Notice Requirements of the Health Care Continuation Coverage Provisions

Wednesday,
May 26, 2004

Part V

Department of Labor
Employee Benefits Security
Administration
29 CFR Part 2590
Health Care Continuation Coverage; Final
Rule

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Federal Register / Vol. 69, No. 102 / Wednesday, May 26, 2004 / Rules and Regulations

DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
RIN 1210–AA60

Health Care Continuation Coverage
Employee Benefits Security
Administration, Labor.
ACTION: Final rules.
AGENCY:

SUMMARY: This document contains final
rules implementing the notice
requirements of the health care
continuation coverage (COBRA)
provisions of part 6 of title I of the
Employee Retirement Income Security
Act of 1974 (ERISA or the Act). The
continuation coverage provisions
generally require group health plans to
provide participants and beneficiaries
who under certain circumstances would
lose coverage (qualified beneficiaries)
the opportunity to elect to continue
coverage under the plan at group rates
for a limited period of time.
The final rules set minimum
standards for the timing and content of
the notices required under the
continuation coverage provisions and
establish standards for administering
the notice process. These rules affect
administrators of group health plans,
participants and beneficiaries (including
qualified beneficiaries) of group health
plans, and the sponsors and fiduciaries
of such plans. These rules also provide
model notices for use by administrators
of single-employer group health plans to
satisfy their obligation to provide
general notices and election notices.
DATES: Effective date: These regulations
are effective July 26, 2004.
Applicability date: These regulations
apply to notice obligations arising under
the COBRA provisions of part 6 of title
I of ERISA on or after the first day of the
first plan year beginning on or after the
date that is six months after May 26,
2004.

Lisa
M. Alexander or Suzanne M. Adelman,
Office of Regulations and
Interpretations, Employee Benefits
Security Administration, (202) 693–
8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:

A. Background
The continuation coverage provisions,
sections 601 through 608 of title I of
ERISA, were enacted as part of the
Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA),
which also promulgated parallel

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provisions that became part of the
Internal Revenue Code (Code) and the
Public Health ServiceAct (PHSA). 1 See
Code section 4980B; PHSA, 42 U.S.C.
300bb–1 et seq. These provisions are
commonly referred to as the COBRA
provisions, and the continuation
coverage that they mandate is
commonly referred to as COBRA
coverage. The COBRA provisions of title
I of ERISA generally require that ‘‘any
group health plan’’ 2 offer ‘‘qualified
beneficiaries’’ the opportunity to elect
‘‘continuation coverage’’ following
certain events that would otherwise
result in the loss of coverage
(‘‘qualifying events’’).3 Continuation
coverage is a temporary extension of the
qualified beneficiary’s previous group
health coverage. The right to elect
continuation coverage allows
individuals to maintain group health
coverage under adverse circumstances
and to bridge gaps in health coverage
that otherwise could limit their access
to health care.
COBRA, as enacted, provides that the
Secretary of Labor (the Secretary) has
the authority under section 608 of
ERISA to carry out the provisions of part
6 of title I of ERISA. The Conference
Report that accompanied COBRA
divided interpretive authority over the
COBRA provisions between the
Secretary and the Secretary of the
Treasury (the Treasury) by providing
that the Secretary has the authority to
issue regulations implementing the
1 The Code and PHSA COBRA provisions,
although very similar in other ways, are not
identical to the COBRA provisions in title I of
ERISA in their scope of application. The PHSA
provisions apply only to State and local
governmental plans, and the Code provisions grant
COBRA rights to individuals who would not be
considered participants or beneficiaries under
ERISA. See PHSA, 42 U.S.C. 300bb–8; Code section
5000(b)(1).
2 A group health plan is not subject to the COBRA
provisions for any calendar year if all employers
maintaining such plan normally employed fewer
than 20 employees on a typical business day during
the preceding calendar year. See ERISA section
601(b).
3 Each of the quoted terms is specifically defined
in the COBRA provisions. In particular, the term
‘‘group health plan’’ is defined in section 607(1) of
the Act to mean an employee welfare benefit plan
as defined in section 3(1) of the Act that provides
medical care (as defined in section 213(d) of the
Code) to participants or beneficiaries directly or
through insurance, reimbursement, or otherwise.
The Department notes that employee welfare
benefit plans under ERISA include, inter alia, plans
sponsored by unions for their members as well as
plans sponsored by employers for their employees.
Such union-sponsored plans would not involve
employers in any sponsorship capacity, nor would
they necessarily cover individuals all of whom are
employees. Although the proposed regulations use
the terms ‘‘employer’’ and ‘‘employee,’’ as do the
COBRA provisions, in assigning duties, they are
intended to apply to all group health plans, as
defined in section 607(1) of the Act, subject to
COBRA.

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notice and disclosure requirements of
COBRA, while the Treasury is
authorized to issue regulations defining
the required continuation coverage.4
Under its authority to interpret the
COBRA provisions, the Treasury has
issued final regulations that provide
rules for determining which plans are
subject to the COBRA provisions, who
is or can become a qualified beneficiary,
which events constitute qualifying
events, what COBRA obligations exist in
the case of mergers and acquisitions,
and the nature of the continuation
coverage that must be offered. See Treas.
Reg. §§ 54.4980B–1 through 54.4980B–
10.
On May 28, 2003, the Department of
Labor (the Department) published in the
Federal Register (68 FR 31832)
proposed regulations governing the
timing, content, and administration of
the notice obligations arising under
sections 601 through 608 of ERISA.5 In
response to the proposed COBRA notice
regulations, the Department received 26
public comments from an array of
interested parties, including
organizations representing employers,
group health plans, plan administrators,
persons specializing in COBRA
administration, and participants and
beneficiaries.
The Department has made a number
of changes to the regulations and model
notices in response to the public
comments received on the proposals.
The following provides an overview of
the final rules, public comments, and
changes from the proposed regulations.
These final rules implementing the
notice requirements of the COBRA
provisions of part 6 of title I of ERISA
also apply for purposes of the COBRA
provisions of section 4980B of the
Code.6
4 H.R. Conf. Rep. No. 99–453 at 562–63 (1985).
The Conference Report further indicated 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
Secretary and the Treasury. Id. at 563.
5 Prior to the development of proposed rules, the
Department published a Request for Information
(RFI) to assess public views on the advisability of
developing regulations on the COBRA notice
provisions. See 62 FR 49894 (Sept. 23, 1997). The
Department received 15 comments, all of which
were taken into account in developing the proposed
rules.
6 As noted in footnote 1, above, certain COBRA
provisions (such as the definitions of group health
plan, employee and employer) are not identical in
the Code and title I of ERISA. The Treasury has
reviewed these rules and concurs that, in those
cases in which the statutory language is not
identical, §§ 2590.606–1 through 2590.606–4 would
nonetheless apply to the COBRA provisions of
§ 4980B of the Code, except to the extent that such
regulations are inconsistent with the statutory
language of the Code.

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B. Overview of Final Regulations
The final COBRA notice rules, like the
proposals, consist of four separate
regulations. Section 2590.606–1 covers
the general notice requirement. In an
appendix to § 2590.606–1, a model
general notice is provided to facilitate
compliance with the general notice
requirements. Section 2590.606–2
creates rules for employer-provided
notices of the occurrence of a qualifying
event. Section 2590.606–3 addresses the
responsibilities of qualified
beneficiaries to provide notice of a
qualifying event or a disability. Section
2590.606–4 deals with the election
notice and other notices that plan
administrators must provide. In an
appendix to § 2590.606–4, a model
election notice is provided to facilitate
compliance with the election notice
requirements.
The model notices provided in the
appendices to §§ 2590.606–1 and
2590.606–4 are intended to be used by
single-employer plans. Other types of
plans, such as multiemployer plans and
plans sponsored by unions for their
members, would have to modify the
model notices to reflect the special rules
or practices that apply in the case of
such plans.7 The Department further
notes that the use of the model notices
is not required. The model notices
included with these regulations are
provided solely for the purpose of
facilitating compliance with the
applicable notice requirements. The
furnishing of appropriately and
accurately completed model notices,
however, will be considered by the
Department to constitute compliance
with the requirements of the applicable
notice regulation.
Section 2590.606–1 General Notice
Section 606(a)(1) of ERISA requires
group health plans to provide written
notice of COBRA rights to each covered
employee and spouse (if any) ‘‘at the
time of commencement of coverage’’
under the plan. Section 2590.606–1
establishes the time frames within
which this general notice must be
provided and describes the specific
information that the general notice must
contain.
The final regulation retains the same
general structure of the proposal. As
discussed below, however, some
changes to both the regulation and the
accompanying model general notice
have been made in response to public
comments.
Paragraph (b) of the final regulation
addresses the timing requirements
7 The model election notice is not designed to be
used when bankruptcy is the qualifying event.

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applicable to the general notice
requirement of section 606(a)(1) of the
Act. Similar to the proposal, paragraph
(b) establishes a 90-day period for
furnishing the general notice. Generally,
the notice must be furnished to each
covered employee and to the employee’s
spouse (if covered under the plan) not
later than the earlier of: (1) either 90
days from the date on which the
covered employee or spouse first
becomes covered under the plan or, if
later, the date on which the plan first
becomes subject to the continuation
coverage requirements; or (2) the date
on which the administrator is required
to furnish an election notice to the
employee or to his or her spouse or
dependent.
While a few commenters expressed
concern about the timing of the general
notice, the majority of commenters
supported the provision as better
reflecting current practice and fostering
efficiency through its possible
combination with the summary plan
description (SPD). The Department
continues to believe that the timing
requirements of the regulation protect
covered employees and their spouses
during the first 90 days of coverage by
ensuring that they timely receive all the
information they need to understand
their rights. For this reason, the
Department has retained the timing
provisions as proposed. In response to
several comments requesting
clarification that the date for the
furnishing of the general notice under
the regulation is the ‘‘commencement of
coverage’’ date for purposes of section
606(a)(1) of the Act, the Department has
added a new paragraph (§ 2590.606–
1(b)(2)), providing that a notice
furnished in accordance with the timing
requirement of the regulation is deemed
to be provided at the time of
commencement of coverage under the
plan.
A number of commenters questioned
the need to furnish a general notice in
addition to an election notice when the
election notice must be given to an
individual within the initial 90-day
period of coverage. Having reviewed the
information required to be contained in
the general notice described in
§ 2590.606–1(c), and the election notice
described in § 2590.606–4(b)(4), the
Department believes that, given the
comprehensive nature of the
information in the election notice and
its importance to a qualified beneficiary,
the furnishing of a general notice
simultaneously with an election notice
during the initial 90-day period would
be duplicative, if not confusing or
distracting. To address this issue, a new
paragraph (§ 2590.606–1(b)(3)) has been

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added to the final regulation providing
that, where an individual is required to
be furnished an election notice within
the 90-day period for furnishing general
notices, the plan administrator may
satisfy its general notice obligation by
furnishing an election notice in
accordance with the final regulation
(§ 2590.606–4(b)).
Paragraph (c) of the regulation sets
forth the required minimum content of
a general notice. These content
requirements cover basic information
regarding COBRA and the rights and
responsibilities of qualified
beneficiaries that a participant or
beneficiary would need to know before
the occurrence of a qualifying event in
order to be able to protect his or her
COBRA rights.
Several commenters argued that the
proposed regulation and model notice
should be modified to eliminate or
reduce plan-specific information. These
commenters generally argued that the
use of ‘‘generic’’ (non-plan specific)
general notices could result in costsavings since the same notice could be
used without customization by COBRA
administrators for multiple plans. While
the Department appreciates the
arguments in favor of a ‘‘generic’’ notice,
the Department believes that covered
employees and spouses need to know
the name of the plan and a plan contact
for further continuation coverage and
plan information. The Department notes
that Technical Release 86–2 (June 26,
1986), which provided a model general
notice for use shortly after COBRA was
enacted, required inclusion of planspecific information for the same
reasons. The Department, therefore, has
retained these requirements in the
regulation. However, in an effort to
minimize the difficulty of customizing
the general notice, the Department has
modified the model general notice to
allow placement of plan-specific
identification information at the end of
the notice. The Department also has
modified the model general notice to
eliminate identification of both the plan
administrator and the COBRA
administrator. As modified, the model
general notice requires only the name,
address, and phone number of a party
or parties who will provide information
about the plan and COBRA upon
request.
A number of commenters argued that
the general notice should not be
required to address the responsibilities
of qualified beneficiaries to provide
notice of second qualifying events,
noting that such information is more
appropriate for the SPD and election
notices. The Department agrees with the
commenters that the general notice

