[Federal Register Volume 62, Number 184 (Tuesday, September 23, 1997)]
[Proposed Rules]
[Pages 49894-49898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25240]



[[Page 49893]]

_______________________________________________________________________

Part IV





Department of Labor





_______________________________________________________________________



Pension and Welfare Benefits Administration



_______________________________________________________________________



29 CFR Part 2580



Health Care Continuation Coverage; Proposed Rule

  Federal Register / Vol. 62, No. 184 / Tuesday, September 23, 1997/ 
Proposed Rules  

[[Page 49894]]



DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2580


Health Care Continuation Coverage

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Request for information.

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SUMMARY: This document is a request for information to assist the 
Department of Labor (the Department) in assessing the need for a 
regulation clarifying certain statutory notice requirements set forth 
in section 606 of Title I of the Employee Retirement Income Security 
Act (ERISA) and in section 4980B of the Internal Revenue Code (the 
Code). These statutory notice requirements were enacted as part of the 
continuation coverage provisions included in the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (COBRA). The continuation coverage 
provisions, commonly referred to as the COBRA provisions, generally 
require group health plans to provide participants and beneficiaries 
who under certain circumstances would otherwise lose coverage 
(qualified beneficiaries) with the opportunity to elect to continue 
coverage under the plan at group rates for a limited period of time.
    The Department anticipates that information and views provided by 
plan sponsors, plan fiduciaries, service providers to plans, plan 
participants and beneficiaries, and other interested persons will aid 
it in assessing the need for issuing a regulation to explicate the 
notice requirements of the COBRA provisions and the appropriate scope 
and content of any such regulation. A regulation on the notice 
requirements of the COBRA provisions would affect participants and 
beneficiaries (including qualified beneficiaries) of certain group 
health plans, as well as the sponsors and fiduciaries of such plans.

DATES: Written comments should be received by the Department of Labor 
on or before November 24, 1997.

ADDRESSES: Comments (preferably, at least six copies) should be 
addressed to the Office of Regulations and Interpretations, Pension and 
Welfare Benefits Administration, Room N-5669, U.S. Department of Labor, 
200 Constitution Ave., NW, Washington, DC 20210. Attn: COBRA RFI. All 
comments received will be available for public inspection at the Public 
Disclosure Room, Pension and Welfare Benefits Administration, U.S. 
Department of Labor, Room N-5507, 200 Constitution Ave., NW, 
Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: David Lurie, Office of Regulations and 
Interpretations, Pension and Welfare Benefits Administration, (202) 
219-7461. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

