Par. 5. In section 54.4980B-3, the language "54.4980B-8" is removed and
"54.4980B-10" is added in its place in the last sentence of paragraph (a)(3)
and the first sentence of paragraph (g) in A-1; in the first and second
sentences of paragraph (a)(1), the first sentence of paragraph (a)(2), and
the first and last sentences in paragraph (b) in A-2; and in A-3.
Par. 6. Section 54.4980B-4 is amended by:
1. Adding a sentence at the end of paragraph (a) in A-1.
2. Removing the language "Q & A-1" and adding "Q & A-4" in its place in the
fifth sentence of paragraph (c) of A-1.
3. Revising the third sentence in paragraph (e) of A-1.
The addition and revision read as follows:
Section 54.4980B-4 Qualifying events.
* * * * *
A-1: (a) * * * See Q & A-1 through Q & A-3 of section 54.4980B-10 for special
rules in the case of leave taken under the Family and Medical Leave Act of
1993 (29 U.S.C. 2601-2619).
* * * * *
(e) * * * For example, an absence from work due to disability, a temporary
layoff, or any other reason (other than due to leave that is FMLA leave; see
section 54.4980B-10) is a reduction of hours of a covered employee's
employment if there is not an immediate termination of employment. * * *
* * * * *
Par. 7. In section 54.4980B-5, the penultimate sentence in paragraph (a) of
A-1 is amended by removing the language "54.4980B-8" and adding "54.4980B-10"
in its place.
Par. 8. In section 54.4980B-6, the Example in paragraph (c) of A-1 is revised
to read as follows:
Example. (i) An unmarried employee without children who is receiving
employer-paid coverage under a group health plan voluntarily terminates
employment on June 1, 2001. The employee is not disabled at the time of the
termination of employment nor at any time thereafter, and the plan does not
provide for the extension of the required periods (as is permitted under
paragraph (b) of Q & A-4 of section 54.4980B-7).
(ii) Case 1: If the plan provides that the employer-paid coverage ends
immediately upon the termination of employment, the election period must
begin not later than June 1, 2001, and must not end earlier than July 31,
2001. If notice of the right to elect COBRA continuation coverage is not
provided to the employee until June 15, 2001, the election period must not
end earlier than August 14, 2001.
(iii) Case 2: If the plan provides that the employer-paid coverage does not
end until 6 months after the termination of employment, the employee does not
lose coverage until December 1, 2001. The election period can therefore begin
as late as December 1, 2001, and must not end before January 30, 2002.
(iv) Case 3: If employer-paid coverage for 6 months after the termination of
employment is offered only to those qualified beneficiaries who waive COBRA
continuation coverage, the employee loses coverage on June 1, 2001, so the
election period is the same as in Case 1. The difference between Case 2 and
Case 3 is that in Case 2 the employee can receive 6 months of employer-paid
coverage and then elect to pay for up to an additional 12 months of COBRA
continuation coverage, while in Case 3 the employee must choose between 6
months of employer-paid coverage and paying for up to 18 months of COBRA
continuation coverage. In all three cases, COBRA continuation coverage need
not be provided for more than 18 months after the termination of employment
(see Q & A-4 of section 54.4980B-7), and in certain circumstances might be
provided for a shorter period (see Q & A-1 of section 54.4980B-7).
* * * * *
Par. 9. Section 54.4980B-7 is amended by:
1. Revising paragraph (a) of A-1.
2. Adding Q & A-4.
3. Revising the second sentence in paragraph (c) of A-5.
4. Revising paragraph (b) of Q & A-6.
5. Removing the language "Q & A-1" and adding "Q & A-4" in its place in
paragraph (a) of A-7.
The addition and revisions read as follows:
Section 54.4980B-7 Duration of COBRA continuation coverage.
