Three landmark pieces of legislation have been enacted within the last forty years; ERISA, COBRA and HIPAA. Each one of these laws was created to foster development and improvement in the welfare of the wage earners, job seekers, and retirees of the United States. The mainstays of these three pieces of legislation are to improve working conditions; to add advanced opportunities for profitable employment, protect employees, and to assure work related benefits and rights.
What is ERISA? ERISA stands for Employee Retirement Income Security Act. ERISA regulates the establishment and implementation of discretionary benefits practices. Since its enactment in 1974, ERISA has been amended to meet the changing retirement and health care needs of employees, retirees, and their families. The provisions of ERISA, which are administered by the U.S. Department of Labor, were enacted to address public concern that funds of private pension plans were being mismanaged and abused. ERISA was the culmination of a long line of legislation concerned with the labor and tax aspects of employee benefit plans. The benefits of ERISA were originally implemented to provide medical insurance, life insurance, disability coverage, and pension programs. The main goal of ERISA is to protect the interests of participants and their beneficiaries through employee benefit plans. Among other things, ERISA requires that sponsors of private employee benefit plans provide those who are participants and beneficiaries with adequate information regarding their individual plans. Also, those individuals and companies who participated must meet certain standards of conduct, derived from the common law of trusts and made applicable to all fiduciaries. The law also contains detailed provisions for reporting to the government and disclosure to participants. Thus, there are civil enforcement provisions aimed at assuring that plan funds are protected and that participants who qualify receive their benefits. As time passed, Congress added new provisions to ERISA, including the Consolidated Omnibus Budget Reconciliation Act (COBRA), which was enacted in 1985, and the Health Insurance Portability and Accountability Act (HIPAA) of 1996.
Congress enacted COBRA as a provision of ERISA to provide continued coverage for those who have lost their employment, including terminated employees; this law is also responsible for amending the Internal Revenue Code and the Public Health Service Act. The three main elements to qualify for COBRA are specific criteria regarding plans, qualified beneficiaries, and qualifying events. Group health plans for any employer who has 20+ employees for more than half the fiscal year is subject to COBRA. Qualified beneficiaries outlined by COBRA include any individual covered by the plan, including the employees spouse and dependent children; qualifying events are outlined by COBRA and specific causes for loss of health coverage that makes individuals eligible for benefits. COBRA is also used to notify, track, and document facets of compliance in accordance with outlined statutes.
To fully understand COBRA, it is necessary to know the meanings of qualifying events, qualified beneficiaries, and continuation coverage. These qualifying events include, death of the covered employee, termination or reduction in hours of employment, divorce or legal separation, dependent child ceasing to meet the health plan’s definition of a dependent child, and covered employee becoming eligible to Medicare benefits under the Social Security Act. Qualified beneficiaries include the covered employees themselves when the qualifying event is termination of employment (other than by reason of misconduct) or a reduction in work hours. Beneficiaries are responsible for paying the insurance premium. Companies are permitted to charge COBRA beneficiaries a premium for continuation coverage of up to 102 percent of the cost of the coverage to the plan.
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