A. Background

1. The COBRA Provisions

    The COBRA provisions, sections 601 to 608 of Title I of ERISA, and 
the related portions of section 4980B of the Code,1 
establish the requirement that any ``group health plan'' 2 
maintained by an employer that employs 20 or more employees must offer 
``qualified beneficiaries'' 3 the opportunity to elect 
``continuation coverage'' under the plan following certain events 
(qualifying events) that would otherwise result in the loss of 
coverage.4
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    \1\ All references herein to ERISA sections 601-608 should be 
read to refer also to corresponding provisions in Code section 
4980B.
    \2\ The term group health plan is defined in section 607(1) to 
mean an employee welfare benefit plan providing medical care (as 
defined in section 213(d) of the Code) to participants or 
beneficiaries directly or through insurance, reimbursement, or 
otherwise. Plans that provide substantially only long-term care 
services (as defined in section 7702B(c) of the Code, however, are 
not included. Further, although governmental plans are excepted from 
coverage under Title I of ERISA, see ERISA section 4(b)(1), COBRA 
amended the Public Health Service Act, 42 U.S.C. Sec. 300bb-1 et 
seq., to impose requirements for the provision of health care 
continuation coverage similar to those contained in Part 6 of Title 
I on certain State and local employers.
    \3\ Section 607(3) defines qualified beneficiary generally as 
any person, other than a covered employee, who, on the day before 
the qualifying event for that employee, was a beneficiary under the 
plan as the spouse or dependent child of the covered employee. In 
the case of a qualifying event that is the termination or reduction 
of hours of the covered employee, the term also includes the covered 
employee. In the case of a qualifying event that is the bankruptcy 
of the plan sponsor, the term qualified beneficiary includes the 
covered employee if he or she had retired on or before the date of 
substantial elimination of coverage, and any individual who, on the 
day before the qualifying event, was a beneficiary under the plan as 
the surviving spouse of the covered employee. The Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) expanded the 
definition of qualified beneficiary contained in section 607(3) to 
include children who are born to or placed for adoption with the 
covered employee during the duration of continuation coverage.
    \4\ Section 603 defines a qualifying event as any of the 
following: 1) the death of the covered employee; 2) the termination 
(other than by reason of gross misconduct) or reduction in hours of 
the covered employee's employment; 3) the divorce or legal 
separation of the covered employee from the employee's spouse; 4) 
the covered employee's becoming entitled to benefits under Medicare; 
5) a dependent child's ceasing to be a dependent under the terms of 
the plan; or 6) the bankruptcy of the employer from which the 
covered employee retired. Section 607 defines other relevant terms, 
such as ``covered employee'' and ``group health plan,'' for the 
purposes of the COBRA provisions.
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    Under section 602(2)(A), the nature of the qualifying event 
determines the length of continuation coverage that an employer must 
make available to a qualified beneficiary. If the qualifying event is 
either a termination or a reduction in the hours of the covered 
employee's employment, the period of continuation coverage is up to 18 
months from the date of the qualifying event.5 This period 
is extended for an additional 11 months, to make a total period of 29 
months of continuation coverage, for all qualified beneficiaries with 
respect to a covered employee, if any of such qualified beneficiaries 
has been determined, pursuant to Title II or Title XVI of the Social 
Security Act, to have been disabled at any time within the first 60 
days of continuation coverage.6 Furthermore, in cases 
involving a termination or reduction of hours of employment, the 
occurrence of another qualifying event during the initial 18 months of 
continuation coverage will extend the continuation coverage period to 
up to 36 months from the date of the original qualifying event. In all 
other cases, the period of continuation coverage is generally up to 36 
months from the date of the qualifying event. The occurrence of certain 
events subsequent to election of continuation coverage can cause the 
period of continuation coverage to end prior to the end of the 
otherwise applicable continuation coverage period.7
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    \5\ A group health plan may, pursuant to section 607(5), provide 
instead that the period of continuation coverage (and the period 
during which the employer must notify the plan administrator of a 
qualifying event) will begin on the date the qualified beneficiary 
loses coverage, rather than the date of the qualifying event.
    \6\ Prior to enactment of HIPAA, section 602(2) provided that a 
qualified beneficiary would be entitled to the 11-month disability 
extension only if he or she was disabled at the time that the 
covered employee suffered the termination or reduction in hours of 
employment. HIPAA also amended section 602(2) to clarify that the 
11-month disability extension applies to the non-disabled family 
members of a disabled qualified beneficiary who meets the 
requirements for the extension, provided those family members are 
also entitled to continuation coverage.
    \7\ For example, a qualified beneficiary's right to continuation 
coverage will cease if an employer ceases to provide group health 
coverage to its employees, if the qualified beneficiary fails to pay 
required premiums in a timely fashion, or if the qualified 
beneficiary becomes covered under another group health plan that 
does not contain any invalidating pre-existing condition exclusions 
or limitations. See Sec. 602(2) (B), (C), (D).
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    The COBRA provisions specify the nature of the continuation 
coverage that must be offered, the premiums that a qualified 
beneficiary may be required to pay as a predicate for such continuation 
coverage, and the manner in which plan administrators must provide 
qualified

[[Page 49895]]

