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HRS/TND Associates, Inc. Thomas N. Dondore, SPHR

COBRA Administration For Dummies…Smarties, too! Lehigh Valley SHRM Conference October 20 and 21, 2008. HRS/TND Associates, Inc. Thomas N. Dondore, SPHR Research by: Sean Glasser, HRS COBRA Administrator. First, a History. COBRA initially passed in 1985

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HRS/TND Associates, Inc. Thomas N. Dondore, SPHR

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  1. COBRA AdministrationFor Dummies…Smarties, too!Lehigh Valley SHRM ConferenceOctober 20 and 21, 2008 HRS/TND Associates, Inc. Thomas N. Dondore, SPHR Research by: Sean Glasser, HRS COBRA Administrator HRS/TND Associates, Inc.

  2. First, a History... • COBRA initially passed in 1985 • DOL - authority to issue regulations regarding notices • IRS - responsibility of issuing rules defining required continuation coverage HRS/TND Associates, Inc.

  3. Developing A Compliance Program Maintaining Proper Compliance Consistency In Applying Provisions MANAGING COBRA Establishing Company Philosophy Sources For Updates Updating COBRA Program HRS/TND Associates, Inc.

  4. 20 OR MORE EMPLOYEES Full-Time + Part-Time Regardless Of Eligibility for the Group Health Plan HRS/TND Associates, Inc.

  5. COBRA Lawsuits? Single most common reason for COBRA lawsuits over the last 20 years -- allegation of ‘improper notice’ HRS/TND Associates, Inc.

  6. Initial/General Notice Employer Qualifying Event Notice FINAL COBRA NOTICE RULES Unavailability Notice Employee Qualifying Event Notice Notice of Early Termination Election Notice HRS/TND Associates, Inc.

  7. GOALS OF PROPER COBRA ADMINISTRATION • KEEP The IRS Out Of Your Business • KEEP Your Business Out Of Court HRS/TND Associates, Inc.

  8. COMPLIANCE WITH COBRA Required Employers With 20 Or More Employees Not Required Church Plans [Under IRC 414 (e)] Federal Government HRS/TND Associates, Inc.

  9. COBRA COVERAGE APPLIES TO DOES NOT APPLY TO Medical Life Insurance Dental Disability Vision Prescription Section 125 FSAs EAP HRS/TND Associates, Inc.

  10. Event Loss Of Coverage + COBRA Qualifying Event HRS/TND Associates, Inc.

  11. Premiums • COBRA Premiums • 100% of cost plus 2% • 150% if Qualified Beneficiary extends coverage due to disability, but only for the last eleven months HRS/TND Associates, Inc.

  12. TAMRA 1988Technical And Miscellaneous Revenue Act Established Criteria For IRS Auditing Of COBRA Compliance Program IRS Enforcement Complaint Driven Audits Audits Through The Mail PackageAudits HRS/TND Associates, Inc.

  13. TAMRA Criteria Incorporated AND Violation Corrected Within 30 Days TAMRA Criteria Not Incorporated OR Violation Not Corrected Within 30 Days ReasonableCause Willful Neglect IRS Can Waive Penalty IRS Has No Authority To Waive Penalty HRS/TND Associates, Inc.

  14. IRS AUDIT THE FOUR TAMRA CRITERIA COBRA Training Written Instructions Program Designed And Updated Program Monitored HRS/TND Associates, Inc.

  15. What do Auditors Look For? • Copies - Summary Plan Descriptions (SPD) • Written COBRA administration procedures manual • Proof of training of named individuals responsible for COBRA compliance • Copies of notices, letters and other documents used in administering COBRA • Information on any lawsuits for violations of COBRA procedures • All documents relating to any specific qualified beneficiary, especially if that person initiated the IRS investigation HRS/TND Associates, Inc.

  16. EMPLOYER’S COMPLIANCE PROGRAM Proper Notification Procedures Proper Notification Language Adherence To COBRA Time Frames Consistency In Applying Provisions Calculations Of Premium Rates Following COBRA Terminating Events HRS/TND Associates, Inc.

  17. COBRA Penalties IRS Excise Tax ERISA Fines DOL Lawsuits Ex-Employee Claims Employer Damages Attorney Fees HRS/TND Associates, Inc.

  18. Penalties • Potential Tax Penalty for COBRA Violations • Excise Tax of $100 Per Day For Per Qualified Beneficiary ($200 Per Family) • For Period of Noncompliance • ERISA Penalty • Up to $110 per day • From date of failure to date of correction • May Be Responsible for any Medical Bills HRS/TND Associates, Inc.

  19. Applies To Involuntary Termination Only No Clear Federal Definition Decided In Court On A Case By Case Basis Consider ‘playing it safe’ and offering COBRA when employees terminate employment A Note about GROSS MISCONDUCT HRS/TND Associates, Inc.

  20. 18 MONTH QUALIFYING EVENTS • Voluntary Termination of Employment • Involuntary Termination of Employment • Reduction Of Hours HRS/TND Associates, Inc.

  21. 29 Month Qualifying Event • Disabled Qualified Beneficiaries • A Qualified Beneficiary who has become disabled under the Social Security Act within first 60 days of COBRA coverage • 11 month extension if plan administrator is notified within 60 days from date disability determination is made by Social Security Administration and before end of 18-month coverage period HRS/TND Associates, Inc.

  22. 36 MONTH QUALIFYING EVENTS(Potential Secondary QE) • Death Of The Employee • Medicare Entitlement • Divorce Or Legal Separation • Dependent Child Ceasing To Be A Dependent HRS/TND Associates, Inc.

