Travis Software Official Blog

In 2010, the court in Hearst v. Progressive Foam Technologies, Inc. ruled that the TPA raised a presumption of COBRA compliance regarding the mailing of an election notice by presenting a daily “manifest” of notices that was date-stamped by the U.S. Postal Service. In addition to the proof of mailing by the post office, the TPA also showed that, upon notice of a qualifying event, there was a systematic process used to print and mail COBRA election notices to individuals. The case primarily focused on alleged retaliation regarding the QB’s FMLA leave, but included this COBRA violation allegation as well.

For our TravisFlex customers that utilize the Evolution Debit Card module, this recent guidance by the IRS is important information.

The IRS recently announced that health flexible spending arrangements (FSAs) and health reimbursement arrangements (HSAs) may continue to utilize debit cards for the purchase of prescribed over-the-counter medications and drugs. IRS Notice 2011-5 represents a change in position, because the IRS had previously issued a notice prohibiting the use of health FSA and HRA debit cards for purchases of over-the-counter medicines or drugs. As you may be aware, effective on and after January 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription (except for insulin). For purposes of this Notice, a “prescription” means a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in such state.

Recently, the Missouri Western District Court acknowledged an employer’s effort of “good faith” compliance, evidenced by implementing a COBRA notice tracking program, which provided an ability to show documentation and proof of the mailing of correspondence. This statement further confirms the value that TravisCobra and WebCOBRA may have in a case where penalties for non-compliance with COBRA requirements are being sought.

Most COBRA issues that result in litigation are settled prior to trial, and in those cases there is no public record of a judge’s rulings. A recent COBRA-related case actually went to trial and the ruling issued by a Federal District judge confirmed that the letters generated by Travis’ systems were “precise” and “unambiguous.” The case is Ratcliff v. Psychiatric Solutions, Inc., 2010WL 2814418 (W.D. La., July 16, 2010).

On March 2, 1010, the American Recovery and Reinvestment Act of 2009 (“ARRA”) was amended by the Temporary Extension Act of 2010 (H.R. 4691) (the “Act”) which, among other things, extends eligibility for the COBRA premium subsidy through March 31, 2010. The Act also includes a measure that extends premium assistance to eligible individuals that had or have a reduction of hours between September 1, 2008 and March 31, 2010 but did not elect COBRA coverage due to that qualifying event, and that later incur an involuntary termination of employment on or after March 2, 2010. Plan Administrators have new election period and notice responsibilities for such individuals.

Now that the Department of Defense Appropriation Act, 2010 DODAA, 2010, or H.R. 3326)has passed the Senate, Congress has given a Christmas gift to several hundred thousand existing COBRA qualifying beneficiaries and to others who lose their coverage during the first two months of 2010. An extension of the 65% ARRA subsidy of COBRA premiums from nine to fifteen months, and possible eligibility for the subsidy to those who have COBRA qualifying events of termination through February 28, 2010.

While Congress is considering extending the COBRA Premium subsidy provided by ARRA there remains the possibility that January 1, 2010 will come and go without ARRA being extended. If no extension is enacted, those who have qualifying events in 2010 will not be eligible to become Assistance Eligible Individuals (AEIs) under ARRA, as ARRA only provides for subsidy for those who have qualifying events between September 1, 2008 and December 31, 2009.