Notice of Proposed Rulemaking for Health Coverage Portability: Tolling Certain Time Periods and Interaction With the Family and Medical Leave Act Under HIPAA Titles I and IV

Par. 2. Section 54.9801-1 is amended in paragraph (a)(1) by removing the language “54.9801-6” and adding “54.9801-7” in its place.

Par. 3. Section 54.9801-2 is amended in the first sentence by removing the language “54.9801-6” and adding “54.9801-7” in its place.

Par. 4. Section 54.9801-4 is amended by:

a. Revising paragraphs (b)(2)(iii) and (b)(2)(iv).

b. Adding Examples 4 and 6 in paragraph (b)(2)(v).

The revisions and additions read as follows:

(b) Standard method. * * *

(2) Counting creditable coverage. * * *

(iii) Significant break in coverage defined. A significant break in coverage means a period of 63 consecutive days during each of which an individual does not have any creditable coverage, except that periods described in paragraph (b)(2)(iv) of this section are not taken into account in determining a significant break in coverage. (See section 731(b)(2)(iii) of ERISA and section 2723(b)(2)(iii) of the PHS Act, which exclude from preemption state insurance laws that require a break of more than 63 days before an individual has a significant break in coverage for purposes of state law.)

(iv) Periods that toll a significant break. Days in a waiting period and days in an affiliation period are not taken into account in determining whether a significant break in coverage has occurred. In addition, for an individual who elects COBRA continuation coverage during the second election period provided under the Trade Act of 2002, the days between the date the individual lost group health plan coverage and the first day of the second COBRA election period are not taken into account in determining whether a significant break in coverage has occurred. Moreover, in the case of an individual whose coverage ceases, if a certificate of creditable coverage with respect to that cessation is not provided on or before the date coverage ceases, then the period that begins on the first date that an individual has no creditable coverage and that continues through the earlier of the following two dates is not taken into account in determining whether a significant break in coverage has occurred:

(A) The date that a certificate of creditable coverage with respect to that cessation is provided; or

(B) The date 44 days after coverage ceases.

(v) Examples. * * *

Example 4.

(i) Facts. Individual B terminates coverage under a group health plan, and a certificate of creditable coverage is provided 10 days later. B begins employment with Employer R and begins enrollment in R's plan 60 days after the certificate is provided.

(ii) Conclusion. In this Example 4, even though B had no coverage for 69 days, the 10 days before the certificate of creditable coverage is provided are not taken into account in determining a significant break in coverage. Therefore, B's break in coverage is only 59 days and is not a significant break in coverage. Accordingly, B's prior coverage must be counted by R's plan.

Example 6.

(i) Facts. Employer V sponsors a group health plan. Under the terms of the plan, the only benefits provided are those provided under an insurance policy. Individual D works for V and has creditable coverage under V's plan. V fails to pay the issuer the premiums for the coverage period beginning March 1. Consistent with applicable state law, the issuer terminates the policy so that the last day of coverage is April 30. V goes out of business on July 31. On August 15 D begins employment with Employer W and enrolls in W's group health plan. W's plan imposes a 12-month preexisting condition exclusion on all enrollees. D never receives a certificate of creditable coverage for coverage under V's plan.

(ii) Conclusion. In this Example 6, the period from May 1 (the first day without coverage) through June 13 (the date 44 days after coverage under V's plan ceases) is not taken into account in determining a 63-day break in coverage. This is because, in cases in which a certificate of creditable coverage is not provided by the date coverage is lost, the break begins on the date the certificate is provided, or the date 44 days after coverage ceases, if earlier. Therefore, even though D's actual period without coverage was 106 days (May 1 through August 14), because the period from May 1 through June 13 is not taken into account, D's break in coverage is only 62 days (June 14 through August 14). Thus, D has not experienced a significant break in coverage, and D's prior coverage must be counted by W's plan.

Par. 5. Section 54.9801-5 is amended by:

a. Redesignating paragraphs (a)(3)(ii)(H)(5) and (6) as paragraphs (a)(3)(ii)(H)(6) and (7), respectively.

b. Adding a new paragraph (a)(3)(ii)(H)(5).

