COBRA compliance can be tricky for both COBRA participants and COBRA administrators. Sending the wrong COBRA notices or even the right notices at the wrong time can have costly consequences as the employer in our tale discovered.

HR specialist, Nancy Ross thought she knew everything about COBRA notices … until an employee (Sam) and her domestic partner split up. Typically, only spouses and dependent children are eligible for COBRA benefits. In fact, the federal Defense of Marriage Act excludes anyone except an opposite-sex spouse from receiving benefits. However, the company health plan was self-insured, and as such, the company had decided on its own, years ago to expand the availability of health and COBRA benefits to domestic partners – beyond the benefits required by law.

When the employee, Sam, and her partner split, there was no formal divorce. Although Sam terminated her partner’s benefits and casually mentioned that they were no longer together, Nancy failed to realize that this was a qualifying event.

So, a year later, when the partner claimed that he had not been provided with the proper COBRA Election Notice, the company had very little defense. Nancy had been told (ever so casually) and had indeed failed to send a COBRA Election Notice. For that matter, Nancy also did not have any documentation that she had provided the Summary Plan Description or the General COBRA Notice to the partner.

And that wasn't the only problem. Upon further investigation, Nancy soon discovered that the Summary Plan Description on file did not specify that non-spouses should have COBRA continuation rights, further clouding the issue.

What can you learn from Nancy Ross’ mistakes?

1.  Make sure that the Summary Plan Description (SPD) is accurate and up to date.
2. Document that the SPD and the General COBRA Notice has been sent to the employee and his/her spouse or partner (if the plan covers partners). This is particularly important if the two maintain separate addresses.
3. When employees terminate health coverage for a spouse or domestic partner, remind them of their duty to provide the employer with notice of any divorce or legal separation.
4. Send COBRA Election Notices as required!
5. If the company decides to provide broader benefits than the law requires, and to extend COBRA continuation benefits to non-spouses, make sure the carrier for each plan knows and agrees.

A fourth notice to keep in mind …

There’s a fourth COBRA notice that would come into play for any employer that follows the federal law, and does not provide COBRA benefits to non-spouses. That is the Notice of Unavailability of Continuation Coverage.

If Nancy’s company did not provide coverage for non-spouses, and if she became aware that Sam and her partner were splitting, Nancy would be well-advised to send the partner a Notice of Unavailability informing him of the reasons that COBRA continuation benefits are not available to him.

As legal and health insurance landscapes become more complicated, so do COBRA Notices and employers’ obligations to provide them. This is yet another reason that COBRA outsourcing is gaining popularity with employers around the country!