Employers should be aware of the different federal employment laws that may apply to their company, such as the FMLA, the Equal Pay Act and COBRA. This Compliance Overview Which Federal Employment Laws Apply To My Company provides a high-level overview of key federal employment laws and explains which employers they apply to.
Most employer-sponsored group health plans are subject to COBRA’s continuation coverage requirements. However, some employers, such as churches and small employers, are exempt from COBRA. In addition, certain welfare benefit plans, such as long-term and short-term disability plans, are not subject to COBRA because they do not provide medical care. This COBRA Covered Employers and Health Plans Legislative Brief explains which employers and health plans are subject to COBRA.
On May 7, 2014, the U.S. Department of Labor (DOL) issued proposed rules with amendments to the notice requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The proposed amendments are intended to align the COBRA notice requirements with the Affordable Care Act (ACA) so that individuals who lose coverage under their employer’s plan understand that they have the option to either (a) purchase COBRA coverage; or (b) purchase coverage through the new ACA Health Insurance Marketplace, which may be more affordable than COBRA coverage. The proposed rules were accompanied by a new model election notice and general notice that employers may use to satisfy their COBRA notice obligations. (A new model Children’s Health Insurance Program notice was also issued.)
A few days before the DOL issued its proposed rules, the Department of Health and Human Services (HHS) also issued a new bulletin regarding COBRA. HHS is concerned that former model COBRA notices did not sufficiently explain the Marketplace options to persons eligible for COBRA. Thus, HHS is giving current COBRA-eligible individuals a one-time special period — through July 1, 2014 — to enroll in a qualified health plan through the Marketplace.
Right now, employers should, at a minimum: (1) update their COBRA general and election notices to include the new model language regarding Marketplace coverage; (2) notify current COBRA eligible individuals regarding their special, one-time right to enroll in Marketplace coverage through July 1, 2014; (3) review and revise their health plan’s COBRA communications, policies and procedures to include the availability of coverage in the Marketplace; and (4) update current plan’s summary plan description to include the option of Marketplace coverage.
If you have questions or need help with these action steps, please feel free to contact me, firstname.lastname@example.org.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires that employers provide former employees and dependents who lose group health benefits with an opportunity to continue group health insurance coverage for a limited period of time. Compliance with the complex rules regarding COBRA coverage can be difficult and mistakes can be costly. Penalties for non-compliance can include IRS excise taxes and ERISA statutory fines. This article provides practical information and tips for avoiding these penalties and other risks, such as lawsuits to compel coverage and adverse selection of COBRA coverage.
COBRA participants have the same rights as active employees at open enrollment:
1. To add/drop coverage
2. Add/drop dependents
3. Switch from one group health plan to another
4. Switch to another benefit package within the same plan
For the purposes of Open Enrollment, COBRA Participants are individuals currently enrolled and paying for COBRA, individuals in their 60-day election period, and individuals who have elected, but not yet paid for, COBRA.
Many provisions of the Affordable Care Act (ACA) that become effective beginning in 2014 are designed to expand access to affordable health coverage. Beginning Jan. 1, 2014, individuals and employees of small businesses will have access to health coverage through ACA’s health insurance exchanges (Exchanges). According to the Department of Labor (DOL), the Exchanges will create competitive health insurance marketplaces where consumers can go to find and compare private health insurance options.
On May 8, 2013, the DOL issued Technical Release 2013-02. This Technical Release provides an updated model election notice for group health plans for purposes of the continuation coverage provisions under COBRA. The model COBRA election notice was updated to inform qualified beneficiaries of coverage options available through the Exchanges and other ACA reforms related to continuation coverage.
Plan sponsors should consider revising their COBRA election notices to include these ACA updates. When the Exchanges and premium tax credits go into effect in 2014, it is possible that fewer qualified beneficiaries will elect COBRA to obtain health coverage and this may result in a cost-savings for the employer-sponsored health plan.
Many employee benefit arrangements that provide non-pension fringe benefits are “employee welfare benefit plans” covered by ERISA. However, there are important exemptions and safe harbors provided for certain categories of employee benefits. The definition of ERISA welfare benefit plan can be distilled into the following three basic elements:
There must be a plan, fund or program
that is established or maintained by an employer
for the purpose of providing the following listed benefits to participants and beneficiaries:
medical, surgical or hospital care or benefits
benefits in the event of sickness, accident, disability, death or unemployment
apprenticeship or other training benefits
holiday and severance benefits
housing assistance benefits
It is easy to have a plan, fund or program – any ongoing administrative scheme will satisfy this condition (although numerous court cases apply some fine distinctions when determining whether very simple plans, especially simple severance plans, have the necessary ongoing scheme). Showing that an employer maintains a plan is also easy – any contribution by the employer toward payment of benefits or administration of the plan is enough (including a contribution toward insurance coverage).
QUICK List – Key ERISA Requirements
Here are the main compliance obligations for ERISA plans
Plan document must exist for each plan
Plan terms must be followed and strict fiduciary standards adhered to
Fidelity bond must be purchased to cover every person who handles plan funds
Summary plan description (SPD) must be furnished automatically to plan participants
Summary of material modification (SMM) must be furnished automatically to plan participants when a plan is amended
Copies of certain plan documents must be furnished to participants and beneficiaries on written request and be made available for inspection
Form 5500 must be filed annually for each plan (subject to important exemptions, especially for small plans)
Summary annual report (summarizing Form 5500 information) must be furnished automatically to plan participants for a plan that files a Form 5500 (except totally unfounded welfare plans)
Claim procedures must be established and carefully followed when processing benefit claims and when reviewing appeals of denied claims
Plan assets, including participant contributions, may be used only to pay plan benefits and reasonable administrative expenses
For a few welfare plans, plan assets may have to be held in trust
Group health plans must conform to applicable mandates like COBRA and HIPAA