The addition reads as follows:

(a) Certificate of creditable coverage. * * *

(3) Form and content of certificate. * * *

(ii) Required information. * * *

(H) * * *

(5) The interaction with the Family and Medical Leave Act;

Par. 6. Section 54.9801-6 is amended by:

a. Revising paragraph (a)(1).

b. Revising paragraph (a)(4).

c. Revising paragraph (b)(1).

d. Revising paragraph (b)(3).

e. Revising Example 2 in paragraph (b)(4).

f. Adding Examples 3, 4, and 5 in paragraph (b)(4).

The additions and revisions read as follows:

(a) Special enrollment for certain individuals who lose coverage—(1) In general. A group health plan is required to permit current employees and dependents (as defined in § 54.9801-2) who are described in paragraph (a)(2) of this section to enroll for coverage under the terms of the plan if the conditions in paragraph (a)(3) of this section are satisfied. Paragraph (a)(4) of this section describes procedures that a plan may require an employee to follow and describes the date by which coverage must begin. The special enrollment rights under this paragraph (a) apply without regard to the dates on which an individual would otherwise be able to enroll under the plan. (See section 701(f)(1) of ERISA and section 2701(f)(1) of the PHS Act, under which this obligation is also imposed on a health insurance issuer offering group health insurance coverage.)

(4) Applying for special enrollment and effective date of coverage—(i) Request. A plan must allow an employee a period of at least 30 days after an event described in paragraph (a)(3) of this section (loss of eligibility for coverage, termination of employer contributions, or exhaustion of COBRA continuation coverage) to request enrollment (for the employee or the employee's dependent). For this purpose, any written or oral request made to any of the following constitutes a request for enrollment —

(A) The plan administrator;

(B) An issuer offering health insurance coverage under the plan;

(C) A person who customarily handles claims for the plan (such as a third party administrator); or

(D) Any other designated representative.

(ii) Tolling of period for requesting special enrollment. (A) In the case of an individual whose coverage ceases, if a certificate of creditable coverage with respect to that cessation is not provided on or before the date coverage ceases, then the period for requesting special enrollment described in paragraph (a)(4)(i) of this section does not end until 30 days after the earlier of —

(1) The date that a certificate of creditable coverage with respect to that cessation is provided; or

(2) The date 44 days after coverage ceases.

(B) For purposes of this paragraph (a)(4), if an individual's coverage ceases due to the operation of a lifetime limit on all benefits, coverage is considered to cease on the earliest date that a claim is denied due to the operation of the lifetime limit. (Nonetheless, the date of a loss of eligibility for coverage is determined under the rules of paragraph (a)(3) of this section, which provides that a loss of eligibility occurs when a claim that would meet or exceed a lifetime limit on all benefits is incurred, not when it is denied.)

(C) The rules of this paragraph (a)(4)(ii) are illustrated by the following examples:

Example 1.

(i) Facts. Employer V provides group health coverage through a policy provided by Issuer M. Individual D works for V and is covered under V's plan. V fails to pay M the premiums for the coverage period beginning March 1. Consistent with applicable state law, M terminates the policy so that the last day of coverage is April 30. On May 15, M provides D with a certificate of creditable coverage with respect to D's cessation of coverage under V's plan.

(ii) Conclusion. In this Example 1, the period to request special enrollment ends no earlier than June 14 (which is 30 days after May 15, the day a certificate of creditable coverage is provided with respect to D).

Example 2.

(i) Facts. Same facts as Example 1, except D is never provided with a certificate of creditable coverage.

(ii) Conclusion. In this Example 2, the period to request special enrollment ends no earlier than July 13. (July 13 is 74 days after April 30, the date coverage ceases. That is, July 13 is 30 days after the end of the 44-day maximum tolling period.)

Example 3.

(i) Facts. Individual E works for Employer W and has coverage under W's plan. W's plan has a lifetime limit of $1 million on all benefits under the plan. On September 13, E incurs a claim that would exceed the plan's lifetime limit. On September 28, W denies the claim due to the operation of the lifetime limit and a certificate of creditable coverage is provided on October 3. E is otherwise eligible to enroll in the group health plan of the employer of E's spouse.

(ii) Conclusion. In this Example 3, the period to request special enrollment in the plan of the employer of E's spouse ends no earlier than November 2 (30 days after the date the certificate is provided) and begins not later than September 13, the date E lost eligibility for coverage.