* * * * *
A-1: (a) Except for an interruption of coverage in connection with a waiver,
as described in Q & A-4 of section 54.4980B-6, COBRA continuation coverage
that has been elected for a qualified beneficiary must extend for at least
the period beginning on the date of the qualifying event and ending not
before the earliest of the following dates --
(1) The last day of the maximum coverage period (see Q & A-4 of this
section);
(2) The first day for which timely payment is not made to the plan with
respect to the qualified beneficiary (see Q & A-5 in section 54.4980B-8);
(3) The date upon which the employer or employee organization ceases to
provide any group health plan (including successor plans) to any employee;
(4) The date, after the date of the election, upon which the qualified
beneficiary first becomes covered under any other group health plan, as
described in Q & A-2 of this section;
(5) The date, after the date of the election, upon which the qualified
beneficiary first becomes entitled to Medicare benefits, as described in Q &
A-3 of this section; and
(6) In the case of a qualified beneficiary entitled to a disability extension
(see Q & A-5 of this section), the later of --
(i) Either 29 months after the date of the qualifying event, or the first day
of the month that is more than 30 days after the date of a final
determination under Title II or XVI of the Social Security Act (42 U.S.C.
401-433 or 1381-1385) that the disabled qualified beneficiary whose
disability resulted in the qualified beneficiary's being entitled to the
disability extension is no longer disabled, whichever is earlier; or
(ii) The end of the maximum coverage period that applies to the qualified
beneficiary without regard to the disability extension.
* * * * *
Q-4: When does the maximum coverage period end?
A-4: (a) Except as otherwise provided in this Q & A-4, the maximum coverage
period ends 36 months after the qualifying event. The maximum coverage period
for a qualified beneficiary who is a child born to or placed for adoption
with a covered employee during a period of COBRA continuation coverage is the
maximum coverage period for the qualifying event giving rise to the period of
COBRA continuation coverage during which the child was born or placed for
adoption. Paragraph (b) of this Q & A-4 describes the starting point from
which the end of the maximum coverage period is measured. The date that the
maximum coverage period ends is described in paragraph (c) of this Q & A-4 in
a case where the qualifying event is a termination of employment or reduction
of hours of employment, in paragraph (d) of this Q & A-4 in a case where a
covered employee becomes entitled to Medicare benefits under Title XVIII of
the Social Security Act (42 U.S.C. 1395-1395ggg) before experiencing a
qualifying event that is a termination of employment or reduction of hours of
employment, and in paragraph (e) of this Q & A-4 in the case of a qualifying
event that is the bankruptcy of the employer. See Q & A-8 of section
54.4980B-2 for limitations that apply to certain health flexible spending
arrangements. See also Q & A-6 of this section in the case of multiple
qualifying events. Nothing in sections 54.4980B-1 through 54.4980B-10
prohibits a group health plan from providing coverage that continues beyond
the end of the maximum coverage period.
(b)(1) The end of the maximum coverage period is measured from the date of
the qualifying event even if the qualifying event does not result in a loss
of coverage under the plan until a later date. If, however, coverage under
the plan is lost at a later date and the plan provides for the extension of
the required periods, then the maximum coverage period is measured from the
date when coverage is lost. A plan provides for the extension of the required
periods if it provides both --
(i) That the 30-day notice period (during which the employer is required to
notify the plan administrator of the occurrence of certain qualifying events
such as the death of the covered employee or the termination of employment or
reduction of hours of employment of the covered employee) begins on the date
of the loss of coverage rather than on the date of the qualifying event; and
(ii) That the end of the maximum coverage period is measured from the date of
the loss of coverage rather than from the date of the qualifying event.
(2) In the case of a plan that provides for the extension of the required
periods, whenever the rules of sections 54.4980B-1 through 54.4980B-10 refer
to the measurement of a period from the date of the qualifying event, those
rules apply in such a case by measuring the period instead from the date of
the loss of coverage.
