COBRA

Rule:

• Under federal law, employers are required to allow "qualified beneficiaries" to choose to continue coverage of group health plans when the beneficiary might otherwise lose coverage due to the occurrence of a qualifying event.
   
• Coverage must remain identical to that of the employees who have not suffered the qualifying event.  However, the employer is not required to pay for the beneficiary's plan after the qualifying event.  The beneficiary must pay the applicable premium.
   
• Plan advisors must inform plan beneficiaries of their right to continued coverage at the time the plan coverage starts and within 14 days of the qualifying event.
   
• Beneficiaries must be given 60 days to choose to continue coverage.
   
• Coverage dates from the qualifying event and generally lasts up to 36 months unless the qualifying event is termination or reduced hours, in which case the coverage generally only lasts 18 months.
   
• Coverage ends when the beneficiary is covered under any other group health plan, the beneficiary fails to pay the applicable premium, the beneficiary becomes eligible for Social Security benefits, or the employer terminates the group health plan entirely.

Definitions:

• A qualified beneficiary is either a covered employee or the employee's spouse or dependent, so long as the spouse or dependent was covered prior to the qualifying event.
   
• Qualifying events include:
   
  1. Death of the covered employee.
      
  2. Termination of employment (so long as it is not due to gross misconduct).
      
  3. A reduction in hours.
      
  4. The spouses' divorce or legal separation from the covered employee.

Filing Requirements and Limitations:

• Actions to enforce COBRA requirements may be brought under ERISA's civil enforcement provisions, which have no statute of limitations.  Federal courts generally look to the state for similar causes of actions and apply that statute of limitations.
   
• COBRA only applies to companies with 20 or more employees.

Remedies and Damages:

• Injunctive relief, which includes the following:
   
  1. Recovering benefits which are due and enforcing rights under the plan.
      
  2. Getting access to plan documents for which access had previously been requested in writing.  If the plan administrator fails to honor the request within 30 days, the court may find the administrator personally liable for up to $100 a day, unless failure to comply is due to circumstances beyond the administrator's control.
      
  3. Clarifying rights to future benefits.
      
  4. Ordering the employer to cease any action that violates the terms of the plan.
      
  5. Ordering the employer to cease any action that violates provisions of ERISA, such as reporting and disclosure requirements, participation, vesting and funding.
      
  6. Ordering the employer to provide a statement of vested benefits upon termination.
      
• Getting appropriate relief for breach of fiduciary duty.
   
• Reasonable attorney's fees may be awarded to the prevailing, or winning, party.
   
• Charging the employer who fails to comply with COBRA up to $100 per day for each affected beneficiary.