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should be as informative as possible
without being unnecessarily complex.
For this reason, the Department has
modified paragraph (c)(4) to eliminate
the proposed requirement that the
notice describe how qualified
beneficiaries who are receiving
continuation coverage must provide
notice of a second qualifying event. In
addition to being included in plan
SPDs, this information is included as
part of the election notice required
under § 2590.606–4 and, therefore, will
be furnished when it will be more
relevant to the qualified beneficiary.
Commenters also argued that, because
different qualifying events under a
single plan may produce different
COBRA coverage start dates (since the
plan may choose to begin COBRA
coverage on either the date of the
qualifying event or the date of loss of
coverage), requiring that specific
information to be described in the
general notice makes the notice
unnecessarily complicated, particularly
since this information will be available
in SPDs. The commenters assumed the
regulation required such detail because
the proposed model general notice
provided for inclusion of this
information. The Department agrees
with the commenters that such
information should not be required as
part of the general notice if it will make
the notice unnecessarily complicated.
While no changes are required to the
regulation, to avoid any confusion, the
Department has modified the model
general notice to eliminate references to
COBRA coverage beginning dates. The
Department notes, however, that
nothing in the regulation or the model
general notice precludes a plan
administrator from including such
information in a plan’s general notice.
A few commenters expressed concern
that the proposal required the general
notice to include a statement that more
complete information about
continuation coverage and other rights
under the plan is available from the
plan administrator and the plan’s SPD.
Because covered employees and spouses
may need additional information about
their rights under their plan, the
Department believes that they should be
reminded that there are sources for that
information, namely the plan
administrator and the plan’s SPD.
Therefore, this provision is retained in
the final regulation.
Paragraph (d) permits delivery of a
single notice addressed to a covered
employee and the covered employee’s
spouse at their joint residence, provided
the plan’s latest information indicates
that both reside at that address. A single
notice would not be permitted,

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however, if a spouse’s coverage under
the plan begins at a different time from
the covered employee’s coverage, unless
the spouse’s coverage begins before the
date on which the notice must be
provided to the covered employee, and
a single notice is then timely sent to
their joint address. In response to one
commenter’s request, paragraph (d) has
been revised to clarify that there is no
requirement to furnish a general notice
to dependent children, even if the
general notice requirement is triggered
early by the occurrence of a qualifying
event involving such an individual.
As indicated in the preamble to the
proposal, in-hand furnishing of the
general notice at the workplace to a
covered employee is deemed to be
adequate delivery to the employee,
although such delivery to the employee
would not constitute delivery to the
spouse. Except for minor editorial
changes intended to make the provision
more clear, this paragraph is being
retained as proposed.
Paragraph (e) of the final regulation
permits plans to satisfy the general
notice requirement by including the
information described in paragraphs
(c)(1), (2), (3), (4), and (5) in the SPD of
the plan and providing the SPD at a
time that complies with the timing
requirements for the general notice.
Some commenters argued that, given the
importance of the information it
contains, the general notice should be
required to be furnished as a standalone notice, as well as being included
in the SPD. The Department continues
to believe that many, and perhaps most,
plans would prefer to take advantage of
the reduced cost and added efficiency of
providing a single disclosure document
that satisfies both the general notice
requirement and the SPD requirement.
Moreover, the Department believes that
participants and beneficiaries are more
likely to retain and have ready access to
their SPD than a general notice
furnished separate and apart from their
SPD. The Department, therefore, has
retained this provision without change.
The Department emphasizes, however,
that retention of this provision is not
intended in any way to limit a plan’s
flexibility to provide other information
in other forms to its employees and the
spouses of its employees.
As noted in the proposal, if a plan
chooses to satisfy its SPD and general
notice obligations by furnishing a single
document, the plan must ensure that the
document satisfies both the general
notice content requirements and the
SPD content requirements.8
SPD content regulation, § 2520.102–3,
specifies other information, in addition to

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Paragraph (f) provides that delivery of
the general notice must be made in
accordance with the standards of 29
CFR 2520.104b-1, including the
standards for use of electronic media.
There were no comments suggesting
changes to this provision. Accordingly,
the provision is being adopted without
change. A discussion of general issues
relating to the furnishing of notices is
contained in section C, entitled
‘‘Miscellaneous.’’
The model general notice appended to
§ 2590.606–1 has been revised to reflect
the changes discussed above. The
Department also has made a number of
editorial changes in response to
suggestions and recommendations to
improve the clarity of the model general
notice.
Section 2590.606–2
of Qualifying Event

Employer’s Notice

Section 606(a)(2) of ERISA requires an
employer to provide notice to the plan
administrator of a qualifying event that
is either the employee’s termination of
employment or reduction in hours of
employment, the employee’s death, the
employee’s becoming entitled to
Medicare, or the commencement of a
proceeding in bankruptcy with respect
to the employer. Regulation § 2590.606–
2 addresses this notice obligation of
employers.
Paragraph (b) of the regulation
provides that an employer shall notify
the plan administrator of a qualifying
event no later than 30 days after the date
of the qualifying event. However,
paragraph (b) further provides that, for
any plan under which continuation
coverage begins, pursuant to section
607(5) of the Act, with the date of loss
of coverage, the 30-day period for
providing the notice of qualifying event
must also begin with the date of loss of
coverage, rather than the date of the
qualifying event. Paragraphs (b) and (d)
also recognize that multiemployer plans
may have different notice periods, as
permitted under sections 606(a)(2) and
606(b).
Paragraph (c) of the regulation
requires that an employer provide the
plan administrator sufficient
information to enable the administrator
to determine the identity of the plan, the
covered employee, the qualifying event,
and the date of the qualifying event.
The comments received by the
Department on this regulation
supported the approach taken in the
proposal. The Department, therefore, is
description of COBRA rights, that must be included
in an SPD for a group health plan. See, e.g.,
§ 2520.102–3(j), (l), (s).

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adopting this section without
modification.
Section 2590.606–3 Qualified
Beneficiaries’ Notices
Under section 606(a)(3) of the Act,
each covered employee or qualified
beneficiary is responsible for notifying
the plan administrator of a qualifying
event that is either the divorce or legal
separation of the employee from his or
her spouse or a child’s becoming no
longer eligible to be covered as a
dependent under the plan. Regulation
§ 2590.606–3 provides guidance with
respect to this notice obligation and
other notice obligations of qualified
beneficiaries, such as the notice of
disability or second qualifying event.
Except as noted below, the final
regulation follows the framework of the
proposal.
Paragraph (a) describes the notices
that covered employees and qualified
beneficiaries may be required to provide
to the administrator, which include
notices of the occurrence of a qualifying
event that is a divorce, legal separation,
or a child’s ceasing to be a dependent
under the plan; the occurrence of a
second qualifying event; a
determination of disability by the Social
Security Administration; and a
determination by the Social Security
Administration that a qualified
beneficiary is no longer disabled.
Paragraph (b) of the final regulation,
like the proposal, requires plans to
establish reasonable procedures for the
furnishing of these notices and sets
general standards for what will be
considered reasonable.9 Under this
provision, a plan’s procedures generally
will be considered reasonable if they are
described in the plan’s SPD, specify
who is designated to receive notices,
and specify the means qualified
beneficiaries must use for giving notice
and the required content of the notice.
Paragraph (b) further provides that, if a
plan does not have reasonable
procedures for qualified beneficiaries’
notices, notice will be deemed to have
been provided when a written or oral
communication identifying a specific
event is communicated in a manner
reasonably calculated to bring the
information to parties that would
customarily be considered to be
responsible for the plan. The proposed
regulation specified that, in the case of
a single-employer plan that failed to
9 ERISA

does not mandate that qualified
beneficiaries provide notices of qualifying event or
disability. A qualified beneficiary may not wish to
elect or extend continuation coverage and may
therefore decide to forgo providing the notice of
qualifying event without violating the COBRA
provisions.

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adopt reasonable procedures, notice
would be deemed provided if
communicated either to the person or
organizational unit that has customarily
handled employee benefit matters of the
employer or to any officer of the
employer.
While some commenters expressed
concern that requiring plans to adopt
qualified beneficiary notice procedures
may force them into creating formal,
inflexible procedures that will harm
participants, most commenters
recognized and supported the
importance of establishing notice
processes that are clearly communicated
to the plan’s participants and
beneficiaries. With regard to plans that
fail to adopt reasonable procedures,
some commenters suggested that notice
should also be deemed to have been
provided if given to the managers and
supervisors of the employee. Other
commenters argued that recognizing
oral notifications and notifications given
to the officers of an employer would
cause confusion and uncertainty as to
when and if notice was provided. In
response to these comments, the
Department has decided to retain the
default standards recognizing oral
notifications, where a plan fails to adopt
reasonable notification procedures. To
restrict the default notice standards to
recognize only written communications
would allow plans that fail to adopt
express notice procedures to rely on a
de facto standard requiring written
notice, which in the Department’s view
would be unfair to participants and
beneficiaries. However, the Department
recognizes that the breadth of the
approach of the proposed regulation in
this regard may have the potential for
uncertainty and confusion. Since it is
reasonable to expect an employee or
qualified beneficiary, even in the
absence of reasonable plan procedures,
to give notice of an event to a party that
customarily handles employee benefit
matters, the Department has eliminated
the reference, at § 2590.606–3(b)(4)(i), to
‘‘any officer of the employer.’’
Like the proposal, paragraph (b)(3) of
§ 2590.606–3 provides that plans may
require qualified beneficiaries to
provide specific information via a
specific form, if the form is easily
available to qualified beneficiaries
without cost. One commenter objected
to allowing plans to require use of a
specific form for notice of qualifying
event. The Department believes that
employees and qualified beneficiaries
may, in fact, benefit from a plan’s use
of specific forms, which would remove
uncertainty about how to comply with
the plan’s requirements. The
Department, therefore, has retained this

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provision in the final regulation without
change.
Paragraph (c) provides the time limits
that may apply to qualified
beneficiaries’ notices. These limits are
minimums that may be imposed by a
plan. There is nothing in the regulation
that prevents plans from providing
longer periods for furnishing these
notices. In general, a plan must allow an
employee or qualified beneficiary at
least 60 days to provide notice of a
qualifying event that is divorce, legal
separation, a child’s ceasing to be a
dependent under the plan, or a second
qualifying event. As proposed, the
starting date for the minimum 60-day
period was based, in part, on what the
plan provided for the start of COBRA
coverage pursuant to section 607(5) of
the Act. At the suggestion of a
commenter and for purposes of
simplicity, the Department has
restructured paragraph (c)(1) of
§ 2590.606–3 to conform with Treasury
regulations by providing that the 60-day
period begins to run from the latest of:
(1) The date of the qualifying event; (2)
the date on which there is a loss of
coverage; or (3) the date on which the
qualified beneficiary is informed,
through the plan’s SPD or the general
COBRA notice, of his or her obligation
to provide notice and the procedures for
providing such notice. See Treas. Reg.
§ 54.4980B–6, Q&A–2.
One commenter questioned why the
regulation requires the furnishing of an
SPD or general COBRA notice before the
60-day period for notices of qualifying
event may begin to run against a
qualified beneficiary. Inasmuch as a
qualified beneficiary might be denied
continuation coverage because he or she
failed to furnish timely notice of a
qualifying event, the Department
believes that disclosing the notice
obligations and the procedures for
providing such notice is critical to the
exercise of statutory rights. The
framework of the final regulation, like
the proposal, is intended to ensure that
qualified beneficiaries will not be
adversely affected in efforts to exercise
their COBRA rights by a plan’s failure
to provide adequate disclosure.
Several commenters raised questions
concerning the time limits, at
§ 2590.606–3 (c)(2) of the proposed rule,
for notices of disability
determinations.10 Specifically, the
10 The COBRA provisions require group health
plans to provide certain qualified beneficiaries an
11-month disability extension of an 18-month
period of COBRA coverage (resulting in a total of
29 months of COBRA coverage), provided the
qualified beneficiary (or any other qualified
beneficiary who is a member of his or her family)

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commenters suggested that the proposal
was ambiguous with respect to
individuals who receive a disability
determination from the Social Security
Administration (SSA) at some time prior
to the occurrence of a qualifying event.
Since the proposed regulation would
permit plans to require qualified
beneficiaries to provide a disability
notice within 60 days of the later of (1)
the date of the SSA disability
determination, or (2) the date on which
the qualified beneficiary is notified of
the obligation to provide the disability
notice, the commenters requested that
the Department clarify whether and how
these rules would apply to individuals
who received an SSA disability
determination before receiving notice of
the obligation to provide the disability
notice. The commenters noted that the
Treasury regulations create a rule for
individuals who have been determined
by SSA to be disabled prior to the
occurrence of a qualifying event under
which their disability is considered to
continue to exist as of the qualifying
event, provided SSA has not issued a
subsequent determination that they are
no longer disabled. Under the Treasury
regulations, therefore, qualified
beneficiaries who have a prior SSA
disability determination are considered
to meet the statutory requirement of
being disabled ‘‘within the first 60
days’’ of COBRA coverage. See Treas.
Reg. § 54.4980B–7, Q&A–5(c).
The Department agrees with the
commenters that there is a need for
further clarification in this area.
Following a review of section 606(a)(3)
of the Act, the legislative changes to the
COBRA provisions since 1986, and the
Treasury regulations, the Department
has concluded that, for purposes of
section 606(a)(3) of the Act, an SSA
disability determination, once issued,
should be considered to remain in
continuing effect until the SSA makes a
contrary determination.11 For this
reason, the Department believes that
section 606(a)(3) is best interpreted to
permit plans to require qualified
is both determined by SSA to be disabled during
the first 60 days of COBRA coverage and also
provides notice to the plan of SSA’s disability
determination within 60 days after the date of the
determination. The notice must be provided before
the end of the first 18 months of continuation
coverage. See ERISA sections 602(2)(A); 606(a)(3).
11 Congress recognized the continuing effect of an
SSA disability determination by including in the
COBRA provisions both a provision requiring a
qualified beneficiary who provides a disability
notice to provide the plan with a subsequent notice
if the SSA determines him or her to be no longer
disabled and a provision permitting plans to
terminate the 11-month disability extension one
month after the SSA makes a determination that the
qualified beneficiary is no longer disabled. See
ERISA sections 602(2)(E); 606(a)(3).