beneficiaries with the opportunity to elect continuation coverage and 
to pay any required premiums. See sections 602, 604, 605.
    Section 606 establishes a series of related notice requirements 
that ultimately trigger, under section 605, the beginning of the period 
of time during which the qualified beneficiary may elect continuation 
coverage (the election period). These notice requirements are described 
in detail in Section 2, below.
    Section 608 grants the Secretary of Labor generally the authority 
to issue regulations to carry out the provisions of Part 6 of Title I 
of ERISA. In order to avoid duplicate and perhaps inconsistent 
regulations, the Conference Report accompanying COBRA 8 
provides that the Secretary of Labor is authorized to promulgate 
regulations implementing the disclosure and reporting requirements of 
COBRA, while the Secretary of the Treasury is authorized to issue 
regulations defining the required continuation coverage.9 
The Conference Report further stated that pending the promulgation of 
regulations, employers would be required to operate ``in good faith 
compliance with a reasonable interpretation of the substantive rules 
and notice requirements' H. Rep. 99-453 at 562-63.
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    \8\ H. Rep. No. 99-453, 99th Cong., 1st Sess. (December 18, 
1995).
    \9\ The Conference Report indicates further that the Secretary 
of Health and Human Services, who is to issue regulations 
implementing the continuation coverage requirements for State and 
local governments, must conform the actual requirements of those 
regulations to the regulations issued by the Secretaries of Labor 
and the Treasury. Id. at 562-63. Pursuant to its authority, the 
Treasury Department has proposed certain regulations relating to 
continuation coverage. See Prop. Treas. Reg. Sec. 1.162-26 (52 Fed. 
Reg. 22716, June 15, 1987).
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2. COBRA Notices

    Section 606 of ERISA provides for a series of related notices, 
beginning with the requirement for a general notice of the rights 
provided under COBRA and culminating with an individualized notice to a 
qualified beneficiary entitled to elect continuation coverage.
    (a) Initial Notice. Section 606(a)(1) requires a group health plan 
to provide to each covered employee and spouse of the employee (if any) 
at the time of commencement of coverage under the plan 10 a 
written notice describing the rights provided under COBRA.11
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    \10\ Advisory Opinion 94-17 (April 9, 1994) states that a group 
health plan is required to provide the initial notice required by 
section 606(a)(1) only to individuals who may at some time become 
entitled to elect continuation coverage under the plan, i.e., 
someone who is or becomes covered under the plan. Accordingly, a 
group health plan is required to provide the initial notice to a 
covered employee's spouse only if, and at the time, the spouse 
commences coverage under the plan.
    \11\ On June 26, 1986, the Department issued ERISA Technical 
Release 86-2 (TR 86-2), ``Guidance on Group Health Continuation 
Coverage Notification Provisions,'' to provide for use by employers 
a model initial notice satisfying the requirements of section 
606(a)(1). TR 86-2 emphasizes that use of the model notice is not 
the only method of achieving good faith compliance with a reasonable 
interpretation of the initial notice requirement. Additionally, TR 
86-2 provides guidance with respect to certain procedural issues not 
addressed by the statute and the Department's view of good faith 
compliance in the absence of regulations. First, TR 86-2 states that 
sending a notice by first-class mail to the last known address of a 
covered employee and his or her spouse (if any) would evince a good 
faith effort at compliance. Second, TR 86-2 states that, if a 
spouse's last known address is the same as the covered employee's, a 
single mailing addressed to both would be considered to be in good 
faith compliance with the requirement set forth in 606(a)(1). 
Finally, TR 86-2 states that if an employer (or plan administrator) 
determines that a spouse no longer resides with the covered 
employee, good faith compliance could be achieved by a separate, 
first-class mailing to the last known address of the spouse.
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    (b) Notice of Qualifying Event. Section 606 (a)(2) and (a)(3) 
require that the plan administrator of a group health plan be notified 
that a qualifying event has occurred. The nature of the qualifying 
event determines whether this notice obligation falls on the employer 
of a covered employee or on the covered employee or qualified 
beneficiary. If the qualifying event is the death of the covered 
employee, the termination or reduction of hours of the covered 
employee's employment,12 the covered employee's becoming 
entitled to Medicare, or a bankruptcy proceeding of the employer, 
section 606(a)(2) requires the employer of the covered employee to 
provide notice of the qualifying event to the plan administrator. The 
employer must provide this notice within 30 days of the date the event 
occurs.13 If the qualifying event is the divorce or legal 
separation of the covered employee or a dependent child's ceasing to be 
a dependent under the terms of the plan, section 606(a)(3) requires the 
covered employee or qualified beneficiary to provide the notice of 
qualifying event to the plan administrator.14 The covered 
employee or qualified beneficiary must provide this notice within 60 
days of the date the qualifying event occurs.15
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    \12\ In the case of a multiemployer plan, the requirement that 
the employer notify the plan administrator of the termination or 
reduction in hours of the covered employee's employment is satisfied 
if the plan provides that the plan administrator will determine the 
occurrence of such a qualifying event.
    \13\ If the plan is a multiemployer plan, this notice must be 
given within the time period set by the plan.
    \14\ Prop. Treas. Reg. Sec. 1.162-26, Q&A 33, states that this 
notice is to be provided to the ``employer or other plan 
administrator.''
    \15\ Prop. Treas. Reg. Sec. 1.162-26, Q&A 33, states that if the 
notice is not sent to the employer or other plan administrator 
within 60 days after the later of the date of the qualifying event 
or the date that the qualified beneficiary would lose coverage, the 
group health plan does not have to offer the qualified beneficiary 
continuation coverage.
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    (c) Notice of Right to Elect Continuation Coverage. Section 
606(a)(4) requires a plan administrator to notify qualified 
beneficiaries of their right to elect continuation 
coverage.16 This notice must be provided within 14 days of 
the date on which the administrator receives the notice that a 
qualifying event has occurred.17 Pursuant to section 605(1), 
a qualified beneficiary must be provided a period of at least 60 days, 
beginning on the later of the date of the loss of coverage due to the 
qualifying event or the date the notice of the right to elect 
continuation coverage was sent, within which to elect continuation 
coverage.
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    \16\ Advisory Opinion 90-16 (May 3, 1990) states that the 
administrator of a group health plan cannot be relieved, by 
delegation, contract, or otherwise, of responsibility for providing 
the notice required by section 606(a)(4).
    \17\ In an information letter dated April 11, 1995, the 
Department stated that, in cases in which the employer of employees 
covered by a group health plan is also the plan administrator, both 
the 30-day notice period for the employer's notice of a qualifying 
event and the 14-day period for the administrator's notice of the 
right to elect continuation coverage would continue to apply. 
Accordingly, an employer who is also the plan administrator has a 
maximum period of 44 days from the date on which the qualifying 
event occurred to provide such notice.
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    (d) Social Security Disability Notice. Section 602 provides that, 
if a qualified beneficiary becomes disabled, as determined under Title 
II or XVI of the Social Security Act, at any time during the first 60 
days of continuation coverage, he or she is entitled to a total of up 
to 29 months of continuation coverage, rather than only 18 months of 
continuation coverage. Section 606(a)(3) provides that, in order to 
obtain the 11-month extension, such a qualified beneficiary must notify 
the plan administrator of the determination of disability within 60 
days after the date of such determination. Section 602 also requires 
that this notice be provided before the end of the original 18-month 
period of continuation coverage. The qualified beneficiary must also 
notify the plan administrator of any final determination that the 
qualified beneficiary is no longer disabled. This notice must be 
provided within 30 days of the date of such determination.

