The joint Committee on Employee Benefits (JCEB) of the
America Bar Association has posted a report on the May 2007 Q&A session
between JCEB and DOL officials.
The following are some excerpts from the Q&A session
between JCEB and the DOL.
Several of the questions pertain to COBRA election notices
and notices sent in advance of a qualifying event. The answers are considered unofficial DOL
staff comments.
For those employers or Third Party Administrators (TPAs)
with health plans covering more than 20 participants you should review your
COBRA processes to make sure they are in compliance with Treasury and DOL COBRA
regulations.
Question 20: In many circumstances employers permit
employees to retain coverage under their health plans while they are on leave
or even on strike. Assuming an employee
on leave or on strike goes from paying only an employee portion to paying both
the employee and the employer subsidy, has a COBRA event occurred? For the purpose of this question, the COBRA
premium is assessed at 102 percent of the applicable premium but the cost of
coverage during the leave or while the employee is on strike is 100% of the
cost of coverage.
Proposed Answer 20:
No. ERISA Section 603 required a loss of
coverage as a condition for a qualifying event and the employee lost only the
employer subsidy not the coverage which continues to cost less than coverage
under COBRA. If the employee terminated
employment prior to the end of the leave or as a result of the work stoppage,
coverage would be lost and the COBRA event would be triggered at that point.
DOL Answer 20:
Staff notes that the authority to interpret the meaning of the term Qualified
Event resides with Treasury and declines to answer. Although without authority
to interpret the Treasury Regulations regarding the COBRA provisions, Staff
points to Treasury Regulation section 54.4980B-4 Q&A 1(c) that provides any
increase in the premium or contribution that must be paid by a covered employee
(or the spouse or dependent child of a covered employee) for coverage under a
group health plan that results from the occurrence of one of the events listed
in paragraph (b) of this Q&A-1 is a loss of coverage. Paragraph (b)(3) of Q&A-1 provides that
an event that is a reduction in hours of a covered employee’s employment may be
a qualifying event.
Question 21: Assume that an employer (that is also the
plan administrator) sends the notice of the right to elect COBRA coverage to a
former employee, but the notices comes back to the employer as
undeliverable. Is the employer relieved
of any further obligation to deliver the notice, even though it has actual
knowledge that the notice was not delivered?
Proposed Answer 21: Where the employer has actual knowledge that
the notice was not received, it must undertake additional actions. The COBRA notice regulations state that the
notice must be furnished in a manner consistent with the general ERISA notice
requirements. 29 C.F.R.
2590.606-4(f). Those rules require that
the plan provide the notice in a manner reasonably calculated to ensure actual
receipt. 29 C.F.R.
2520-104b-1(b)(1). Failing to take
further action when the employer knows that the notice was not delivered is not
a procedure reasonably designed to ensure actual receipt.
DOL Answer 21: As
discussed in the Preamble to the Final Regulation, the Department believes that
COBRA election notices must be furnished using a method that is reasonably
calculated to ensure actual receipt. 69
Fed. Reg. 30084, 30091
(May 26, 2004). This standard focuses on
the reasonableness of the procedures used to furnish COBRA notices and does not
require guaranteed delivery. Whether the
method of delivery complies with the standard depends on specific facts and
circumstances. Without expressing an
opinion on correctness of the decision Staff notes that in DeGruise v. Sprint
Corp., 279 F.3d 333 (%th Cir. 2003), the 5th Circuit rejected the
notion that the employer in that case had an affirmative duty to resend COBRA
mailings that were returned by the postal service.
Question 22: Can the plan administrator refuse to provide
a COBRA notice to the estranged spouse of an employee unless the employee
consents to his or her estranged spouse receiving the notice?
Proposed Answer 22:
No. that approach effectively conditions the right of the estranged spouse to
elect COBRA upon obtaining the consent of the employee-spouse, which violates
the rule that each qualified beneficiary has the right to make a separate
election as to whether he or she wants COBRA coverage. See Code 4980B(f)(5)(B).
DOL Answer 22:
Where the estranged spouse meets the definition of “qualified beneficiary”,
Staff agrees that requiring the covered employee’s consent to provide a CORBA
notice to such qualified beneficiary is not required. Staff notes, however, that the determination
of who is a qualified beneficiary entitled to receive a COBRA continuation
notice is under the jurisdiction of the Treasury Department.
Question 23: Can the notice of the right to elect COBRA
coverage be given months in advance of the occurrence of the Qualifying Event?
Proposed Answer 23:
No. For example, the notice from the
employer to the plan administrator is required to provide the date of the
Qualifying Event, which cannot be predicted months in advance. 29 C.F.R. 2590.606-2©. Similarly, the notice of the right to elect
COBRA coverage must contain the date on which coverage under the plan would
terminate (Absent an election of COBRA coverage), which also cannot be
predicted in advance. 29 C.F.R. 2590.606-4(b)(4)(iii).
DOL Answer 23:
Staff does not believe the question includes sufficient information. While ERISA and the COBRA notice regulations
do not specifically preclude notice in advance of a qualifying event, in many
instances the information necessary to comply with the various notice
provisions may not be available weeks or months in advance of a qualifying
event.
Question 24: An
employer maintains an ERISA covered health reimbursement arrangement (HRA) and
an ERISA covered health flexible spending arrangement (health FSA), both of
which are group health plans. As
permitted under the Tax Relief and Health Care Act of 2006, see Pub. L.
109-432, 302(a) (2006) (adding Code 106(e)), the employer amends the HRA and
health FSA to permit employees to voluntarily elect to rollover the amounts
they have in these plans to health savings accounts (HSAs). Does the ability to rollover amounts to HSAs
result in the HSAs being subject to ERISA?
If the employer required the rollover of the amounts to HSAs, does this
result in the HSAs being subject to ERISA?
Do either voluntary or mandatory rollovers violate ERISA’s exclusive
benefit rule?
Proposed Answer 24:
The ability to voluntarily rollover amounts to HSAs does not result in the HSAs
being subject to ERISA. The mandatory
rollover amounts to HSAs, however does result in the HSAs being subject to
ERISA. Neither voluntary nor mandatory
rollovers violate ERISA’s exclusive benefit rule.
DOL Answer 24:
The Department addressed Health Savings Accounts (HSAs) in Field Assistance
Bullentins (FAB 2004-1 and 2006-2. FAB
2004-1 provides that employer contributions to an employee’s HSA would not
result in the HSA being covered by ERISA, as long as the HSA meets the other
conditions established in the FAB.
(Staff notes that, depending on the circumstances, HSAs that do not
satisfy the requirements in the FAB may present ERISA coverage issues.) Accordingly, regardless of whether the HRA or
FSA amounts characterized as employee or employer contributions, the voluntary
rollover of those amounts would not result in the HSA being covered by
ERISA. With regard to mandatory
rollovers of HRA and FSA amounts into HSAs, one of the conditions in the FAB is
that employee participation in the HSA be completely voluntary, which the
Department interprets to mean employee contributions must be voluntary. A provision mandating that employees rollover
FSA amounts, which are oftentimes attributable to employee contributions, would
violate the condition that employee participation be completely voluntary.
For a copy of the Q&A click on the following link:
http://www.abanet.org/jceb/2007/2007dol.pdf