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beneficiaries to provide a disability
notice within 60 days after the latest of:
(1) The date of the SSA disability
determination; (2) the date on which the
qualifying event occurs; (3) the date on
which the qualified beneficiary loses
coverage; or (4) the date on which the
qualified beneficiary is informed of the
obligation to provide the disability
notice. The final regulation reflects this
interpretation in § 2590.606–3(c)(2).
Under this interpretation, an individual
who previously received an SSA
disability determination and has not
received a subsequent SSA
determination that he or she is no longer
disabled would have at least 60 days
after the occurrence of a qualifying
event to provide the plan with a
disability notice in order to be entitled
to the disability extension.12 There is
nothing that precludes plans from
allowing a longer period for providing
this notice. For example, a plan may
find it administratively more convenient
to permit individuals who receive an
SSA determination prior to a qualifying
event to provide the notice of disability
within the same time period within
which the election notice is required to
be provided.
Paragraph (d) of § 2590.606–3, like the
proposal, provides that a plan may not
reject an incomplete notice as untimely
if the notice is provided within the
plan’s time limits and contains enough
information to enable the plan
administrator to identify the plan, the
covered employee and qualified
beneficiar(ies), the qualifying event or
disability determination, and the date
on which such event or determination
occurred. However, if a timely notice
fails to supply all of the information
required under the plan’s procedures,
the plan administrator can require
qualified beneficiaries to supply the
missing information. Several
commenters asked for a clarification as
to whether a plan could reject a
deficient notice if, following a request to
provide the information required by the
plan’s procedures, a covered employee
or qualified beneficiary fails to provide
the requested information. It is the view
of the Department that there is nothing
in the final regulation that would
preclude a plan, following a request for
more complete information, from
rejecting a notice when an employee or
12 The general notice requirement would also
have to have been fulfilled with respect to that
individual. Since the general notice is required to
be furnished only to the covered employee and
spouse (if also covered), the Department will
consider furnishing the general notice to either of
those two individuals adequate notice with respect
to a disabled child of the covered employee for this
purpose.

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qualified beneficiary fails to provide the
requested information within some
reasonable period of time. The
Department believes that both the plan
and the plan’s participants and
beneficiaries would benefit from a
procedure that specifically defines
when and under what circumstances,
following a request for more complete
information, a notice will be rejected
due to a failure to provide the
information a plan requires.13
In view of the comments, paragraph
(d) of the proposal is adopted without
modification. Inasmuch as no comments
were submitted on paragraphs (e)
through (g) of the proposal, those
paragraphs are also adopted as
proposed.
Section 2590.606–4 Plan
Administrator’s Notice Obligations
Section 606(a)(4) of ERISA requires a
plan administrator to notify each
qualified beneficiary who is entitled to
elect continuation coverage of his or her
COBRA rights. Section 606(c) requires a
plan administrator to provide such
notice within 14 days after the plan
administrator is notified of a qualifying
event. Regulation § 2590.606–4 provides
guidance on the requirements of
sections 606(a)(4) and 606(c). In general,
the regulation describes timing and
content requirements for election
notices, requires administrators to notify
individuals under certain circumstances
if continuation coverage is determined
not to be available, and requires plan
administrators to provide notice when
continuation coverage terminates before
the end of the maximum period for such
coverage.
Paragraph (a) of the final regulation
describes the obligation of the
administrator of a group health plan to
provide qualified beneficiaries with
notice of their right to elect continuation
coverage under the plan.
Paragraph (b) of the final regulation
addresses the specific timing and
content requirements for the election
notice.14 With regard to timing,
13 The plan’s procedures must be reasonable in all
respects, including the rules for what information
is required, how much time an individual is given
to provide the required information, and the bases
for accepting or rejecting a notice.
14 The regulation requires an administrator to
provide an election notice only when it has been
determined that a qualified beneficiary is entitled
to elect continuation coverage. In this regard, the
Department notes that it is the administrator’s
responsibility to determine whether individuals
who are named in a notice of qualifying event are
entitled to continuation coverage and that disputes
may arise over the correctness of the administrator’s
determinations. The Department further notes that
determinations regarding eligibility for COBRA
continuation coverage, like determinations
involving eligibility for coverage under a group

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paragraph (b)(1) of the final regulation
generally provides that the
administrator shall furnish an election
notice to qualified beneficiaries within
14 days after the receipt of notice of a
qualifying event.
Paragraph (b)(2) provides a special
timing rule in connection with
qualifying events for which the
employer must notify the plan, where
the employer is also the administrator of
the plan. Under the special rule, an
election notice must be furnished not
later than 44 days after the date of the
qualifying event, or, if the plan provides
that COBRA coverage starts on the date
of loss of coverage, the date the
qualified beneficiary loses coverage
under the plan. The Department has
revised the final regulation, as suggested
by one commenter, to make clear that
the 44-day rule applies only in those
cases where the employer is required to
provide notice of a qualifying event to
the plan administrator. Paragraph (b)(2)
has also been revised to reflect the
possibility that a plan may adopt a
different starting date for COBRA
coverage for different types of qualifying
events.
Paragraph (b)(3) of the final regulation
contains a special timing rule for
multiemployer plans. No comments
were received on this provision.
Accordingly, paragraph (b)(3) is adopted
without modification.
Paragraph (b)(4) of the final regulation
sets forth the content requirements for
the election notice. The Department
received several comments on this
section and the corresponding model
election notice.
Several commenters argued that the
regulation required too much
information to be included in the
election notice. In this regard,
commenters suggested elimination of
HIPAA information, information about
alternative coverage and conversion
rights, and plan contact information
because much of that information is
available in the SPD. Conversely, other
commenters argued that the election
notice did not include enough
information and suggested that the
content requirements be expanded in
various ways.
Following a careful review of these
comments, the Department has decided
to retain the requirements that HIPAA
information and plan contact
information be included in the election
notice. The Department believes it is
important that qualified beneficiaries
health plan, are not governed by ERISA’s claims
procedure regulation unless they relate to a specific
claim for benefits. See preamble to § 2560.503–1, 65
FR 70246, 70255 (Nov. 21, 2000).

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understand that election or non-election
of COBRA continuation coverage may
have significant implications for their
future exercise of HIPAA rights and
their ability to obtain health care
coverage. The Department is concerned
that the significance of the HIPAA
information may be lost if the election
notice merely refers to the SPD for more
information about plan rights. Similarly,
the Department believes that qualified
beneficiaries should have ready access
to additional information about COBRA
and their rights under the plan. Because
all qualified beneficiaries may not have
the plan’s SPD, requiring that specific
contact information be included in the
election notice is the best way to ensure
that all qualified beneficiaries have
access to the available information.
The Department is persuaded,
however, that qualified beneficiaries
would not be adversely affected by
elimination of the requirement that
information concerning alternative
coverage and conversion rights be
included in the election notice.
Accordingly, the final regulation does
not include those items in the list of
required content for the election notice.
In making these changes, the
Department notes that information on
these subjects is likely to be provided by
the plan in some other form, either in
connection with offering the individual
a choice between COBRA coverage and
the plan’s alternative coverage options,
or at the time that COBRA continuation
coverage ends.15
Some commenters requested that the
regulation and model election notice be
modified to clarify that the election
notice need not identify by name each
qualified beneficiary entitled to elect
continuation coverage. In response to
this comment, paragraph (b)(4)(iii) has
been revised to make clear that
identification of qualified beneficiaries
may be accomplished either by
reference to their status (e.g., employee,
spouse, dependent child covered under
the plan prior to the qualifying event) or
by name. The Department intends that
identification by status must be
sufficiently detailed to permit the
affected individuals to determine
whether they are qualified beneficiaries.
The model election notice has been
revised accordingly.

As proposed, the model election
notice included an optional paragraph
describing the 65% health coverage tax
credit (HCTC) created by the Trade Act
of 2002 (the Trade Act) that may be used
if an administrator believes employees
might be eligible for trade adjustment
assistance (TAA) and therefore eligible
for the HCTC.16 Some commenters
suggested that Trade Act model
language be expanded to refer not only
to individuals potentially eligible for the
HCTC because of eligibility for TAA
(TAA-eligibles) but also to individuals
potentially eligible for the HCTC
because they may be receiving payments
from the Pension Benefit Guaranty
Corporation (PBGC-eligibles). Other
commenters requested that the Trade
Act paragraph be expanded to include
additional information on how the new
second COBRA election period created
by the Trade Act relates to preexisting
condition exclusion periods under
HIPAA and how to become certified for
TAA. Other commenters requested that
the Department make clear that the
election notice is not required to contain
any Trade Act information.
As with the proposed regulation, the
final regulation does not impose any
specific disclosure requirement
regarding rights and duties that may
arise as a result of the Trade Act.
Nonetheless, the Department has
included an optional Trade Act
paragraph in the model election notice
to assist administrators who wish to
notify potentially eligible individuals of
their rights under the Trade Act as they
relate to continuation coverage. In this
regard, the Department has modified the
model election notice Trade Act
language to reference both PBGCeligibles and TAA-eligibles. With regard
to including more detailed information
about Trade Act, the Department
believes that the governmental sources
identified in the model election notice
represent the best sources for detailed
information on Trade Act-related rights
and procedures.
In addition to the aforementioned
comments, the Department received a
number of comments suggesting
modifications to the model election
notice to improve its clarity and
readability. In finalizing the model
election notice, the Department has
taken into account all of these

15 The COBRA provisions separately require
plans to provide qualified beneficiaries who receive
the maximum amount of COBRA coverage available
to them the option of enrollment under a
conversion health plan if such right is otherwise
generally available under the plan. The option must
be provided during the 180-day period ending on
the expiration date of the period of COBRA
coverage. See ERISA section 602(5).

16 As noted in the preamble to the proposed
regulation, it is the view of the Department that
information on the possible availability of a new
second COBRA election period in the event of TAA
eligibility should, pursuant to § 2520.102–3(o), be
included in the summary plan description of a
group health plan as part of the discussion of the
continuation coverage provisions of the plan. See
68 FR 31831, 31833 (May 28, 2003).