(iii) Reasonable procedures for special enrollment. After an individual has requested enrollment under paragraph (a)(4)(i) of this section, a plan may require the individual to complete enrollment materials within a reasonable time after the end of the 30-day period described in paragraph (a)(4)(i) of this section. In these enrollment materials, the plan may require the individual only to provide information required of individuals who enroll when first eligible and information about the event giving rise to the special enrollment right. A plan may establish a deadline for receiving completed enrollment materials, but such a deadline must be extended for information that an individual making reasonable efforts does not obtain by that deadline.

(iv) Date coverage must begin. If the plan requires completion of additional enrollment materials in accordance with paragraph (a)(4)(iii) of this section, coverage must begin no later than the first day of the first calendar month beginning after the date the plan receives enrollment materials that are substantially complete. If the plan does not require completion of additional enrollment materials, coverage must begin no later than the first day of the first calendar month beginning after the date the plan receives the request for special enrollment under paragraph (a)(4)(i) of this section.

(b) Special enrollment with respect to certain dependent beneficiaries—(1) In general. A group health plan that makes coverage available with respect to dependents is required to permit individuals described in paragraph (b)(2) of this section to be enrolled for coverage in a benefit package under the terms of the plan. Paragraph (b)(3) of this section describes procedures that a plan may require an individual to follow and describes the date by which coverage must begin. The special enrollment rights under this paragraph (b) apply without regard to the dates on which an individual would otherwise be able to enroll under the plan. (See 29 CFR 2590.701-6(b) and 45 CFR 146.117(b), under which this obligation is also imposed on a health insurance issuer offering group health insurance coverage.)

(3) Applying for special enrollment and effective date of coverage—(i) Request. A plan must allow an individual a period of at least 30 days after the date of the marriage, birth, adoption, or placement for adoption (or, if dependent coverage is not generally made available at the time of the marriage, birth, adoption, or placement for adoption, a period of at least 30 days after the date the plan makes dependent coverage generally available) to request enrollment (for the individual or the individual's dependent). For this purpose, any written or oral request made to any of the following constitutes a request for enrollment—

(A) The plan administrator;

(B) An issuer offering health insurance coverage under the plan;

(C) A person who customarily handles claims for the plan (such as a third party administrator); or

(D) Any other designated representative.

(ii) Reasonable procedures for special enrollment. After an individual has requested enrollment under paragraph (b)(3)(i) of this section, a plan may require the individual to complete enrollment materials within a reasonable time after the end of the 30-day period described in paragraph (b)(3)(i) of this section. In these enrollment materials, the plan may require the individual only to provide information required of individuals who enroll when first eligible and information about the event giving rise to the special enrollment right. A plan may establish a deadline for receiving completed enrollment materials, but such a deadline must be extended for information that an individual making reasonable efforts does not obtain by that deadline.

(iii) Date coverage must begin—(A) Marriage. In the case of marriage, if the plan requires completion of additional enrollment materials in accordance with paragraph (b)(3)(ii) of this section, coverage must begin no later than the first day of the first calendar month beginning after the date the plan receives enrollment materials that are substantially complete. If the plan does not require such additional enrollment materials, coverage must begin no later than the first day of the first calendar month beginning after the date the plan receives the request for special enrollment under paragraph (b)(3)(i) of this section.

(B) Birth, adoption, or placement for adoption. Coverage must begin in the case of a dependent's birth on the date of birth and in the case of a dependent's adoption or placement for adoption no later than the date of such adoption or placement for adoption (or, if dependent coverage is not made generally available at the time of the birth, adoption, or placement for adoption, the date the plan makes dependent coverage available). If the plan requires completion of additional enrollment materials in accordance with paragraph (b)(3)(ii) of this section, the plan must provide benefits (including benefits retroactively to the date of birth, adoption, or placement for adoption) once the plan receives enrollment materials that are substantially complete.

(4) Examples. * * *

Example 2.

(i) Facts. Individual D works for Employer X. X maintains a group health plan with two benefit packages—an HMO option and an indemnity option. Self-only and family coverage are available under both options. D enrolls for self-only coverage in the HMO option. Then, a child, E, is placed for adoption with D. Within 30 days of the placement of E for adoption, D requests enrollment for D and E under the plan's indemnity option and submits completed enrollment materials timely.

(ii) Conclusion. In this Example 2, D and E satisfy the conditions for special enrollment under paragraphs (b)(2)(v) and (b)(3) of this section. Therefore, the plan must allow D and E to enroll in the indemnity coverage, effective as of the date of the placement for adoption.

