The federal Employee Benefits Security Administration has issued a final rule that spells out what employers have to do regarding health insurance continuation notices for departing employees.
The regulation affects all employers who must comply with the Consolidated Omnibus Budget Reconciliation Act of 1986.
In practice, COBRA requires most U.S. employers with at least 20 employees to offer departing health plan members continuation benefits.
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Benefits experts have known since COBRA was enacted that employers must advise incoming and outgoing employees about their COBRA rights. But the new regulation gives the first official, clear-cut COBRA notice requirements, according to Jason Froggatt, a partner at Davis Wright Tremaine L.L.P., Seattle.
The new guidelines are certainly really helpful to employers, Froggatt says.
The final rule includes examples of the notices that plan administrators must give new health plan members and departing plan members who might be eligible for COBRA.
EBSA also has spelled out requirements for a notice for departing plan members who are ineligible for continuation coverage and a notice for employers who will be ending former plan members continuation benefits early.
Benefits advisors should tell employers about the importance of complying with the new COBRA notice requirements because violating COBRA notice rules can lead to serious legal and financial problems, experts say.
The government can make employers who violate COBRA coverage continuation rules pay as much as $200 in tax penalties per affected family per day.
When health plan sponsors fail to issue adequate COBRA notices, former plan members can sue to make the sponsors pay their medical bills, according to the COBRA statute.
EBSAs final COBRA notice rule is a revision of a proposed regulation that EBSA published in May 2003.