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suggestions and has made a variety of
revisions intended to improve, clarify,
and simplify the model notice.
The Department received a number of
comments on the notice requirements
set forth in paragraphs (c) and (d) of
proposed § 2590.606–4. Under
paragraph (c) of the proposed
§ 2590.606–4, if a plan administrator
receives a notice of a qualifying event
pursuant to § 2590.606–3 from an
individual not eligible to receive
continuation coverage under the plan,
the administrator would be required to
provide notice to the individual(s)
explaining why he or she is not entitled
to such coverage. This unavailability
notice was to be provided within the
same time frame for providing an
election notice, i.e., within 14 days after
receipt of the notice of a qualifying
event. Under paragraph (d) of the
proposal, the administrator would be
required to provide notice to qualified
beneficiaries in the event that
continuation coverage terminates before
the end of its maximum duration. This
early termination notice was to be
provided as soon as practicable
following the administrator’s
determination that continuation
coverage shall terminate.
A number of commenters argued that
the notice provisions of paragraphs (c)
and (d) should be eliminated entirely.
These commenters generally argued that
these notices are not required by statute,
that the notices create serious
administrative concerns, that they
duplicate information already required
to be disclosed in plan SPDs or election
notices, and that they increase the risk
of civil penalties and litigation for plan
sponsors. At the same time, commenters
indicated that many plans already
provide similar notifications. A number
of commenters supported these notice
requirements, but suggested changes or
clarifications.
With regard to the unavailability
notice of paragraph (c), some
commenters suggested that
administrators should be required to
provide the notice ‘‘as soon as
possible,’’ although not later than 14
days after receiving the notice of
qualifying event. Another commenter
argued that the time frame for
furnishing the unavailability notice
should conform to the time frame for
furnishing notice of a benefit claim
denial. Other commenters requested
clarification concerning the
circumstances that would trigger the
notice requirement.
After consideration of the comments,
the Department has decided to retain
the requirement that notice of
unavailability of continuation coverage

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be provided, with some modification. It
is the view of the Department that when
a participant or beneficiary submits a
request to the plan administrator for
COBRA continuation coverage, the
individual has an expectation of
coverage unless (or until) he or she is
notified to the contrary. The Department
continues to believe that furnishing the
unavailability notice in such
circumstances will avoid
misunderstandings in this area. The
Department also believes that the
proposed time frame of 14 days,
paralleling the time frame for providing
an election notice after receiving a
notice of qualifying event, is appropriate
for the unavailability notice. Therefore,
the final regulation retains the time
frame of the proposal.
Commenters questioned whether the
unavailability notice is required only
after receipt of ‘‘a notice of a qualifying
event furnished in accordance with
§ 2590.606–3,’’ as stated in the proposal,
or whether the unavailability notice
must also be provided after receipt of
any qualified beneficiary’s notice
furnished in accordance with
§ 2590.606–3. There appears to be little
basis for distinguishing among the
various qualified beneficiary notices
that may be required to be furnished in
accordance with § 2590.606–3 on the
basis of the expectations of the
individual furnishing the notice.
Accordingly, the Department has
modified the language of paragraph
(c)(1) to clarify that the unavailability
notice must be furnished when the plan
administrator denies coverage after
receiving a notice described in
§ 2590.606–3, regardless of the basis of
the denial and regardless of whether the
notice involves a first qualifying event,
a second qualifying event, or a request
for a disability extension. For example,
the unavailability notice would be
required to be provided when a plan
administrator denies continuation
coverage because it has been determined
that no qualifying event had occurred or
because the qualified beneficiary did
not furnish the notice of qualifying
event notice in a timely manner or did
not provide complete information.
With respect to the early termination
notice of paragraph (d) of the proposal,
in addition to those commenters
opposing the notice obligation in its
entirety, some commenters suggested
changes. One commenter suggested that
plan administrators be required to
provide an early termination notice in
advance of terminating COBRA coverage
and that plan administrators should not
be allowed to combine the early
termination notice with the notice of
creditable coverage required to be

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provided under HIPAA. Another
commenter objected to the proposal’s
adoption of the requirement that the
early termination notice be furnished
‘‘as soon as practicable,’’ suggesting that
a specific time frame would be more
workable. One commenter suggested
that the early termination notice be
required only when coverage terminates
‘‘voluntarily’’ or for lack of premium
payment.
Following consideration of the
comments on paragraph (d), the
Department has decided to retain the
early termination notice requirements as
proposed. As noted in the proposal,
continuation coverage may be
terminated earlier than the end of the
maximum period for many different
reasons. The Department continues to
believe that providing a notice of early
termination serves an important
administrative function and permits
qualified beneficiaries to take
appropriate next steps to protect their
access to health coverage, either on a
group or individual basis.
In retaining the notice of early
termination of continuation coverage
requirement, the Department is not
requiring that the notice be furnished
before COBRA coverage can be
terminated or within a specified time
frame. To require notification to be
made in advance of an otherwise
permissible early termination of
continuation coverage would extend
COBRA continuation coverage beyond
the statutory periods, which would be
beyond the Department’s interpretive
and regulatory authority. In recognition
of the fact that there may be instances
when an administrator is able to furnish
an early termination notice in advance
of the early termination of COBRA
coverage, the Department has retained
the requirement that notice of an early
termination be furnished as soon as
reasonably practicable. The Department
believes that this standard is in the best
interest of the qualified beneficiaries.
The Department further believes that
allowing plans to combine furnishing
the early termination notice with the
certificate of creditable coverage
required under HIPAA would benefit
the qualified beneficiary by providing
related benefit information in a single
information package and would benefit
the plan as a result of reduced
administrative costs. For this reason, the
Department reiterates the view
expressed in the proposal that nothing
in these regulations is intended to
prevent a plan administrator from
combining the furnishing of an early
termination notice with the furnishing
of the certificate of creditable coverage.

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One commenter recommended that
the Department develop model notices
for the unavailability notice and the
early termination notice required under
paragraphs (c) and (d) of § 2590.606–4.
The Department has not adopted this
suggestion due to the event-specific
nature of the required notices. In the
Department’s view, it would be difficult
to develop a single model form for such
notices that would serve adequately to
cover every circumstance, or even the
most frequent circumstances, under
which COBRA continuation coverage
might be denied or terminated before
the end of its maximum period.
C. Standards for Furnishing Notices
As discussed above, the final
regulations provide standards for a
variety of notices required to be
furnished by and to qualified
beneficiaries, employers, and plan
administrators. Several commenters
requested further guidance on the
acceptable methods for furnishing the
various notices addressed by the
regulations. They also requested
guidance on how to determine, for
purposes of the various time limits,
when a notice should be considered to
be furnished.
The Department generally recognizes
that disclosures may be furnished
through a number of different methods.
See § 2520.104b–1(b) (describing
generally appropriate methods for
furnishing reports, statements, notices,
and other documents required under
title I to individuals). With regard to
general notices, election notices,
unavailability notices, and early
termination notices, each of which is
required to be furnished by the plan
administrator, the final regulations
expressly provide that such notices
must be furnished in a manner
consistent with the standards set out in
§ 2520.104b–1(b). See § 2590.606–1(f);
§ 2590.606–4(f).
Under the standards set by
§ 2520.104b–1(b), and therefore under
these regulations, a required notice
generally should be considered
‘‘furnished’’ by a plan administrator as
of the date of mailing, if mailed by first
class mail, certified mail, or Express
Mail; or as of the date of electronic
transmission, if transmitted
electronically.17 When hand delivery is
the chosen method of delivery,
however, a notice would not be
considered furnished until actually
17 See § 2520.104b–1(c) (disclosure through
electronic media). The Department recognizes that
other methods of furnishing may be available that,
under the actual facts and circumstances, should be
accorded the same deference as electronic
transmission and first class mail.

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received by the individual to whom the
notice is directed.18 In the absence of
written plan procedures to the contrary
that are communicated to participants
and beneficiaries, it is the view of the
Department that the same standards
would apply to notices of qualifying
event furnished by an employer to the
plan administrator and to COBRA
notices provided by covered employees,
qualified beneficiaries, and other
persons acting on their behalf to plan
administrators.
The regulations contain one exception
to this general rule. Section 2590.606–
4(b) expressly provides that the 14-day
time limit applicable to plan
administrators for furnishing an election
notice will not begin to run until a plan
administrator actually receives a notice
furnished in accordance with the
requirements of § 2590.606–2 or
§ 2590.606–3.
D. Effective and Applicability Dates
The Department received a number of
comments expressing concern about the
proposal’s statement of the
Department’s intention to make final
regulations effective and applicable as
of the first day of the first plan year
occurring on or after January 1, 2004.
Commenters argued that such a short
time period between publication and
effective dates would not provide group
health plans sufficient time for an
orderly implementation of the changes
necessary to accommodate the final
COBRA continuation coverage notice
regulations. The Department recognizes
the importance of providing plans with
an adequate period for making the
changes to their COBRA processes
required by these final COBRA notice
regulations. It is in the public interest to
enable plans to come into compliance
smoothly and economically and to take
advantage of the additional
opportunities for administrative
efficiency provided by these regulations.
Accordingly, the Department has
determined to provide a period of at
least six months after publication of
these final regulations before they will
be applicable to notice obligations
arising under group health plans.
In order to avoid confusion
concerning the applicability date of the
final rules, each rule (§§ 2590.606–1
through 2590.606–4) has been modified
to add a new ‘‘applicability’’ paragraph.
This paragraph provides that the
regulation applies to notice obligations
that arise on or after the first day of the
18 The use of interoffice mail for purposes of
providing a notice to an employee should be
considered tantamount to hand delivery and
governed by the same standards.

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first plan year beginning on or after the
date that is six months after the date of
publication of the final rules in the
Federal Register.19 The regulations are
scheduled to become effective sixty
days after the date of publication in the
Federal Register.
The preamble to the proposed
regulations made clear that plans could
no longer rely upon prior guidance
issued by the Department shortly after
the enactment of COBRA, which
provided a model general notice to be
used in connection with plans’ first
becoming covered by COBRA.20 The
Department also stated in the proposal
that, in the absence of final regulations,
the Department would judge plan
compliance with the COBRA statutory
notice requirements under the standard
set by the COBRA conference report:
‘‘[E]mployers are required to operate in
good faith compliance with a reasonable
interpretation of these substantive rules,
notice requirements, etc.’’21 Several
commenters have requested guidance
from the Department on whether, in the
interim between issuance of the
proposed regulations and a future
applicability date for new final rules,
they could rely on the proposed
regulations as a reasonable
interpretation of the COBRA statutory
notice requirements that would be
viewed by the Department as good faith
compliance. The Department has
determined that it is in the public
interest to encourage early compliance
with these new standards and, therefore,
will, pending the applicability of the
final rules, view compliance with either
the proposed rules or the final rules,
including use of the model notices as
proposed or as finalized, to constitute
good faith compliance with the COBRA
statutory notice requirements.
E. Regulatory Impact Analysis
Summary
The regulatory standards promulgated
in these regulations will benefit both
19 In response to public concerns about the
proposed effective date, the Department issued a
press release expressing its intention to give group
health plans six months after the adoption of final
rules to implement administrative changes required
by the new rules. Press Release, EBSA, Labor
Department Announces Proposed Effective Date of
COBRA Regulations Will Be Delayed (September 17,
2003).
20 The preamble to the proposed COBRA notice
regulations explained that the early guidance and
model general notice contained in Technical
Release 86–2, issued June 26, 1986, no longer
adequately reflected the COBRA provisions due to
subsequent amendments and that use of that model
notice would no longer be considered good faith
compliance with the requirements of section
606(a)(1) of the Act. See 68 FR 31832, 31834 n.13
(May 28, 2003).
21 H.R. Conf. Rep. No. 99–453 at 563.

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plan sponsors and participants. They
will dispel plan administrators’
uncertainty about how to comply with
COBRA notice provisions and reduce
the risk of inadvertent violations. They
will help participants and beneficiaries
understand how to exercise their
COBRA rights, thereby averting costly
disputes and lost opportunities to elect
COBRA coverage. This will result in an
increase in the number of COBRA
elections by qualified beneficiaries.
These benefits of the regulations are
expected to outweigh their costs.
New administrative costs imposed by
these regulations are limited because
plan sponsors and administrators
already distribute notices pursuant to
the COBRA statute, and many of their
existing practices likely already satisfy
the requirements of these regulations.
The Department estimates the new
administrative costs to be $2.6 million
in the first year that the regulations are
effective and $0.9 million annually in
subsequent years. The $0.9 million
ongoing annual cost is attributable to
the new requirements to notify qualified
beneficiaries when continuation
coverage is unavailable or has been
terminated before the maximum period
of coverage has ended. The remaining
$1.7 million first-year cost reflects the
cost to plans to review existing notices
and procedures, to make any necessary
revisions, and to modify or develop
newly required notices.
The Department also expects the
number of COBRA elections to increase
slightly, by between 0.5 percent and 1.0
percent, which will increase costs to
employers. Employers can charge
COBRA enrollees the cost of coverage
plus an administrative charge, but those
electing continuation coverage tend to
have higher costs and therefore as a
group enjoy a subsidy from plan
sponsors equal to about one-third of the
cost of their coverage. If COBRA
elections increase, the amount of the
subsidy will increase by a similar
proportion, or between $12 million and
$24 million annually.
Executive Order 12866
Under Executive Order 12866, the
Department must determine whether the
regulatory action is ‘‘significant’’ and
therefore subject to the requirements of
the Executive Order and subject to
review by the Office of Management and
Budget (OMB). Under section 3(f), the
order defines a ‘‘significant regulatory
action’’ as an action that is likely to
result in a rule’s (1) having an annual
effect on the economy of $100 million
or more, or adversely and materially
affecting a sector of the economy,
productivity, competition, jobs, the

