRA to Multiemployer Group Health Plans	4	(1)
Who Is the Named Fiduciary, Plan Administrator, and Plan Sponsor of a Multiemployer Plan?	4	(1)
General Description of the Operation of Multiemployer Plans	5	(1)
Special COBRA Notice Rules for Multiemployer Group Health Plans	6	(3)
The Obligation of Contributing Employers to Notify the Plan Administrator of Qualifying Events	7	(1)
Extending the Period Within Which the Plan Administrator Is Required to Notify a Qualified Beneficiary of COBRA Rights	8	(1)
Which Entity is Responsible for Providing Continuation Coverage Under a Multiemployer Plan When an Employer Ceases to Contribute to the Plan?	9	(1)
Application of COBRA Excise Tax Penalty Provisions to Multiemployer Plans	10	(3)
Amount of the Excise Tax	11	(1)
Who Is Liable for the Excise Tax?	11	(2)
COBRA Rules Affecting Multiemployer Plans	13	(7)
Commencement of the COBRA Continuation Coverage Period	14	(1)
Determining the Number of Group Health Plans	15	(2)
Reduction of Benefits Under a Multiemployer Plan	17	(1)
Small-Employer Plan Exception	18	(2)
Effective Date of COBRA	20	(1)
Remedies	20
Notes
Medicare and Its Relationship to COBRA
Introduction	3	(1)
What is Medicare?	3	(1)
What Does it Mean to be Entitled to Medicare?	4	(3)
Applicable Law	4	(2)
Medicare Entitlement for COBRA Purposes	6	(1)
Medicare Entitlement as a COBRA Qualifying Event	7	(7)
Definition of Qualified Beneficiary	7	(5)
Duration of COBRA Coverage	12	(2)
Medicare Entitlement as a COBRA Terminating Event	14	(5)
Medicare Entitlement Occurring After COBRA Coverage Is Elected	15	(2)
Medicare Entitlement Occurring Before COBRA Coverage Is Elected	17	(2)
Other COBRA Rules Related to Medicare Entitlement	19
Coordination of COBRA Continuation Coverage and Medicare	19
Notes
COBRA Issues in Mergers and Acquisitions
Overview of COBRA Issues in Mergers and Acquisitions	2	(1)
Stock and Asset Transactions	3	(12)
Common Law Rules	3	(3)
The 2001 Final COBRA Regulations (the Final M&A Regulations)	6	(8)
Effective Date of the Final M&A Regulations	14	(1)
Successor Employer---the Final M&A Regulations	14	(1)
Predecessor Employer Under Code Section 4980B	15	(1)
COBRA Provisions in Purchase Agreements	15	(1)
Issues Created by the Final M&A Regulations	16
Certain Issues in Stock Sales	16	(2)
Certain Issues in Asset Sales	18	(1)
Contractual Allocation of COBRA Responsibility	19
Notes
State Continuation Coverage Laws
Introduction	2	(1)
What is Preemption?	2	(1)
Why is Erisa Preemption Significant?	2	(1)
Erisa Preemption of State Continuation Coverage Laws	3	(2)
Plans That Are Not Subject to Preemption	4	(1)
Determining Whether a State Law Relates to Erisa Plans	5	(2)
Determining Whether a State Law is Exempt from Preemption Because it Regulates the Business of Insurance	7	(3)
Self-Insured Plans: Determining Whether Erisa's Deemer Clause Causes a State Insurance Law to be Preempted from Applying to Self-Insured Plans	10	(1)
Preemption of Non-Insurance Laws	11	(1)
Implications of Erisa Preemption	12
Integrating State Law and COBRA Continuation Coverage Requirements	13	(3)
Preemption of State Law Remedies for COBRA Violations	16
Notes
Coordination of COBRA Coverage and Other Health Benefits
Which Coordination Rules Apply When Qualified Beneficiaries Have Dual Coverage?	2	(1)
Coverage Under Another Group Health Plan	2	(1)
Medicare	2	(1)
General Principles of COB	2	(9)
Why COB Rules Were Developed	2	(2)
How Do COB Rules Relate to COBRA Coverage?	4	(1)
COB Model Regulation	5	(5)
Self-Insured ERISA Plans	10	(1)
Choice of Law Issues and COB	10	(1)
Coordination with Medicare	11
Notes
Appendix A Text of COBRA and Other Statutory Provisions	1	(1)
A-1 Internal Revenue Code Provisions	3	(12)
A-2 Employee Retirement Income Security Act (ERISA) Provisions	15	(20)
A-3 Public Health Service Act (PHSA) Provisions	35	(7)
A-4 Family and Medical Leave Act (FMLA) Provisions	42	(5)
A-5 Uniformed Services Employment and Reemployment Rights Act (USERRA) Provisions	47	(7)
A-6 Health Insurance Portability and Accountability Act of 1996 (HIPAA) Provisions	54
Appendix B Regulations	1	(1)
B-1 2001 IRS Final COBRA Regulations	2	(49)
B-2 1999 IRS Final COBRA Regulations	51	(44)
B-3 1999 IRS Proposed COBRA Regulations	95	(42)
B-4 1987 IRS Proposed COBRA Regulations	137	(46)
B-5 Excerpt From Final Dol Rule, Family and Medical Leave Act (Interplay of COBRA and FMLA)	183	(7)
B-6 1998 Proposed COBRA Regulations	190
Appendix C Administrative Notices, Releases, and Rulings	1	(1)
C-1 Internal Revenue Service	3	(30)
C-2 Department of Labor	33	(27)
C-3 Department of Health and Human Services	60
Appendix D Sample Notices, Letters, Election Form, and Certificate*	1	(1)
D-1 Sample COBRA Notice (Updated and Modified Version of DOL/HHS Model)	2	(4)
D-2 Sample COBRA Letter	6	(5)
D-3 Sample COBRA Letter	11	(4)
D-4 Sample COBRA Letter	15	(4)
D-5 Sample COBRA Election Form	19	(3)
D-6 Sample Notice of Qualifying Event from Employer to Plan Administrator	22	(1)
D-7 Sample Notice of Qualifying Event from Employer to Plan Administrator	23	(1)
D-8 IRS/DOL/HHS Model Certificate of Creditable Coverage Under HIPAA	24
Appendix E Sample COBRA Provisions in a Purchase Agreement	1	(1)
Sample COBRA Representations and Warranties	2	(3)
Sample COBRA Indemnification Language	5	(1)
Note Regarding 1999 IRS Transaction Guidance	5
GLOSSARY	1	(1)
TABLES
Internal Revenue Code	1	(3)
Employee Retirement Income Security Act (ERISA)	4	(3)
Treasury Regulations	7	(5)
Code of Federal Regulations	12	(2)
United States Code	14	(1)
Department of Labor Regulations and Advisory Opinion Letters	15	(1)
Internal Revenue Service Announcements, Notices, Letter Rulings, Revenue Rulings, and Revenue Procedures	16	(1)
Cases	17	(14)
COBRA Cases by Issue	31
Index	1