Example 3.

(i) Facts. Same facts as Example 1. On March 17 (two days after the birth of C), A telephones the plan administrator and requests special enrollment of A, B, and C. The plan administrator sends A an enrollment form. Under the terms of the plan, enrollment is denied unless a completed form is submitted within 30 days of the event giving rise to the special enrollment right (in this case, C's birth).

(ii) Conclusion. In this Example 3, the plan does not satisfy paragraph (b)(3) of this section. The plan may require only that A request enrollment during the 30-day period after C's birth. A did so by telephoning the plan administrator. The plan may not condition special enrollment on filing additional enrollment materials during the 30-day period. To comply with paragraph (b)(3) of this section, the plan must allow A a reasonable time after the end of the 30-day period to submit any additional enrollment materials. Once these enrollment materials are received, the plan must allow whatever coverage is chosen to begin on March 15, the date of C's birth.

Example 4.

(i) Facts. Same facts as Example 3, except that A telephones the plan administrator to request enrollment on April 13 (29 days after C's birth). Also, under the terms of the plan, the deadline for submitting the enrollment form is 14 days after the end of the 30-day period for requesting special enrollment (thus, in this case, April 28, which is 44 days after C's birth). The form requests the same information for A, B, and C (name, date of birth, and place of birth) as well as a copy of C's birth certificate. A fills out the enrollment form and delivers it to the plan administrator on April 28. At that time A does not have a birth certificate for C but applies on that day for one from the appropriate government office. A receives the birth certificate on June 1 and furnishes a copy of the birth certificate to the plan administrator shortly thereafter.

(ii) Conclusion. In this Example 4, A, B, and C are entitled to special enrollment under the plan even though A did not satisfy the plan's requirement of providing a copy of C's birth certificate by the plan's 14-day deadline. While a plan may establish such a deadline, the plan must extend the deadline for information that an individual making reasonable efforts does not obtain by that deadline. A delivered the enrollment form to the plan administrator by the deadline and made reasonable efforts to furnish the birth certificate that the plan requires.

Example 5.

(i) Facts. Same facts as Example 4. On May 3 (after A has delivered the enrollment form to the plan administrator but before A provides the birth certificate) A submits claims for all medical expenses incurred for B and C from the date of C's birth.

(ii) Conclusion. In this Example 5, the plan must pay all of the claims submitted by A. Because the plan requires that individuals seeking special enrollment complete additional enrollment materials, it is required to provide benefits once it receives enrollment materials that are substantially complete. The form that A submitted on April 28 was substantially complete. Because C's birth is the event giving rise to the special enrollment right, on April 28 A, B, and C become entitled to benefits under the plan retroactive to the date of C's birth.

Par. 7. A new § 54.9801-7 is added to read as follows:

(a) In general. The rules of §§ 54.9801-1 through 54.9801-6 apply with respect to an individual on leave under the Family and Medical Leave Act of 1993 (29 U.S.C. 2601) (FMLA), and apply with respect to a dependent of such an individual, except to the extent otherwise provided in this section.

(b) Tolling of significant break in coverage during FMLA leave. In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and does not continue group health coverage for any period of FMLA leave, that period is not taken into account in determining whether a significant break in coverage has occurred under § 54.9801-4(b)(2)(iii).

(c) Application of certification provisions—(1) Timing of issuance of certificate—(i) In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and the individual's group health coverage is terminated during FMLA leave, an automatic certificate must be provided in accordance with the timing rules set forth in § 54.9801-5(a)(2)(ii)(B) (which generally require plans to provide certificates within a reasonable time after coverage ceases).

(ii) In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and continues group health coverage for the period of FMLA leave, but then ceases coverage under the plan at the end of FMLA leave, an automatic certificate must be provided in accordance with the timing rules set forth in § 54.9801-5(a)(2)(ii)(A) (which generally require plans to provide a certificate no later than the time a notice is required to be furnished for a qualifying event under a COBRA continuation provision).

(2) Demonstrating FMLA leave. (i) A plan is required to take into account all information about FMLA leave that it obtains or that is presented on behalf of an individual. A plan must treat the individual as having been on FMLA leave for a period if —

(A) The individual attests to the period of FMLA leave; and

(B) The individual cooperates with the plan's efforts to verify the individual's FMLA leave.