[[Page 49896]]

3. Statutory Sanctions for Failure to Comply With COBRA Notice 
Requirements

    The COBRA provisions impose sanctions for failure to comply with 
certain of the notice requirements of ERISA section 606.
a. ERISA Section 502
    Section 502(a)(1)(A) of ERISA permits participants and 
beneficiaries to bring a civil action for the relief provided in 
section 502(c). Section 502(c)(1) provides that a plan administrator 
that fails to provide an initial notice or a notice of the right to 
elect continuation coverage may, in the court's discretion, be held 
liable to the participant or beneficiary for up to $100 per day from 
the date of the failure to provide notice and for any other relief that 
the court deems proper.
b. Code Section 4980B
    Code section 4980B imposes excise taxes on the 
employer,18 and, in certain circumstances, a person (other 
than an employee) who is responsible for administering or providing 
benefits under the plan and whose act or failure to act caused the 
failure, for the failure of a group health plan to meet any of the 
requirements of the COBRA provisions, including the relevant notice 
requirements. Pursuant to section 4980B(b)(1), the amount of the tax on 
any failure with respect to a qualified beneficiary is $100 per day 
19 for each day of non-compliance. Code section 4980B(b) 
establishes a number of standards relating to minimum and maximum 
amounts of tax and specifies situations in which the tax will not be 
imposed.
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    \18\ In the case of a multiemployer plan, the tax is imposed on 
the plan.
    \19\ If there is more than one qualified beneficiary with 
respect to the same qualifying event, the maximum amount of tax that 
may be imposed on all failures on any day with respect to such 
qualified beneficiaries is $200.
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4. Health Insurance Portability and Accountability Act (HIPAA)