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environment, public health or safety, or
State, local or tribal governments or
communities (also referred to as
‘‘economically significant’’); (2) creating
serious inconsistency or otherwise
interfering with an action taken or
planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order.
Pursuant to the terms of the Executive
Order, it has been determined that this
action is ‘‘significant’’ within the
meaning of section 3(f)(4) of the
Executive Order and therefore subject to
review by the Office of Management and
Budget (OMB).
Costs.—The administrative cost of
these regulations is expected to be
modest, primarily because COBRA’s
statutory provisions have been in effect
since 1986. As a result, most group
health plans, plan administrators, and
health insurance issuers already have
developed forms and procedures for the
administration of COBRA notices. The
Department estimates that the
regulations will increase administrative
costs by $2.6 million in the first year
and $0.9 million annually in subsequent
years.
Commenters on the proposed
regulations remarked in general terms
on the importance of controlling costs in
relation to the benefits achieved for
qualified beneficiaries. One commenter
indicated that revising automated
systems that generate COBRA notices
would be more costly than the
Department had estimated in
connection with the proposal because
many COBRA administrators currently
issue COBRA notices that narrowly
target individual audiences, such as
spouses or children. Although some
COBRA administrators choose to
include additional information in their
notices for certain types of qualified
beneficiaries, the Department continues
to believe that few COBRA
administrators will be required to make
significant changes in order to comply
with the basic requirements of these
notice provisions. COBRA
administrators have in place processes
that are, in fact, flexible enough to
provide notices that satisfy the need for
a generic product suitable for use by
multiple plans while remaining
sufficiently adaptable to include
detailed information unique to the plan
or individual qualified beneficiary.
Economies of scale also tend to
moderate COBRA administrative costs

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because the majority of notice
obligations are met through the
purchase of COBRA administrative
services from a number of COBRA
administrators that is small relative to
the number of group health plans they
serve. In addition, not all COBRA
administrators or plans will be required
to make substantial changes. In
estimating the impact of the proposed
regulations and model forms, the
Department assumed that many COBRA
administrators and plans currently use
notices that, for the most part, are in
compliance with the requirements of the
regulations. Comments received did not
support a revision of that assumption
for the estimate of the economic impact
of the final rule. In response to
comments, however, the Department
has made certain clarifications to the
proposed regulations with respect to
content and format of the notices and
has clarified the model notices
accordingly. These changes, discussed
more fully earlier in the preamble, will
expand opportunities for COBRA
administrators to fulfill plans’ COBRA
notice obligations within the context of
their current practices. The clarification
of the scope of applicability of the
unavailability notice in § 2590.606–4(c)
has resulted in an increase in the
estimated cost of the final regulations of
$204,000.
The Department expects the number
of COBRA elections to increase slightly
as a result of the implementation of
these final regulations. Consequently, a
portion of the cost of health care
coverage will transfer from those new
COBRA enrollees to plan sponsors,
thereby increasing the subsidy from
employers to COBRA enrollees. The
transfer of costs arises because surveys
indicate that although qualified
beneficiaries that elect COBRA coverage
pay a cost consisting of the applicable
premium amount for group coverage
plus an administrative charge, the actual
average cost of continuation coverage is
somewhat higher than the combined
amount paid by the qualified
beneficiary. Payment by a plan sponsor
of the difference in these costs
constitutes a subsidy of a qualified
beneficiary’s continuation coverage. As
such, the transfer represents a cost to
plan sponsors and a benefit to COBRA
enrollees.
In estimating the amount of the
transfer, the Department observed that
the number of inquiries the Department
receives annually concerning COBRA,
about 59,000, is equivalent to just more
than 1 percent of the estimated 5
million annual COBRA qualifying
events. It is likely that some but not all
of these inquiries reflect notice

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inadequacies that these regulations
would correct. The Department also
noted that approximately 19 percent of
qualifying events result in elections, and
that the average annualized subsidy
from plan sponsors to COBRA enrollees
amounts to about $2,500 per enrollee. If
between 0.5 percent and 1.0 percent of
qualifying events involve missed
opportunities due to inadequate notice,
and 19 percent of those events would
have resulted in elections, then the
regulations, by correcting notice
deficiencies, would increase COBRA
enrollees by between 4,750 and 9,500
each year, and the aggregate subsidy by
between $12 million and $24 million.
Expressed in unit costs, for every one
percent increase in the number of
qualified beneficiaries who elect
continuation coverage due to improved
notices and procedures, there is an
estimated incremental increase in cost
of $24 million to plan sponsors or an
average of approximately $58 per plan.
Both the administrative cost and the
transfer cost will be borne by the
411,000 group health plans, covering a
total of about 111 million participants
and their dependents, that are currently
required to offer continuation coverage.
Cost estimates recognize only the cost of
changes to existing practices that are
likely to be associated with these rules;
they exclude the pre-regulation impact
of the statute itself. Estimates are
grounded in an assumption as to the
entity expected to perform the needed
work (e.g., a health insurer or
professional administrator); the
assumption should not be interpreted to
bear on any party’s legal responsibility
for COBRA compliance. The costs of the
regulations are equal to only one onehundredth of 1 percent or less of total
group health plan costs to entities
subject to COBRA. Because the
magnitude of the overall increase in
costs to plans is small, the Department
believes that it will not have a
consequential effect on the availability
of health coverage for employees.
Benefits.—The benefits of these rules
arise from improved administrative
efficiency, reduced exposure to risk, and
from the potential avoidance of some
unnecessary losses of group health plan
coverage by qualified beneficiaries.
Improvements in the consistency and
quality of information provided to
participants and beneficiaries will help
them understand their rights and limit
their risk of losing the opportunity to
elect COBRA coverage. Inconsistent
procedures and notices that are not
adequate as to content, timing, and form
are known to generate questions, delays,
disputes, and duplications of effort that
require the expenditure of additional

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resources by both plan administrators
and participants and beneficiaries to
resolve. Although the magnitude of the
costs and potential savings associated
with administrative inefficiencies is
unknown, clearer and more uniform
standards should serve to avoid the
otherwise unnecessary expense
associated with rectifying procedural
and substantive notice inadequacies.
Providing greater certainty to plan
sponsors and plan administrators as to
how their notice obligations can be met
should also limit risks to both plans and
qualified beneficiaries. Plan sponsors
and plan administrators who comply
with this guidance will be less likely to
be subjected to costly disputes,
litigation, or penalties as a result of their
compliance with this guidance.
The benefit to COBRA enrollees
exceeds the financial value of the
transfer insofar as the enrollees will gain
access to high-value group coverage
rather than having to choose between
purchasing generally lower-value
individual insurance, usually at a
significantly higher rate than a group
rate, or going without coverage
altogether. Individual coverage is more
costly and less efficient due in large part
to significantly higher costs of
individual policy administration. The
uninsured are also known to seek
preventive care less frequently and to
delay or forgo treatment, which may
lead to less favorable health outcomes
and higher social costs for acute care at
a later time. Interruptions in group
health plan coverage can ultimately
limit the portability of group coverage,
as well. A reduction in the numbers of
losses of coverage that result from
notification failures results in efficiency
gains to the extent that the qualified
beneficiaries elect group health plan
coverage rather than individual
coverage.
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501–
3520) (PRA 95), the Department
submitted the information collection
request (ICR) included in the Notice
Requirements of the Health Care
Continuation Coverage Provisions to the
Office of Management and Budget
(OMB) for review and clearance at the
time the Notice of Proposed Rulemaking
(NPRM) was published. In accordance
with 5 CFR 1320.11(c) of the PRA, OMB
issued a Notice of Action, on June 6,
2003, deferring action on the request for
approval until the submission of the ICR
in connection with the final rulemaking.
Action was deferred in order to provide
the Department with an opportunity to
include changes resulting from

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comments on the proposed regulations.
Accordingly, the Department has
submitted the ICR included in the
Notice of Final Regulations for review
and clearance by OMB.
The Department has issued these
rules to set minimum standards for the
timing and content of the notices
required under the continuation
coverage provisions of part 6 of title I of
ERISA, and to establish uniform
standards for administering the notice
process. In very general terms, the
statute requires that qualified
beneficiaries be offered the opportunity
to elect to continue group health
coverage after losses of coverage due to
death of the covered employee,
termination of employment or reduction
of hours of employment, divorce or legal
separation of the covered employee
from the employee’s spouse, loss of
dependent child status, the covered
employee’s becoming entitled to
Medicare, or bankruptcy of an employer
that affects covered retirees and their
families. Qualified beneficiaries may
include covered employees, spouses of
covered employees, and dependent
children of covered employees.
Coverage generally extends for up to 18
or 36 months, depending on the nature
of the qualifying event.
The regulations set standards for six
types of notices and provide two model
notices in the following sections:
General Notice of Continuation
Coverage; Notice Requirements for
Employers; Notice Requirements for
Covered Employees and Qualified
Beneficiaries; and Notice Requirements
for Plan Administrators. The last section
covers a notice of right to elect
continuation coverage, a notice of
unavailability of continuation coverage,
and a notice of early termination of
continuation coverage. Each of the
regulations includes one or more ICRs.
It should be noted that this Paperwork
Reduction Act analysis includes the cost
of the statute (the COBRA provisions) as
well as the cost of the discretion
exercised in this rulemaking. These
costs were developed in the manner
described below.
In order to develop estimates of the
cost of the review, revision,
development, and distribution of
COBRA notices, it was first necessary to
determine the numbers of participants
and beneficiaries in plans that are
required to offer COBRA coverage
(generally, plans sponsored by
employers with 20 or more employees),
the numbers of beneficiaries who reside
at addresses that are different from
related covered employees, and the rates
of occurrences of qualifying events that
give rise to notice obligations. Also

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required were estimates of the number
of entities, such as group health
insurance issuers and professional
administrators, that would review
COBRA notices; the number that would
consequently revise COBRA notices;
and the time required to do so for each
type of notice.
The Department derived its estimates
of 55.8 million covered employees, 55
million beneficiaries, and 2.5 million
COBRA enrollees from the February and
March 2001 Current Population Survey
(CPS; Census Bureau household
surveys), the 2000 Medical Expenditure
Panel Survey, Household and Insurance
Components (MEPS comprises surveys
of households and private
establishments conducted jointly by the
Census Bureau and the Agency for
Healthcare Research and Quality), and
the 1996 Panel of the Survey of Income
and Program Participation (SIPP; a
Census Bureau longitudinal household
survey). These data sources also
indicate that 67,000 dependents live
outside the household of related
employees. Frequency rates for
qualifying events were also developed
from MEPS and SIPP.
An estimate of the number of plans
covering these employees and
dependents was also needed. About
50,000 group health plans currently file
the Form 5500–Annual Return/Report of
Employee Benefit Plan each year,
including 38,000 large plans, and 8,000
small plans, and a number of plans that
may not be required to file. For the
purpose of regulatory analysis, plans
with fewer than 100 participants are
considered to be small. Because the
majority of small group health plans are
not required to file Form 5500, the
number of such plans must be estimated
from other data sources. CPS and MEPS
data were used to derive an estimate of
the number of employers that offer
group health coverage, and to exclude
employers within that group that have
fewer than 20 employees. This estimate
indicates that these regulations will
affect about 411,000 plans, 38,000 of
which are large, and 373,000 of which
are small. The number of participants in
large plans is estimated at 43.5 million.
The number of participants in small
plans is estimated to be 12.3 million.
The preparation and distribution of
notices (discussed below) is accounted
for as cost rather than hours because
most COBRA administration is
accomplished through the purchase of
services for which fees are paid. Startup costs that arise from these
regulations pertain to the review and
revision of existing forms and
procedures and the development of the
new early termination and

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unavailability notices. The costs for
completing and distributing notices are
ongoing operating costs.
The Department has assumed that all
COBRA administrators will review their
existing forms and procedures in
response to promulgation of this
guidance, and that some of those plan
administrators will need to revise their
notices and procedures. In order to
derive an estimate of the number of
entities that will review forms and
procedures, the Department looked at
the number of health insurers offering
group products and the number of
professional administrators providing
services to group health plans. This
results in an estimate of about 3,000
entities that perform COBRA
administration for the majority of all
plans. All of these entities are expected
to review all of their notices and
procedures in response to this
regulatory guidance. The reviews are
assumed to require 2 hours each for the
general notice and the election notice.
The reviews are expected to be
conducted by professionals at the level
of financial managers at a cost of $68
per hour.
In order to estimate the number of
service providers that would be required
to revise their existing notices, the
Department first examined its data
pertaining to the nature of the telephone
inquiries it receives. These data show
that about 59,000 inquiries pertaining to
COBRA are received each year.
Although the portion of these inquiries
that pertain to notice provisions is
unknown, as is the number of COBRA
notification issues that do not give rise
to contact with the Department, this
number provides the only available
proxy for a rate of notice-related
difficulties. Given the roughly 5 million
COBRA election notices provided each
year, the rate of notice inadequacies is
assumed to be about 1%. Because some
COBRA inquiries received by the
Department pertain to issues other than
notices, the number of inadequate
notices may range from .5% to 1% but
1% has been used for purposes of these
estimates.
These regulations will require service
providers to revise the .5% to 1% of
notices that historically have been
inadequate. The cost of these revisions
will be driven in part by the number of
service providers affected. The
proportion of service providers affected
may be larger than the proportion of
notices that are inadequate. If
inadequate notices are concentrated
among smaller service providers, then
the proportion of service providers
affected will be more than .5% to 1%.
The Department assumed that 3% of all