(ii) Nothing in this section prevents a plan from modifying its initial determination of FMLA leave if it determines that the individual did not have the claimed FMLA leave, provided that the plan follows procedures for reconsideration similar to those set forth in § 54.9801-3(f).

(d) Relationship to loss of eligibility special enrollment rules. In the case of an individual (or a dependent of the individual) who is covered under a group health plan and who takes FMLA leave, a loss of eligibility for coverage under § 54.9801-6(a) occurs when the period of FMLA leave ends if—

(1) The individual's group health coverage is terminated at any time during FMLA leave; and

(2) The individual does not return to work for the employer at the end of FMLA leave.

Par. 8. Section 54.9831-1 is amended by:

a. Adding paragraph (a)(2).

b. Revising paragraph (b).

c. Revising paragraph (c)(1).

d. By adding paragraph (e).

The additions and revisions read as follows:

(a) Group health plan. * * *

(2) Determination of number of plans. The number of group health plans that an employer or employee organization (including for this purpose a joint board of trustees of a multiemployer trust affiliated with one or more multiemployer plans) maintains is determined under the rules of this paragraph (a)(2).

(i) Except as provided in paragraph (a)(2)(ii) or (iii) of this section, health care benefits provided by a corporation, partnership, or other entity or trade or business, or by an employee organization, constitute one group health plan, unless—

(A) It is clear from the instruments governing the arrangement or arrangements to provide health care benefits that the benefits are being provided under separate plans; and

(B) The arrangement or arrangements are operated pursuant to such instruments as separate plans.

(ii) A multiemployer plan and a nonmultiemployer plan are always separate plans.

(iii) If a principal purpose of establishing separate plans is to evade any requirement of law, then the separate plans will be considered a single plan to the extent necessary to prevent the evasion.

(b) General exception for certain small group health plans. The requirements of §§ 54.9801-1 through 54.9801-7, 54.9802-1, 54.9802-2, 54.9811-1T, 54.9812-1T, and 54.9833-1 do not apply to any group health plan for any plan year if, on the first day of the plan year, the plan has fewer than two participants who are current employees.

(c) Excepted benefits—(1) In general. The requirements of §§ 54.9801-1 through 54.9801-7, 54.9802-1, 54.9802-2, 54.9811-1T, 54.9812-1T, and 54.9833-1 do not apply to any group health plan in relation to its provision of the benefits described in paragraph (c)(2), (3), (4), or (5) of this section (or any combination of these benefits).

(e) Determining the average number of employees—(1) Scope. Whenever the application of a rule in this part depends upon the average number of employees employed by an employer, the determination of that number is made in accordance with the rules of this paragraph (e).

(2) Full-time equivalents. The average number of employees is determined by calculating the average number of full-time equivalents on business days during the preceding calendar year.

(3) Methodology. For the preceding calendar year, the average number of full-time equivalents is determined by—

(i) Determining the number of employees who were employed full-time by the employer throughout the entire calendar year;

(ii) Totaling all employment hours (not to exceed 40 hours per week) for each part-time employee, and for each full-time employee who was not employed full-time with the employer throughout the entire calendar year;

(iii) Dividing the total determined under paragraph (e)(3)(ii) of this section by a figure that represents the annual full-time hours under the employer's general employment practices, such as 2,080 hours (although for this purpose not more than 40 hours per week may be used); and

(iv) Adding the quotient determined under paragraph (e)(3)(iii) of this section to the number determined under paragraph (e)(3)(i).

(4) Rounding. For purposes of paragraph (e)(3)(iv) of this section, all fractions are disregarded. For instance, a figure of 50.9 is deemed to be 50.

(5) Employers not in existence in the preceding year. In the case of an employer that was in existence for less than the entire preceding calendar year (including an employer that was not in existence at all), a determination of the average number of employees that the employer employs is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year.

(6) Scope of the term “employer.” For purposes of this paragraph (e), employer includes any predecessor of the employer. In addition, all persons treated as a single employer under section 414(b), (c), (m), or (o) are treated as one employer.

(7) Special rule for multiemployer plans. (i) With respect to the application of a rule in this part to a multiemployer plan (as defined in section 3(37) of ERISA), each employer with at least one employee participating in the plan is considered to employ the same average number of employees. That number is the highest number that results by applying the rules of paragraphs (e)(1) through (6) of this section separately to each of the employers.