    HIPAA, which was signed into law on August 21, 1996, made certain 
substantive changes to the COBRA provisions. Those changes became 
effective January 1, 1997, regardless of the date of any qualifying 
event. Among other changes,20 HIPAA amended section 
602(2)(D)(i), with respect to circumstances under which a group health 
plan may cease providing continuation coverage to a qualified 
beneficiary because that qualified beneficiary has become covered under 
another group health plan, to reflect the changes made by HIPAA with 
respect to preexisting condition exclusions and limitations. 
Specifically, the COBRA provisions mandate that, if the new plan limits 
or excludes coverage for any preexisting condition of the qualified 
beneficiary, the plan providing continuation coverage cannot cease 
making continuation coverage available solely due to the coverage under 
the new plan. However, HIPAA provides that, if the new group health 
plan limits or excludes coverage for preexisting conditions, but those 
limits or exclusions would not apply to or would be satisfied by a 
qualified beneficiary under the HIPAA rules limiting pre-existing 
coverage exclusions, the plan providing continuation coverage may cease 
providing it. As a separate matter, HIPAA provides that the amount of 
an individual's ``creditable coverage'' (see footnote 21) must include 
any period of time during the relevant look-back period for which the 
individual was covered by a group health plan as a result of the 
individual's having elected continuation coverage.
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    \20\ As described in footnotes 2 and 4, above, HIPAA clarified 
the definition of ``qualified beneficiary'' and the scope of the 11-
month extension for disabled qualified beneficiaries. In addition, 
section 421(e) of HIPAA required group health plans subject to COBRA 
to notify individuals who have elected continuation coverage no 
later than November 15, 1996, of the changes to COBRA enacted by 
HIPAA. The Department issued Technical Release 96-1 on October 15, 
1996, to inform employers and plan administrators of the changes in 
the COBRA rules made by HIPAA and of their obligation under HIPAA to 
notify qualified beneficiaries of such changes. The Department, as a 
matter of enforcement policy, deemed that supplying qualified 
beneficiaries with a written copy of the information contained in TR 
96-1, or with a copy of TR 96-1, would constitute compliance with 
the notice requirement contained in section 421(e) of HIPAA if the 
information was sent to each qualified beneficiary by first class 
mail at the last known address of the qualified beneficiary by 
November 1, 1996.
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5. Interim HIPAA Regulations

    On April 8, 1997, the Department, in conjunction with the IRS and 
the Health Care Financing Administration of the Department of Health 
and Human Services, published in the Federal Register interim rules and 
a proposed rule implementing certain provisions of HIPAA (62 FR 16894). 
The Department's interim regulation relating to certificates of 
creditable coverage,21 29 CFR 2590.701-5 (62 FR 16946, 
16947), provides that a qualified beneficiary is entitled to a 
certificate both at the time that coverage would be lost in the absence 
of continuation coverage and, if the qualified beneficiary has elected 
continuation coverage, at the time that the continuation coverage 
ceases. In addition, in cases in which the person is entitled to elect 
continuation coverage, the first certificate must be furnished no later 
than the time a notice of the right to elect continuation coverage is 
required to be provided. The second certificate, after continuation 
coverage ceases, must be provided within a reasonable time after 
continuation coverage ceases.
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    \21\ Pursuant to ERISA section 701, which was added by HIPAA, 
certificates of creditable coverage are required to be provided to 
participants and beneficiaries under group health plans under 
certain circumstances. These certificates serve to establish a 
participant's or beneficiary's period of ``creditable coverage,'' 
which will reduce or eliminate the period for which a group health 
plan can limit or exclude coverage of a preexisting condition of 
such participant or beneficiary.
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B. Circumstances Suggesting a Need for Regulatory Guidance

