Final Cobra Regulations Establish Compliance Rules For Employers

On May 26, 2004, the U.S. Department of Labor (DOL) issued final regulations that clarify and expand group health plans’ obligations to provide notices of COBRA continuation coverage rights to qualified beneficiaries. For the most part, the final regulations adopt the rules spelled out by the proposed regulations issued one year earlier; however, the DOL did make some significant changes from the earlier proposal.

Failure to comply with the new regulations could lead to significant costs, including penalties under ERISA, unanticipated medical claims and even attorney’s fees if the issue is litigated. Moreover, now that final regulations are issued, it can be expected that the DOL will increase audit activity on COBRA notice and election issues. Therefore, employers and plan administrators need to act now to bring group health plans into compliance.