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service providers, or 90 providers, will
be affected.
Modifications to the general notice
and the election notice are assumed to
require two hours per notice, at $68 per
hour for a service provider. Additional
start-up costs include the cost of four
hours of professional time, at $68 per
hour, to modify or develop the employer
and employee notices and to develop
the two newly required early
termination and unavailability notices.
Ongoing operating costs arise from
completing a notice upon the
occurrence of each event that gives rise
to a notice obligation and from
distributing the completed notice. The
Department did not attribute any
ongoing operating cost to the provision
of the general notice to covered
employees and their spouses who reside
with them. Under this final rule, a plan
administrator may satisfy the general
notice requirement by including the
required content in the SPD and
furnishing a single notice addressed to
both the covered employee and the
covered employee’s spouse. The
Department did, however, attribute an
ongoing operating cost to completing
and distributing the general notice to a
spouse of a covered employee who
resides at a separate address.
No burden is included for completing
the employer’s notice because it
involves only information that the
employer has at hand in its customary
personnel practices. Similarly, no
completion burden is calculated for the
qualified beneficiaries’ notices because
this information is limited, readily
available, and would be provided as a
usual practice by only the qualified
beneficiary who wishes to elect
continuation coverage.
No cost has been included for the
completion or distribution of the notice
of unavailability of continuation
coverage because there is currently no
basis for determining the number of
these notices that might be sent. The
Department has assumed, however, that
due to the clear and consistent
information provided in the general
notice, plan administrators will
distribute only a limited number of
unavailability notices annually and that
the associated cost will be very small.
Finally, the cost for completing the
election notice, at 4 minutes per notice,
and the early termination notice, at 1
minute per notice, is estimated at $34
per hour. The 4 minutes required to
complete an election notice represent a
reduction from the 5 minutes originally
calculated in the proposed regulation.
The one minute saved as a result of
clarifications in the final regulations
regarding how plans may identify

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qualified beneficiaries for purposes of
the election notice, is expected to
reduce the burden for completing
election forms. As such, the estimated
operating and maintenance costs for the
ICR have been reduced by an estimated
$2.7 million.
In determining the cost for
distribution of COBRA notices, the
Department noted in the proposed
regulations that due to the nature of the
rights and obligations involved in
COBRA notice requirements most plan
administrators tend not to choose
electronic distribution methods for
COBRA notices. The Department further
noted that plans are not precluded from
using electronic distribution methods
that comply with regulations at 29
CFR.104b–1(b) and (c) and specifically
requested comment on the use of
electronic technologies in COBRA
notice administration. The Department
received one comment attesting to the
availability of electronic information
systems that are capable of transmitting
COBRA notices and disclosures, and
that are efficient, legally protective, and
cost effective. The Department
recognizes that there may be cost
savings when information is transmitted
electronically and that some plans may
choose to use electronic technologies to
fulfill their requirements. For purposes
of the PRA, however, the Department
has conservatively estimated costs based
on first-class mail, which is currently
the most common method for delivery
of COBRA information. Postage and
materials for distribution are estimated
at $0.38 per notice. No assumption has
been made as to the number of these
notices that will be distributed
electronically. The application of these
assumptions results in an estimated
annual distribution of 66,900 general
notices, 2,809,000 employer notices,
651,000 qualified beneficiary notices,
4,699,000 plan administrator election
notices, and 1,000,000 early termination
notices. The number of unavailability
notices is unknown.
Type of Review: New collection.
Agency: Employee Benefits Security
Administration, Department of Labor.
Title: Notice Requirements of the
Health Care Continuation Coverage
Provisions.
OMB Number: 1210–0NEW.
Affected Public: Individuals or
households; Business or other for-profit;
Not-for-profit institutions.
Respondents: 411,000.
Frequency of Response: On occasion.
Responses: 9,225,900.
Estimated Total Burden Hours: None.
Total Annualized Capital/Startup
Costs: 1,656,500.

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Total Burden Cost (Operating and
Maintenance): $14,723,400.
Total Annualized Cost: $16,379,900.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. Unless an
agency certifies that a rule will not have
a significant economic impact on a
substantial number of small entities,
section 604 of the RFA requires that the
agency present a final regulatory
flexibility analysis at the time of the
publication of the NFRM describing the
impact of the rule on small entities.
Small entities include small businesses,
organizations, and governmental
jurisdictions.
For purposes of analysis under the
RFA, EBSA proposes to continue to
consider a small entity to be an
employee benefit plan with fewer than
100 participants. The basis of this
definition is found in section 104(a)(2)
of the Act, which permits the Secretary
to prescribe simplified annual reports
for pension plans that cover fewer than
100 participants. Under section
104(a)(3), the Secretary may also
provide for exemptions or simplified
annual reporting and disclosure
requirements for welfare benefit plans.
Pursuant to the authority of section
104(a)(3), the Department has
previously issued regulations at 29 CFR
2520.104–20, 2520.104–21, 2520.104–
41, 2520.104–46, and 2520.104b–10,
providing for simplified reporting
requirements and limited exemptions
from reporting and disclosure
requirements for small plans, including
unfunded or insured welfare plans
covering fewer than 100 participants,
that satisfy certain other requirements.
Further, while some large employers
may have small plans, in general most
small plans are maintained by small
employers. Thus, EBSA believes that
assessing the impact of this rule on
small plans is an appropriate substitute
for evaluating the effect on small
entities. The definition of small entity
considered appropriate for this purpose
differs, however, from a definition of
small business based on size standards
promulgated by the Small Business
Administration (SBA) (13 CFR 121.201)
pursuant to the Small Business Act (15
U.S.C. 631 et seq.). At the time of the
publication of the NPRM, the
Department requested comments on the

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appropriateness of the size standard
used in evaluating the impact of this
rule on small entities. No comments
were received.
On the basis of this definition, EBSA
estimates that the regulations will not
have a significant impact on a
substantial number of small entities. In
support of this conclusion, the
Department has conducted a final
regulatory flexibility analysis, which is
summarized below.
These regulations provide plans and
qualified beneficiaries with greater
certainty as to how the notice
obligations of COBRA can be met.
Inquiries to the Department, as well as
public comment in response to the 1997
RFI, indicated that service providers
and plan administrators would welcome
guidance that would provide greater
administrative efficiency and reduce
exposure to risk resulting from
procedural or substantive failures to
meet notification requirements.
Improvements in the quality of
information provided to participants
and beneficiaries is expected to help
them understand their rights and limit
their risk of losing the opportunity to
elect the COBRA coverage that is
required to be offered.
The COBRA provisions require a
group health plan to offer qualified
beneficiaries the opportunity to elect
continuation coverage when they would
otherwise lose group health coverage as
a result of certain events described in
the statute as ‘‘qualifying events.’’
Under section 608 of ERISA, the
Secretary has the authority to carry out
the provisions of part 6 of title I of
ERISA. Further, the Conference Report
that accompanied COBRA provided that
the Secretary has the authority to issue
regulations implementing the notice and
disclosure provisions of part 6 of ERISA.
The Department’s objective in issuing
the regulations is to provide guidelines
that will assure plan administrators that
they are in compliance with the
notification provisions of COBRA and
that participants and beneficiaries have
sufficient information to exercise their
COBRA rights. Small plans will benefit
from clarifications about the content
and timing of notices and from the
likelihood that fewer determinations
about COBRA coverage will be delayed,
disputed, or appealed. In addition, an
increased number of qualified
beneficiaries in small health plans will
be able to obtain COBRA continuation
coverage.
The Department believes that, because
of the expertise required, small plans
will use COBRA administrators to
review notices and to modify or adapt
the Department’s model notices for use

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by the plan administrator. Generally,
COBRA administrators offer plans ongoing administrative services, such as
notifying employees about their group
health plan continuation coverage,
distributing and processing election
forms, collecting and applying premium
payments, and monitoring COBRA
compliance. Small plans, in particular,
are less likely to have in-house
capabilities to handle these
administrative tasks. For a service
provider, reviewing and adopting or
modifying forms for plans will result in
some direct cost. COBRA administrators
may choose to absorb some of the cost
in order to maintain competitive
products; others may charge the cost to
their client plans. Where these costs are
charged to plans, the cost will most
likely be minimized because of the
economies of scale inherent in the use
of standardized forms and procedures.
Costs to small plans are further reduced
because of the large number of small
plans that share the cost burden; there
are approximately seven times as many
small plans as large plans. Finally, to
further reduce costs, the Department has
provided two model notices that can be
adapted by COBRA administrators for
use by individual single-employer
plans.
The Department estimates that there
are approximately 2.5 million plans,
each with fewer than 100 participants,
that are considered small group health
plans under the Department’s
definition. Among these, COBRA
applies to only those plans with 20 or
more employees, or 373,000 plans, with
a total of approximately 12.3 million
participants. While the majority of
group health plans subject to COBRA
are small plans, participation in those
plans represents only about 22% of
participation in all plans covered by
COBRA.
The cost estimates for small plan
compliance recognize only the cost of
changes to existing practices associated
with the regulations; they exclude the
impact of the statute itself. Costs result
from the likelihood that COBRA
administrators may be required to
modify two notices currently used by
plans and may modify or develop other
notices, including the two new early
termination and unavailability notices.
The cost to small group health plans to
review and modify existing notices is
estimated at $275,900. The cost to
develop the two new notices and to
complete and distribute the early
termination notice is estimated at
$299,400. No costs have been estimated
for completion and distribution of the
unavailability notice because the
number of notices that might be sent

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cannot reasonably be determined; it is
expected, however, that, with the
additional clarity provided by the
general notice regulation, the number of
unavailability notices required to be
sent will be small. The total cost to
small plans for a service provider’s
assistance in reviewing, modifying, or
developing notices is estimated to be
$575,300, or $1.54 per small plan. The
comparable average cost to large plans
is $53.09 per plan.
Employers with small plans will also
incur transfer costs as a result of an
increase in the number of elections of
continuation coverage by qualified
beneficiaries who would have lost the
opportunity to elect COBRA coverage
absent improved notices and
procedures. A portion of the cost of
health care coverage previously borne
by these individuals will be transferred
to plan sponsors. However, because
there are fewer participants in small
plans, the per-plan transfer costs are
considerably less than for large plans.
The potential transfer cost to small
plans is estimated to range between $2.6
million and $5.2 million, depending on
the number of qualified beneficiaries
who will elect COBRA coverage. The
rate of potential losses of opportunity to
elect COBRA coverage is estimated to
fall between .5% and 1%. This
represents an average of $7 to $14 per
small plan. The comparable cost to large
plans ranges from $9.4 million to $18.7
million, an average of $242 to $484 per
plan. At the upper bound, the total
estimated cost of the regulations for
373,000 small plans is $5.7 million, or
an average of $15 per plan.
The basis for the regulations lies in
the notice and disclosure provisions of
part 6 of title I of ERISA. The
regulations do not duplicate, overlap, or
conflict with other Federal rules. The
COBRA provisions have been in effect
for many years. Accordingly, most plan
administrators and COBRA
administrators have developed
procedures to comply with their
statutory obligations. The regulations
merely seek to provide additional,
detailed guidance that will clarify a
plan’s administrative obligations and
assure plan administrators and COBRA
administrators that, in complying with
the regulations, they have satisfied their
statutory obligations.
The Department has attempted to
minimize the burden of the review and
potential revision of existing notices
undertaken in response to this guidance
by including model notices that can be
adapted to plans’ specific
circumstances. This should lessen the
use of resources for small and large
plans alike.

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Unfunded Mandates Reform Act
For purposes of the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–4), as well as Executive Order
12875, this rule does not include any
federal mandate that may result in
expenditures by state, local, or tribal
governments in the aggregate of more
than $100 million, or increased
expenditures by the private sector of
more than $100 million.
Small Business Regulatory Enforcement
Fairness Act
The rule being issued here is subject
to the Congressional Review Act
provisions of the Small Business
Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and has been
transmitted to Congress and the
Comptroller General for review. The
rule is not a ‘‘major rule,’’ as that term
is defined in 5 U.S.C. 804, because it is
not likely to result in (1) an annual
effect on the economy of $100 million
or more; (2) a major increase in costs or
prices for consumers, individual
industries, or Federal, State, or local
government agencies, or geographic
regions; or (3) significant adverse effects
on competition, employment,
investment, productivity, innovation, or
on the ability of United States-based
enterprises to compete with foreignbased enterprises in domestic or export
markets.
Federalism Statement
Executive Order 13132 (Aug. 4, 1999)
outlines fundamental principles of
federalism and requires the adherence
to specific criteria by Federal agencies
in the process of their formulation and
implementation of policies that have
substantial direct effects on the States,
the relationship between the national
government and the States, or on the
distribution of power and
responsibilities among the various
levels of government. This rule does not
have federalism implications because it
has no substantial direct effect on the
States, on the relationship between the
national government and the States, or
on the distribution of power and
responsibilities among the various
levels of government. Section 514 of
ERISA provides, with certain exceptions
specifically enumerated, that the
provisions of titles I and IV of ERISA
supersede any and all laws of the States
as they relate to any employee benefit
plan covered under ERISA. The
requirements implemented in this rule
do not alter the fundamental provisions
of the statute with respect to employee
benefit plans, and as such would have
no implications for the States or the

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relationship or distribution of power
between the national government and
the States.
List of Subjects in 29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Medical child
support, Reporting and recordkeeping
requirements.
■ For the reasons set forth in the
preamble, the Department amends
chapter XXV, subchapter L, part 2590 of
title 29 of the Code of Federal
Regulations as follows:
Subchapter L—Group Health Plans
PART 2590—RULES AND
REGULATIONS FOR GROUP HEALTH
PLANS
1. The heading of subchapter L is
revised to read as shown above.
■ 2. The heading of part 2590 is revised
to read as shown above.
■ 3. The authority citation for part 2590
is revised to read as follows:
■

Authority: 29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1185, 1185a,
1185b, 1191, 1191a, 1191b, and 1191c; sec.
401(b), Pub. L. 105–200, 112 Stat. 645; and
Secretary of Labor’s Order No. 1–2003, 68 FR
5374 (Feb. 3, 2003).