    As discussed herein, the COBRA provisions of ERISA impose 
obligations on employers, plan administrators, plan participants, and 
qualified beneficiaries regarding disclosure of information through 
notices and the ensuing right to elect continuation coverage. Section 
606 of ERISA provides a statutory framework within which these notices 
have significance as a means of providing affected parties with 
adequate notice at appropriate times of the rights granted under the 
statutory scheme. The delivery of notices also delineates limited time 
periods during which such rights must be exercised. Failure to comply 
with any of the notice requirements carries consequences for the party 
failing to provide notice, whether in the form of potential liability 
to provide coverage under the group health plan, sanctions imposed on 
employers or plan administrators, or a loss of coverage or an 
opportunity to elect continuation coverage on the part of qualified 
beneficiaries. The Department believes the following factors suggest a 
possible need for guidance concerning the COBRA notice provisions.
    First, a significant amount of the relevant litigation that has 
occurred since enactment of the COBRA provisions has involved failures 
or alleged failures to comply with the notice 
requirements.22 Second, many of the numerous requests that 
the Department has received from participants for assistance with the 
COBRA provisions have involved

[[Page 49897]]

allegations that employers' and plan administrators' notices have been 
not forthcoming or have been inadequate or confusing. Third, the COBRA 
provisions have been amended several times since publication of TR 86-
2, reducing its value as a model for good faith compliance. Fourth, the 
obligations imposed on group health plans by HIPAA and other 
legislation with respect to coordination of continuation coverage with 
other statutory rights have further increased the importance of proper 
implementation of the COBRA notice provisions. For these reasons, the 
Department believes that regulatory guidance clarifying the notice 
requirements may aid employers and plan administrators in complying 
with the COBRA notice requirements and may also provide participants 
and beneficiaries with a better understanding of their rights and 
obligations.
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    \22\ See, e.g., Underwood v. Fluor Daniel, Inc., No. 95-3036 
(4th Cir. 1997); Stanton v. Larry Fowler Trucking, Inc., 52 F.3d 723 
(8th Cir. 1995); Bixler v. Central Pennsylvania Teamsters Health & 
Welfare Fund, 12 F.3d 1292 (3rd Cir. 1993); Meadows v. Cagle's, 
Inc., 954 F.2d 686 (11th Cir. 1992); Kidder v. H&B Marine, Inc., 932 
F.2d 347 (5th Cir. 1991); Truesdale v. Pacific Holding Co./Hay Adams 
Division, 778 F. Supp. 77 (D.D.C. 1991).
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C. Issues on Which Information is Requested

    To assist the Department in assessing the need for guidance 
concerning the COBRA notice requirements, the Department invites 
interested parties to submit information relating to whether the 
Department should promulgate standards with regard to the content of 
the notices, the delivery and timing of these notices, and the 
consequences of either satisfying or failing to satisfy the notice 
requirements, and what such standards should be.
    In order to assist interested parties in responding, this notice 
contains a list of specific questions the answers to which the 
Department believes would be helpful in considering guidance in this 
area. It is requested that the public, in responding to specific 
questions presented by this Notice, refer to the question number listed 
in this Notice. Reference to the appropriate question number will aid 
the Department in analyzing submissions.
    The questions provided herein may not address all issues relevant 
to the development of the regulation. Accordingly, the Department 
further invites interested parties to submit additional comments on any 
other matters that they believe may be pertinent to the Department's 
consideration of guidance on this subject.
    Specific areas with respect to which the Department is interested 
include:

I. Initial Notice to Covered Employees and Spouses

    A. What information should be required to be included in the 
initial notice to covered employees and spouses?
    B. Would ``model'' language with respect to any of the required 
information be helpful?
    C. Should the Department provide an updated, revised ``model'' 
notice to replace that published in TR 86-2?
    D. In TR 86-2, the Department indicated that furnishing one initial 
notice to participants and spouses residing at the same address would 
be adequate. Should the Department continue to view this method of 
furnishing information to a spouse residing with a participant as 
sufficient?