(c) In the case of a qualifying event that is a termination of employment or
reduction of hours of employment, the maximum coverage period ends 18 months
after the qualifying event if there is no disability extension, and 29 months
after the qualifying event if there is a disability extension. See Q & A-5 of
this section for rules to determine if there is a disability extension. If
there is a disability extension and the disabled qualified beneficiary is
later determined to no longer be disabled, then a plan may terminate the
COBRA continuation coverage of an affected qualified beneficiary before the
end of the disability extension; see paragraph (a)(6) in Q & A-1 of this
section.
(d)(1) If a covered employee becomes entitled to Medicare benefits under
Title XVIII of the Social Security Act (42 U.S.C. 1395-1395ggg) before
experiencing a qualifying event that is a termination of employment or
reduction of hours of employment, the maximum coverage period for qualified
beneficiaries other than the covered employee ends on the later of --
(i) 36 months after the date the covered employee became entitled to Medicare
benefits; or
(ii) 18 months (or 29 months, if there is a disability extension) after the
date of the covered employee's termination of employment or reduction of
hours of employment.
(2) See paragraph (b) of Q & A-3 of this section regarding when a covered
employee becomes entitled to Medicare benefits.
(e) In the case of a qualifying event that is the bankruptcy of the employer,
the maximum coverage period for a qualified beneficiary who is the retired
covered employee ends on the date of the retired covered employee's death.
The maximum coverage period for a qualified beneficiary who is the spouse,
surviving spouse, or dependent child of the retired covered employee ends on
the earlier of --
(1) The date of the qualified beneficiary's death; or
(2) The date that is 36 months after the death of the retired covered
employee.
* * * * *
A-5: * * *
(c) * * * For this purpose, the period of the first 60 days of COBRA
continuation coverage is measured from the date of the qualifying event
described in paragraph (b) of this Q & A-5 (except that if a loss of coverage
would occur at a later date in the absence of an election for COBRA
continuation coverage and if the plan provides for the extension of the
required periods (as described in paragraph (b) of Q & A-4 of this section)
then the period of the first 60 days of COBRA continuation coverage is
measured from the date on which the coverage would be lost). * * *
* * * * *
A-6: * * *
(b) The requirements of this paragraph (b) are satisfied if a qualifying
event that gives rise to an 18-month maximum coverage period (or a 29-month
maximum coverage period in the case of a disability extension) is followed,
within that 18-month period (or within that 29-month period, in the case of a
disability extension), by a second qualifying event (for example, a death or
a divorce) that gives rise to a 36-month maximum coverage period. (Thus, a
termination of employment following a qualifying event that is a reduction of
hours of employment cannot be a second qualifying event that expands the
maximum coverage period; the bankruptcy of an employer also cannot be a
second qualifying event that expands the maximum coverage period.) In such a
case, the original 18-month period (or 29-month period, in the case of a
disability extension) is expanded to 36 months, but only for those
individuals who were qualified beneficiaries under the group health plan in
connection with the first qualifying event and who are still qualified
beneficiaries at the time of the second qualifying event. No qualifying event
(other than a qualifying event that is the bankruptcy of the employer) can
give rise to a maximum coverage period that ends more than 36 months after
the date of the first qualifying event (or more than 36 months after the date
of the loss of coverage, in the case of a plan that provides for the
extension of the required periods; see paragraph (b) in Q & A-4 of this
section). For example, if an employee covered by a group health plan that is
subject to COBRA terminates employment (for reasons other than gross
misconduct) on December 31, 2000, the termination is a qualifying event
giving rise to a maximum coverage period that extends for 18 months to June
30, 2002. If the employee dies after the employee and the employee's spouse
and dependent children have elected COBRA continuation coverage and on or
before June 30, 2002, the spouse and dependent children (except anyone among
them whose COBRA continuation coverage had already ended for some other
reason) will be able to receive COBRA continuation coverage through December
31, 2003. See Q & A-8(b) of section 54.4980B-2 for a special rule that
applies to certain health flexible spending arrangements.