Subpart A—[Amended]
4. Part 290, Subpart A, is amended by
adding §§ 2590.606–1 through
2590.606–4 to read as follows:

■

§ 2590.606–1. General notice of
continuation coverage.

(a) General. Pursuant to section
606(a)(1) of the Employee Retirement
Income Security Act of 1974, as
amended (the Act), the administrator of
a group health plan subject to the
continuation coverage requirements of
part 6 of title I of the Act shall provide,
in accordance with this section, written
notice to each covered employee and
spouse of the covered employee (if any)
of the right to continuation coverage
provided under the plan.
(b) Timing of notice. (1) The notice
required by paragraph (a) of this section
shall be furnished to each employee and
each employee’s spouse, not later than
the earlier of:
(i) The date that is 90 days after the
date on which such individual’s
coverage under the plan commences, or,
if later, the date that is 90 days after the
date on which the plan first becomes
subject to the continuation coverage
requirements; or
(ii) The first date on which the
administrator is required, pursuant to
§ 2590.606–4(b), to furnish the covered

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employee, spouse, or dependent child of
such employee notice of a qualified
beneficiary’s right to elect continuation
coverage.
(2) A notice that is furnished in
accordance with paragraph (b)(1) of this
section shall, for purposes of section
606(a)(1) of the Act, be deemed to be
provided at the time of commencement
of coverage under the plan.
(3) In any case in which an
administrator is required to furnish a
notice to a covered employee or spouse
pursuant to paragraph (b)(1)(ii) of this
section, the furnishing of a notice to
such individual in accordance with
§ 2590.606–4(b) shall be deemed to
satisfy the requirements of this section.
(c) Content of notice. The notice
required by paragraph (a) of this section
shall be written in a manner calculated
to be understood by the average plan
participant and shall contain the
following information:
(1) The name of the plan under which
continuation coverage is available, and
the name, address and telephone
number of a party or parties from whom
additional information about the plan
and continuation coverage can be
obtained;
(2) A general description of the
continuation coverage under the plan,
including identification of the classes of
individuals who may become qualified
beneficiaries, the types of qualifying
events that may give rise to the right to
continuation coverage, the obligation of
the employer to notify the plan
administrator of the occurrence of
certain qualifying events, the maximum
period for which continuation coverage
may be available, when and under what
circumstances continuation coverage
may be extended beyond the applicable
maximum period, and the plan’s
requirements applicable to the payment
of premiums for continuation coverage;
(3) An explanation of the plan’s
requirements regarding the
responsibility of a qualified beneficiary
to notify the administrator of a
qualifying event that is a divorce, legal
separation, or a child’s ceasing to be a
dependent under the terms of the plan,
and a description of the plan’s
procedures for providing such notice;
(4) An explanation of the plan’s
requirements regarding the
responsibility of qualified beneficiaries
who are receiving continuation coverage
to provide notice to the administrator of
a determination by the Social Security
Administration, under title II or XVI of
the Social Security Act (42 U.S.C. 401
et seq. or 1381 et seq.), that a qualified
beneficiary is disabled, and a
description of the plan’s procedures for
providing such notice;

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(5) An explanation of the importance
of keeping the administrator informed of
the current addresses of all participants
or beneficiaries under the plan who are
or may become qualified beneficiaries;
and
(6) A statement that the notice does
not fully describe continuation coverage
or other rights under the plan and that
more complete information regarding
such rights is available from the plan
administrator and in the plan’s SPD.
(d) Single notice rule. A plan
administrator may satisfy the
requirement to provide notice in
accordance with this section to a
covered employee and the covered
employee’s spouse by furnishing a
single notice addressed to both the
covered employee and the covered
employee’s spouse, if, on the basis of
the most recent information available to
the plan, the covered employee’s spouse
resides at the same location as the
covered employee, and the spouse’s
coverage under the plan commences on
or after the date on which the covered
employee’s coverage commences, but
not later than the date on which the
notice required by this section is
required to be provided to the covered
employee. Nothing in this section shall
be construed to create a requirement to
provide a separate notice to dependent
children who share a residence with a
covered employer or a covered
employee’s spouse to whom notice is
provided in accordance with this
section.
(e) Notice in summary plan
description. A plan administrator may
satisfy the requirement to provide notice
in accordance with this section by
including the information described in
paragraphs (c)(1), (2), (3), (4), and (5) of
this section in a summary plan
description meeting the requirements of
§ 2520.102–3 of this chapter furnished
in accordance with paragraph (b) of this
section.
(f) Delivery of notice. The notice
required by this section shall be
furnished in a manner consistent with
the requirements of § 2520.104b–1 of
this chapter, including paragraph (c) of
that section relating to the use of
electronic media.
(g) Model notice. The appendix to this
section contains a model notice that is
intended to assist administrators in
discharging the notice obligations of this
section. Use of the model notice is not
mandatory. The model notice reflects
the requirements of this section as they
would apply to single-employer group
health plans and must be modified if
used to provide notice with respect to
other types of group health plans, such
as multiemployer plans or plans

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established and maintained by
employee organizations for their
members. In order to use the model
notice, administrators must
appropriately add relevant information
where indicated in the model notice,
select among alternative language, and
supplement the model notice to reflect

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applicable plan provisions. Items of
information that are not applicable to a
particular plan may be deleted. Use of
the model notice, appropriately
modified and supplemented, will be
deemed to satisfy the notice content
requirements of paragraph (c) of this
section.

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(h) Applicability. This section shall
apply to any notice obligation described
in this section that arises on or after the
first day of the first plan year beginning
on or after November 26, 2004.
BILLING CODE 4510–29–P

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30102

BILLING CODE 4910–29–C

§ 2590.606–2.
employers.

Notice requirement for

(a) General. Pursuant to section
606(a)(2) of the Employee Retirement
Income Security Act of 1974, as
amended (the Act), except as otherwise
provided herein, the employer of a
covered employee under a group health
plan subject to the continuation
coverage requirements of part 6 of title
I of the Act shall provide, in accordance
with this section, notice to the
administrator of the plan of the
occurrence of a qualifying event that is
the covered employee’s death,
termination of employment (other than
by reason of gross misconduct),
reduction in hours of employment,
Medicare entitlement, or a proceeding
in a case under title 11, United States
Code, with respect to the employer from
whose employment the covered
employee retired at any time.
(b) Timing of notice. The notice
required by this section shall be
furnished to the administrator of the
plan—
(1) In the case of a plan that provides,
with respect to a qualifying event,
pursuant to section 607(5) of the Act,
that continuation coverage and the
applicable period for providing notice
under section 606(a)(2) of the Act shall
commence on the date of loss of
coverage, not later than 30 days after the
date on which a qualified beneficiary
loses coverage under the plan due to the
qualifying event;
(2) In the case of a multiemployer
plan that provides, pursuant to section
606(a)(2) of the Act, for a longer period
of time within which employers may
provide notice of a qualifying event, not
later than the end of the period
provided pursuant to the plan’s terms
for such notice; and
(3) In all other cases, not later than 30
days after the date on which the
qualifying event occurred.
(c) Content of notice. The notice
required by this section shall include

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sufficient information to enable the
administrator to determine the plan, the
covered employee, the qualifying event,
and the date of the qualifying event.
(d) Multiemployer plan special rules.
This section shall not apply to any
employer that maintains a
multiemployer plan, with respect to
qualifying events affecting coverage
under such plan, if the plan provides,
pursuant to section 606(b) of the Act,
that the administrator shall determine
whether such a qualifying event has
occurred.
(e) Applicability. This section shall
apply to any notice obligation described
in this section that arises on or after the
first day of the first plan year beginning
on or after November 26, 2004.
§ 2590.606–3. Notice requirements for
covered employees and qualified
beneficiaries.

(a) General. In accordance with the
authority of sections 505 and 606(a)(3)
of the Employee Retirement Income
Security Act of 1974, as amended (the
Act), this section sets forth requirements
for group health plans subject to the
continuation coverage requirements of
part 6 of title I of the Act with respect
to the responsibility of covered
employees and qualified beneficiaries to
provide the following notices to
administrators:
(1) Notice of the occurrence of a
qualifying event that is a divorce or
legal separation of a covered employee
from his or her spouse;
(2) Notice of the occurrence of a
qualifying event that is a beneficiary’s
ceasing to be covered under a plan as a
dependent child of a participant;
(3) Notice of the occurrence of a
second qualifying event after a qualified
beneficiary has become entitled to
continuation coverage with a maximum
duration of 18 (or 29) months;
(4) Notice that a qualified beneficiary
entitled to receive continuation
coverage with a maximum duration of
18 months has been determined by the
Social Security Administration, under

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title II or XVI of the Social Security Act
(42 U.S.C. 401 et seq. or 1381 et seq.)
(SSA), to be disabled at any time during
the first 60 days of continuation
coverage; and
(5) Notice that a qualified beneficiary,
with respect to whom a notice described
in paragraph (a)(4) of this section has
been provided, has subsequently been
determined by the Social Security
Administration, under title II or XVI of
the SSA to no longer be disabled.
(b) Reasonable procedures. (1) A plan
subject to the continuation coverage
requirements shall establish reasonable
procedures for the furnishing of the
notices described in paragraph (a) of
this section.
(2) For purposes of this section, a
plan’s notice procedures shall be
deemed reasonable only if such
procedures:
(i) Are described in the plan’s
summary plan description required by
§ 2520.102–3 of this chapter;
(ii) Specify the individual or entity
designated to receive such notices;
(iii) Specify the means by which
notice may be given;
(iv) Describe the information
concerning the qualifying event or
determination of disability that the plan
deems necessary in order to provide
continuation coverage rights consistent
with the requirements of the Act; and
(v) Comply with the requirements of
paragraphs (c), (d), and (e) of this
section.
(3) A plan’s procedures will not fail
to be reasonable, pursuant to this
section, solely because the procedures
require a covered employee or qualified
beneficiary to utilize a specific form to
provide notice to the administrator,
provided that any such form is easily
available, without cost, to covered
employees and qualified beneficiaries.
(4) If a plan has not established
reasonable procedures for providing a
notice required by this section, such
notice shall be deemed to have been
provided when a written or oral
communication identifying a specific

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Federal Register / Vol. 69, No. 102 / Wednesday, May 26, 2004 / Rules and Regulations
event is made in a manner reasonably
calculated to bring the information to
the attention of any of the following:
(i) In the case of a single-employer
plan, the person or organizational unit
that customarily handles employee
benefits matters of the employer;
(ii) In the case of a plan to which
more than one unaffiliated employer
contributes, or which is established or
maintained by an employee
organization, either the joint board,
association, committee, or other similar
group (or any member of any such
group) administering the plan, or the
person or organizational unit to which
claims for benefits under the plan
customarily are referred; or
(iii) In the case of a plan the benefits
of which are provided or administered
by an insurance company, insurance
service, or other similar organization
subject to regulation under the
insurance laws of one or more States,
the person or organizational unit that
customarily handles claims for benefits
under the plan or any officer of the
insurance company, insurance service,
or other similar organization.
(c) Periods of time for providing
notice. A plan may establish a
reasonable period of time for furnishing
any of the notices described in
paragraph (a) of this section, provided
that any time limit imposed by the plan
with respect to a particular notice may
not be shorter than the time limit
described in this paragraph (c) with
respect to that notice.
(1) Time limits for notices of
qualifying events. The period of time for
furnishing a notice described in
paragraph (a)(1), (2), or (3) of this
section may not end before the date that
is 60 days after the latest of:
(i) The date on which the relevant
qualifying event occurs;
(ii) The date on which the qualified
beneficiary loses (or would lose)
coverage under the plan as a result of
the qualifying event; or
(iii) The date on which the qualified
beneficiary is informed, through the
furnishing of the plan’s summary plan
description or the notice described in
§ 2590.606–1, of both the responsibility
to provide the notice and the plan’s
procedures for providing such notice to
the administrator.
(2) Time limits for notice of disability
determination. (i) Subject to paragraph
(c)(2)(ii) of this section, the period of
time for furnishing the notice described
in paragraph (a)(4) of this section may
not end before the date that is 60 days
after the latest of:
(A) The date of the disability
determination by the Social Security
Administration;