II. Notice of Qualifying Event

    A. What information should be required to be included in the notice 
of qualifying event?
    B. In what form should this notice be required to be provided?
    C. Should the required information or the required form in which 
this information is conveyed vary depending on whether the notice is 
being given by the employer or by the covered employee (or qualified 
beneficiary)?
    D. Should the Department provide rules under which notice of a 
qualifying event is deemed to have been given when an employer is also 
the plan administrator of a group health plan, or should some formality 
of communications be required under such circumstances?
    E. Should the Department provide a ``model'' notice of qualifying 
event for use by employers and qualified beneficiaries?
    F. What, if any, problems have arisen in connection with compliance 
with this notice requirement?

III. Notice of Right to Elect Continuation Coverage

    Section 605 of the COBRA provisions provides that the election 
period during which a qualified beneficiary may elect continuation 
coverage must extend for at least sixty days, measured from the later 
of the date on which coverage otherwise would terminate or the date on 
which the notice of the right to elect continuation coverage is sent to 
the qualified beneficiary. The plan administrator's provision of the 
notice of right to elect continuation coverage, therefore, initiates 
the qualified beneficiary's right to elect and begins the running of 
the period of that right. The Department, accordingly, believes that 
the notice of right to elect continuation coverage must provide the 
qualified beneficiary with the information relevant to the exercise of 
the right. The following questions should be considered in light of 
this concern.
    A. What information should be required to be included in the notice 
of the right to elect continuation coverage?
    B. For example, should the notice be required to include:
    1. A description of the continuation coverage that the qualified 
beneficiary is entitled to elect;
    2. A description of the period over which such continuation 
coverage would be provided;
    3. A description of the premiums that the qualified beneficiary 
would be required to pay, including the manner in which such premiums 
were calculated, the dates on which payment would be due, the address 
to which payment should be sent, and the consequences of nonpayment;
    4. An explanation of the election process, including the period of 
time within which an election can be made, the consequences of electing 
or failing to elect continuation coverage, and the possibility of 
rescinding an election; or
    5. An explanation of any rights that might arise to cause an 
extension of the maximum period of continuation coverage (such as with 
respect to any qualified beneficiary who is determined to be disabled 
within the first 60 days of continuation coverage) and the notice 
obligations imposed on any such qualified beneficiary?
    C. Is there other information that should be required to be 
included in the notice of right to elect continuation coverage, such as 
the significance of electing continuation coverage for rights granted 
by HIPAA or the FMLA?
    D. Should significant information relevant to the decision whether 
to elect continuation coverage be required to be provided in the 
notice, or should inclusion of the information in the summary plan 
description (SPD), with a reference in the notice to the relevant 
information in the SPD, be deemed adequate?
    E. Should the Department provide a ``model'' notice of right to 
elect continuation coverage or ``model'' language on selected subjects 
for use in the notice?

IV. Social Security Disability Notice

    A. What, if any, problems have covered employees, qualified 
beneficiaries, employers, or plan administrators encountered in 
obtaining the 11-month extension or in administering the provisions 
granting the right to the 11-month extension, particularly with respect 
to satisfying the notice requirements imposed by sections 602(2)(v) and 
606(3)?

[[Page 49898]]

V. Other Issues

    A. What are the practical and appropriate means (e.g., written 
notices, electronic media, and/or oral interviews) through which the 
COBRA notice requirements should be satisfied?
    B. What kinds of procedures should or may plan administrators 
establish to permit qualified beneficiaries to establish their 
entitlement to extensions of the period of continuation coverage, such 
as through the occurrence of second qualifying events or as a result of 
disability determinations?
    C. What administrative procedures have plan administrators adopted 
to provide additional notices or information not expressly mandated in 
the COBRA provisions, but necessary or useful in the orderly 
implementation of continuation coverage requirements, such as to 
explain changes in the coverage provided under the group health plan 
(including changes in the issuer or service provider), to make 
available open enrollment or election periods provided under the plan, 
to enforce due dates for continuation coverage premiums, or to 
implement the termination of continuation coverage and make available 
any conversion options provided under the plan?
    All submitted comments will be made part of the record of the 
preceding referred to herein and will be available for public 
inspection.

    Signed at Washington, DC, this 17th day of September, 1997.
Olena Berg,
Assistant Secretary for Pension and Welfare Benefits, U.S. Department 
of Labor.
[FR Doc. 97-25240 Filed 9-22-97; 8:45 am]
BILLING CODE 4510-29-P