  23. QUALIFIED BENEFICIARIES Covered Employee Covered Spouse Covered Dependent Covered Dependent Child Born To, Or Adopted By, Covered Employee HRS/TND Associates, Inc.

  24. SEPARATE PLANS Separate MEDICAL Plan Medical Only Medical & Dental Medical & Vision Medical, Dental & Vision Dental Only Dental & Vision Vision Only Separate DENTAL Plan Separate VISION Plan Qualified Beneficiaries Can Elect ANY Of These Combinations HRS/TND Associates, Inc.

  25. Initial Notice • Must be provided to all qualified beneficiaries in writing within 90 days of first being covered by Plan • May be sent to Employee & Spouse as one notice if they reside together –Consider two notices • Must include beneficiary’s responsibility to advise Plan of a qualifying event with procedure for doing so • Must include requirement to keep Plan informed of current contact info HRS/TND Associates, Inc.

  26. Qualifying Event Notice Employer Responsibility (Employer Knowledge) • Must inform the Plan Administrator of certain qualifyingevents such as Termination of Employment within 30 days of qualifying event • Health plans may provide that the 30 day period begins on the day the coverage ends HRS/TND Associates, Inc.

  27. Qualifying Event Notice Beneficiary Responsibility (Without Employer Knowledge) • Must inform the Plan Administrator of qualifying events such as divorce or ineligible dependent within 60 days of qualifying event (Plan may extend this timeframe) • Supervisor Liability • May be required by Plan to use a specified form to provide notice. Plan may demand all required information before deeming the notice to be properly provided. HRS/TND Associates, Inc.

  28. Qualifying Event Notice Plan must set Reasonable Procedures for Beneficiary Notice • Contained in the Summary Plan Description • Specify the individual who should receive notice • Specify the means by which the notice must be given – The Certified Mail hot button! • List all required information the notice must contain. HRS/TND Associates, Inc.

  29. HIPAA RequirementCertification of Creditable Coverage • Provided automatically to: • Individual who is a Qualified Beneficiary when individual becomes entitled to elect COBRA • Individual who is not a Qualified Beneficiary entitled to elect COBRA within a reasonable period of time after individual's coverage ends • Individual who is a Qualified Beneficiary and has elected COBRA coverage at the time that the individual's COBRA coverage ends • Provided upon request to: • An individual who lost coverage under plan within 24 months after date lost coverage HRS/TND Associates, Inc.

  30. ElectionNotice • Plan administrator sends to employees and covered beneficiaries • Details COBRA options and costs • Must be sent 14 to 44 days after receipt of notice of Qualifying Event HRS/TND Associates, Inc.

  31. Notice of COBRA Unavailability • Plan administrator sends to employees and covered beneficiaries • Explanation of why individual is not eligible for COBRA • Must be sent 14 to 44 days after receipt of notice of Qualifying Event (same timeframe as Election Notice) HRS/TND Associates, Inc.

  32. Notice of Early Termination of COBRA • Plan administrator sends to affected individual(s) • Reason for and effective date of coverage termination • Explanation of any rights to elect alternative group or individual coverage • Notice to be sent ‘as soon as practicable’ after determining COBRA must terminate HRS/TND Associates, Inc.

  33. Medicare • The IRS issued guidance (Rev. Rule 2004-22) on the issue of Medicare as a second qualifying event for COBRA purposes. “The Medicare entitlement of a covered employee is not a secondary qualifying event for a qualified beneficiary unless the Medicare entitlement would have resulted in a loss of coverage for the qualified beneficiary under the group health plan that is providing the COBRA continuation coverage.” HRS/TND Associates, Inc.

  34. Medicare continued • Ongoing COBRA coverage followed by Medicare eligibility is generally not a secondary qualifying event • Medicare eligible person loses COBRA, any dependents continue coverage through the normal time-frame HRS/TND Associates, Inc.

  35. Medicare continued • 65 and over + QE = COBRA eligibility • Medicare would be the primary payer • If Medicare is based on ESRD (End Stage Renal Disease), COBRA continuation coverage is the primary payer for a 30-month period and Medicare is the secondary payer • Any dependents would get 36 months of coverage starting from initial Medicare eligibility HRS/TND Associates, Inc.

  36. FMLA Leave Is Not A COBRA Qualifying Event Group Health Plan Coverage Continues As If Employee Was Not On FMLA Leave Group Health Plan Coverage May Be Terminated For Failure To Pay (At Least 30-Day Grace Period) FAMILY & MEDICAL LEAVE ACT If Employee Returns If Employee Does Not Return Entitled To Job Reinstatement Entitled To Group Health Plan Reinstatement (Regardless Of Whether Coverage Was Maintained During FMLA Leave) COBRA Qualifying Event Is Last Day of Qualifying FMLA leave Qualified Beneficiaries Entitled To COBRA Coverage (Regardless Of Whether Coverage Was Maintained During FMLA Leave) HRS/TND Associates, Inc.

  37. 45 DAY RETROACTIVE PREMIUM PAYMENT Loss Of Coverage Date Date Of Election All Retroactive Premium Due March 1 April 25 June 9 HRS/TND Associates, Inc.

  38. COBRA ADMINISTRATION PROGRAM WHAT TO LOOK FOR: • All COBRA notifications • Confirmation of status to electees • Timely billing notices or payment coupons • Late notices • Termination notices • Telephone consultations HRS/TND Associates, Inc.

  39. COBRA ADMINISTRATION • Medicare entitlement monitored • Disability status monitored • Telephone consultations • HIPAA notice • Audit trails • COBRA consulting to client HRS/TND Associates, Inc.

  40. COBRA ADMINISTRATION YOUR QUESTIONS? Thomas N. Dondore, SPHR www.hrstndassociates.com HRS/TND Associates, Inc.

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