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(B) The date on which a qualifying
event occurs;
(C) The date on which the qualified
beneficiary loses (or would lose)
coverage under the plan as a result of
the qualifying event; or
(D) The date on which the qualified
beneficiary is informed, through the
furnishing of the summary plan
description or the notice described in
§ 2590.606–1, of both the responsibility
to provide the notice and the plan’s
procedures for providing such notice to
the administrator.
(ii) Notwithstanding paragraph
(c)(2)(i) of this section, a plan may
require the notice described in
paragraph (a)(4) of this section to be
furnished before the end of the first 18
months of continuation coverage.
(3) Time limits for notice of change in
disability status. The period of time for
furnishing the notice described in
paragraph (a)(5) of this section may not
end before the date that is 30 days after
the later of:
(i) The date of the final determination
by the Social Security Administration,
under title II or XVI of the SSA, that the
qualified beneficiary is no longer
disabled; or
(ii) The date on which the qualified
beneficiary is informed, through the
furnishing of the plan’s summary plan
description or the notice described in
§ 2590.606–1, of both the responsibility
to provide the notice and the plan’s
procedures for providing such notice to
the administrator.
(d) Required contents of notice. (1) A
plan may establish reasonable
requirements for the content of any
notice described in this section,
provided that a plan may not deem a
notice to have been provided untimely
if such notice, although not containing
all of the information required by the
plan, is provided within the time limit
established under the plan in
conformity with paragraph (c) of this
section, and the administrator is able to
determine from such notice the plan,
the covered employee and qualified
beneficiary(ies), the qualifying event or
disability, and the date on which the
qualifying event (if any) occurred.
(2) An administrator may require a
notice that does not contain all of the
information required by the plan to be
supplemented with the additional
information necessary to meet the plan’s
reasonable content requirements for
such notice in order for the notice to be
deemed to have been provided in
accordance with this section.
(e) Who may provide notice. With
respect to each of the notice
requirements of this section, any
individual who is either the covered

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30103

employee, a qualified beneficiary with
respect to the qualifying event, or any
representative acting on behalf of the
covered employee or qualified
beneficiary may provide the notice, and
the provision of notice by one
individual shall satisfy any
responsibility to provide notice on
behalf of all related qualified
beneficiaries with respect to the
qualifying event.
(f) Plan provisions. To the extent that
a plan provides a covered employee or
qualified beneficiary a period of time
longer than that specified in this section
to provide notice to the administrator,
the terms of the plan shall govern the
time frame for such notice.
(g) Additional rights to continuation
coverage. Nothing in this section shall
be construed to preclude a plan from
providing, in accordance with its terms,
continuation coverage to a qualified
beneficiary although a notice
requirement of this section was not
satisfied.
(h) Applicability. This section shall
apply to any notice obligation described
in this section that arises on or after the
first day of the first plan year beginning
on or after November 26, 2004.
§ 2590.606–4. Notice requirements for plan
administrators.

(a) General. Pursuant to section
606(a)(4) of the Employee Retirement
Income Security Act of 1974, as
amended (the Act), the administrator of
a group health plan subject to the
continuation coverage requirements of
Part 6 of title I of the Act shall provide,
in accordance with this section, notice
to each qualified beneficiary of the
qualified beneficiary’s rights to
continuation coverage under the plan.
(b) Notice of right to elect
continuation coverage. (1) Except as
provided in paragraph (b) (2) or (3) of
this section, upon receipt of a notice of
qualifying event furnished in
accordance with § 2590.606–2 or
§ 2590.606–3, the administrator shall
furnish to each qualified beneficiary,
not later than 14 days after receipt of the
notice of qualifying event, a notice
meeting the requirements of paragraph
(b)(4) of this section.
(2) In the case of a plan with respect
to which an employer of a covered
employee is also the administrator of
the plan, except as provided in
paragraph (b)(3) of this section, if the
employer is otherwise required to
furnish a notice of a qualifying event to
an administrator pursuant to
§ 2590.606–2, the administrator shall
furnish to each qualified beneficiary a
notice meeting the requirements of

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paragraph (b)(4) of this section not later
than 44 days after:
(i) In the case of a plan that provides,
with respect to the qualifying event, that
continuation coverage and the
applicable period for providing notice
under section 606(a)(2) of the Act shall
commence with the date of loss of
coverage, the date on which a qualified
beneficiary loses coverage under the
plan due to the qualifying event; or
(ii) In all other cases, the date on
which the qualifying event occurred.
(3) In the case of a plan that is a
multiemployer plan, a notice meeting
the requirements of paragraph (b)(4) of
this section shall be furnished not later
than the later of:
(i) The end of the time period
provided in paragraph (b)(1) of this
section; or
(ii) The end of the time period
provided in the terms of the plan for
such purpose.
(4) The notice required by this
paragraph (b) shall be written in a
manner calculated to be understood by
the average plan participant and shall
contain the following information:
(i) The name of the plan under which
continuation coverage is available; and
the name, address and telephone
number of the party responsible under
the plan for the administration of
continuation coverage benefits;
(ii) Identification of the qualifying
event;
(iii) Identification, by status or name,
of the qualified beneficiaries who are
recognized by the plan as being entitled
to elect continuation coverage with
respect to the qualifying event, and the
date on which coverage under the plan
will terminate (or has terminated)
unless continuation coverage is elected;
(iv) A statement that each individual
who is a qualified beneficiary with
respect to the qualifying event has an
independent right to elect continuation
coverage, that a covered employee or a
qualified beneficiary who is the spouse
of the covered employee (or was the
spouse of the covered employee on the
day before the qualifying event
occurred) may elect continuation
coverage on behalf of all other qualified
beneficiaries with respect to the
qualifying event, and that a parent or
legal guardian may elect continuation
coverage on behalf of a minor child;
(v) An explanation of the plan’s
procedures for electing continuation
coverage, including an explanation of
the time period during which the
election must be made, and the date by
which the election must be made;
(vi) An explanation of the
consequences of failing to elect or
waiving continuation coverage,

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including an explanation that a
qualified beneficiary’s decision whether
to elect continuation coverage will affect
the future rights of qualified
beneficiaries to portability of group
health coverage, guaranteed access to
individual health coverage, and special
enrollment under part 7 of title I of the
Act, with a reference to where a
qualified beneficiary may obtain
additional information about such
rights; and a description of the plan’s
procedures for revoking a waiver of the
right to continuation coverage before the
date by which the election must be
made;
(vii) A description of the continuation
coverage that will be made available
under the plan, if elected, including the
date on which such coverage will
commence, either by providing a
description of the coverage or by
reference to the plan’s summary plan
description;
(viii) An explanation of the maximum
period for which continuation coverage
will be available under the plan, if
elected; an explanation of the
continuation coverage termination date;
and an explanation of any events that
might cause continuation coverage to be
terminated earlier than the end of the
maximum period;
(ix) A description of the
circumstances (if any) under which the
maximum period of continuation
coverage may be extended due either to
the occurrence of a second qualifying
event or a determination by the Social
Security Administration, under title II
or XVI of the Social Security Act (42
U.S.C. 401 et seq. or 1381 et seq.) (SSA),
that the qualified beneficiary is
disabled, and the length of any such
extension;
(x) In the case of a notice that offers
continuation coverage with a maximum
duration of less than 36 months, a
description of the plan’s requirements
regarding the responsibility of qualified
beneficiaries to provide notice of a
second qualifying event and notice of a
disability determination under the SSA,
along with a description of the plan’s
procedures for providing such notices,
including the times within which such
notices must be provided and the
consequences of failing to provide such
notices. The notice shall also explain
the responsibility of qualified
beneficiaries to provide notice that a
disabled qualified beneficiary has
subsequently been determined to no
longer be disabled;
(xi) A description of the amount, if
any, that each qualified beneficiary will
be required to pay for continuation
coverage;

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(xii) A description of the due dates for
payments, the qualified beneficiaries’
right to pay on a monthly basis, the
grace periods for payment, the address
to which payments should be sent, and
the consequences of delayed payment
and non-payment;
(xiii) An explanation of the
importance of keeping the administrator
informed of the current addresses of all
participants or beneficiaries under the
plan who are or may become qualified
beneficiaries; and
(xiv) A statement that the notice does
not fully describe continuation coverage
or other rights under the plan, and that
more complete information regarding
such rights is available in the plan’s
summary plan description or from the
plan administrator.
(c) Notice of unavailability of
continuation coverage. (1) In the event
that an administrator receives a notice
furnished in accordance with
§ 2590.606–3 relating to a qualifying
event, second qualifying event, or
determination of disability by the Social
Security Administration regarding a
covered employee, qualified beneficiary,
or other individual and determines that
the individual is not entitled to
continuation coverage under part 6 of
title I of the Act, the administrator shall
provide to such individual an
explanation as to why the individual is
not entitled to continuation coverage.
(2) The notice required by this
paragraph (c) shall be written in a
manner calculated to be understood by
the average plan participant and shall be
furnished by the administrator in
accordance with the time frame set out
in paragraph (b) of this section that
would apply if the administrator
received a notice of qualifying event and
determined that the individual was
entitled to continuation coverage.
(d) Notice of termination of
continuation coverage. (1) The
administrator of a plan that is providing
continuation coverage to one or more
qualified beneficiaries with respect to a
qualifying event shall provide, in
accordance with this paragraph (d),
notice to each such qualified beneficiary
of any termination of continuation
coverage that takes effect earlier than
the end of the maximum period of
continuation coverage applicable to
such qualifying event.
(2) The notice required by this
paragraph (d) shall be written in a
manner calculated to be understood by
the average plan participant and shall
contain the following information:
(i) The reason that continuation
coverage has terminated earlier than the
end of the maximum period of

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Federal Register / Vol. 69, No. 102 / Wednesday, May 26, 2004 / Rules and Regulations
continuation coverage applicable to
such qualifying event;
(ii) The date of termination of
continuation coverage; and
(iii) Any rights the qualified
beneficiary may have under the plan or
under applicable law to elect an
alternative group or individual
coverage, such as a conversion right.
(3) The notice required by this
paragraph (d) shall be furnished by the
administrator as soon as practicable
following the administrator’s
determination that continuation
coverage shall terminate.
(e) Special notice rules. The notices
required by paragraphs (b), (c), and (d)
of this section shall be furnished to each
qualified beneficiary or individual,
except that:
(1) An administrator may provide
notice to a covered employee and the
covered employee’s spouse by
furnishing a single notice addressed to
both the covered employee and the
covered employee’s spouse, if, on the
basis of the most recent information
available to the plan, the covered

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employee’s spouse resides at the same
location as the covered employee; and
(2) An administrator may provide
notice to each qualified beneficiary who
is the dependent child of a covered
employee by furnishing a single notice
to the covered employee or the covered
employee’s spouse, if, on the basis of
the most recent information available to
the plan, the dependent child resides at
the same location as the individual to
whom such notice is provided.
(f) Delivery of notice. The notices
required by this section shall be
furnished in any manner consistent
with the requirements of § 2520.104b–1
of this chapter, including paragraph (c)
of that section relating to the use of
electronic media.
(g) Model notice. The appendix to this
section contains a model notice that is
intended to assist administrators in
discharging the notice obligations of
paragraph (b) of this section. Use of the
model notice is not mandatory. The
model notice reflects the requirements
of this section as they would apply to

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30105

single-employer group health plans and
must be modified if used to provide
notice with respect to other types of
group health plans, such as
multiemployer plans or plans
established and maintained by
employee organizations for their
members. In order to use the model
notice, administrators must
appropriately add relevant information
where indicated in the model notice,
select among alternative language and
supplement the model notice to reflect
applicable plan provisions. Items of
information that are not applicable to a
particular plan may be deleted. Use of
the model notice, appropriately
modified and supplemented, will be
deemed to satisfy the notice content
requirements of paragraph (b)(4) of this
section.
(h) Applicability. This section shall
apply to any notice obligation described
in this section that arises on or after the
first day of the first plan year beginning
on or after November 26, 2004.
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30112

Federal Register / Vol. 69, No. 102 / Wednesday, May 26, 2004 / Rules and Regulations

Signed at Washington, DC., this 19th day
of May, 2004.
Ann L. Combs,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
[FR Doc. 04–11796 Filed 5–25–04; 8:45 am]

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BILLING CODE 4510–29–C