* * * * *
Par. 10. Sections 54.4980B-9 and 54.4980B-10 are added to read as follows:
Section 54.4980B-9 Business reorganizations and employer withdrawals from
multiemployer plans.
The following questions-and-answers address who has the obligation to make
COBRA continuation coverage available to affected qualified beneficiaries in
the context of business reorganizations and employer withdrawals from
multiemployer plans:
Q-1: For purposes of this section, what are a business reorganization, a
stock sale, and an asset sale?
A-1: For purposes of this section:
(a) A business reorganization is a stock sale or an asset sale.
(b) A stock sale is a transfer of stock in a corporation that causes the
corporation to become a different employer or a member of a different
employer. (See Q & A-2 of section 54.4980B-2, which defines employer to
include all members of a controlled group of corporations.) Thus, for
example, a sale or distribution of stock in a corporation that causes the
corporation to cease to be a member of one controlled group of corporations,
whether or not it becomes a member of another controlled group of
corporations, is a stock sale.
(c) An asset sale is a sale of substantial assets, such as a plant or
division or substantially all the assets of a trade or business.
(d) The rules of section 1.414(b)-1 of this chapter apply in determining what
constitutes a controlled group of corporations, and the rules of sections
1.414(c)-1 through 1.414(c)-5 of this chapter apply in determining what
constitutes a group of trades or businesses under common control.
Q-2: In the case of a stock sale, what are the selling group, the acquired
organization, and the buying group?
A-2: In the case of a stock sale -
(a) The selling group is the controlled group of corporations, or the group
of trades or businesses under common control, of which a corporation ceases
to be a member as a result of the stock sale;
(b) The acquired organization is the corporation that ceases to be a member
of the selling group as a result of the stock sale; and
(c) The buying group is the controlled group of corporations, or the group of
trades or businesses under common control, of which the acquired organization
becomes a member as a result of the stock sale. If the acquired organization
does not become a member of such a group, the buying group is the acquired
organization.
Q-3: In the case of an asset sale, what are the selling group and the buying
group?
A-3: In the case of an asset sale --
(a) The selling group is the controlled group of corporations or the group of
trades or businesses under common control that includes the corporation or
other trade or business that is selling the assets; and
(b) The buying group is the controlled group of corporations or the group of
trades or businesses under common control that includes the corporation or
other trade or business that is buying the assets.
Q-4: Who is an M&A qualified beneficiary?
A-4: (a) Asset sales: In the case of an asset sale, an individual is an M&A
qualified beneficiary if the individual is a qualified beneficiary whose
qualifying event occurred prior to or in connection with the sale and who is,
or whose qualifying event occurred in connection with, a covered employee
whose last employment prior to the qualifying event was associated with the
assets being sold.
(b) Stock sales: In the case of a stock sale, an individual is an M&A
qualified beneficiary if the individual is a qualified beneficiary whose
qualifying event occurred prior to or in connection with the sale and who is,
or whose qualifying event occurred in connection with, a covered employee
whose last employment prior to the qualifying event was with the acquired
organization.
(c) In the case of a qualified beneficiary who has experienced more than one
qualifying event with respect to her or his current right to COBRA
continuation coverage, the qualifying event referred to in paragraphs (a) and
(b) of this Q & A-4 is the first qualifying event.
Q-5: In the case of a stock sale, is the sale a qualifying event with respect
to a covered employee who is employed by the acquired organization before the
sale and who continues to be employed by the acquired organization after the
sale, or with respect to the spouse or dependent children of such a covered
employee?
A-5: No. A covered employee who continues to be employed by the acquired
organization after the sale does not experience a termination of employment
as a result of the sale. Accordingly, the sale is not a qualifying event with
respect to the covered employee, or with respect to the covered employee's
spouse or dependent children, regardless of whether they are provided with
group health coverage after the sale, and neither the covered employee, nor
the covered employee's spouse or dependent children, become qualified
beneficiaries as a result of the sale