(ii) The rules of this paragraph (e)(7) are illustrated by the following example:

Example.

(i) Facts. Twenty five employers have at least one employee who participates in Multiemployer Plan M. Among these 25 employers, Employer K has 51 employees, determined under the rules of paragraphs (e)(1) through (6) of this section. Each of the other 24 employers has fewer than 50 employees.

(ii) Conclusion. With respect to the application of a rule in this part to M, each of the 25 employers is considered to employ 51 employees.

Mark E. Matthews,

Deputy Commissioner for Services and Enforcement, Internal Revenue Service.

(b) Standard method. * * *

(2) Counting creditable coverage. * * *

(iii) Significant break in coverage defined. A significant break in coverage means a period of 63 consecutive days during each of which an individual does not have any creditable coverage, except that periods described in paragraph (b)(2)(iv) of this section are not taken into account in determining a significant break in coverage. (See also § 2590.731(c)(2)(iii) regarding the applicability to issuers of state insurance laws that require a break of more than 63 days before an individual has a significant break in coverage for purposes of state insurance law.)

(iv) Periods that toll a significant break. Days in a waiting period and days in an affiliation period are not taken into account in determining whether a significant break in coverage has occurred. In addition, for an individual who elects COBRA continuation coverage during the second election period provided under the Trade Act of 2002, the days between the date the individual lost group health plan coverage and the first day of the second COBRA election period are not taken into account in determining whether a significant break in coverage has occurred. Moreover, in the case of an individual whose coverage ceases, if a certificate of creditable coverage with respect to that cessation is not provided on or before the date coverage ceases, then the period that begins on the first date that an individual has no creditable coverage and that continues through the earlier of the following two dates is not taken into account in determining whether a significant break in coverage has occurred:

(A) The date that a certificate of creditable coverage with respect to that cessation is provided; or

(B) The date 44 days after coverage ceases.

(v) Examples. The rules of this paragraph (b)(2) are illustrated by the following examples:

Example 4.

(i) Facts. Individual B terminates coverage under a group health plan, and a certificate of creditable coverage is provided 10 days later. B begins employment with Employer R and begins enrollment in R's plan 60 days after the certificate is provided.

(ii) Conclusion. In this Example 4, even though B had no coverage for 69 days, the 10 days before the certificate of creditable coverage is provided are not taken into account in determining a significant break in coverage. Therefore, B's break in coverage is only 59 days and is not a significant break in coverage. Accordingly, B's prior coverage must be counted by R's plan.

Example 6.

(i) Facts. Employer V sponsors a group health plan. Under the terms of the plan, the only benefits provided are those provided under an insurance policy. Individual D works for V and has creditable coverage under V's plan. V fails to pay the issuer the premiums for the coverage period beginning March 1. Consistent with applicable state law, the issuer terminates the policy so that the last day of coverage is April 30. V goes out of business on July 31. On August 15 D begins employment with Employer W and enrolls in W's group health plan. W's plan imposes a 12-month preexisting condition exclusion on all enrollees. D never receives a certificate of creditable coverage for coverage under V's plan.

(ii) Conclusion. In this Example 6, the period from May 1 (the first day without coverage) through June 13 (the date 44 days after coverage under V's plan ceases) is not taken into account in determining a 63-day break in coverage. This is because, in cases in which a certificate of creditable coverage is not provided by the date coverage is lost, the break begins on the date the certificate is provided, or the date 44 days after coverage ceases, if earlier. Therefore, even though D's actual period without coverage was 106 days (May 1 through August 14), because the period from May 1 through June 13 is not taken into account, D's break in coverage is only 62 days (June 14 through August 14). Thus, D has not experienced a significant break in coverage, and D's prior coverage must be counted by W's plan.

3. Section 2590.701-5 is amended by redesignating paragraphs (a)(3)(ii)(H)(5) and (6) as paragraphs (a)(3)(ii)(H)(6) and (7), respectively, and by adding a new paragraph (a)(3)(ii)(H)(5) as follows:

(a) Certificate of creditable coverage. * * *

(3) Form and content of certificate. * * *

(ii) Required information. * * *

(H) * * *

(5) The interaction with the Family and Medical Leave Act;

4. Section 2590.701-6 is amended by revising paragraphs (a)(1), (a)(4), (b)(1), (b)(3), and Example 2 in paragraph (b)(4), and adding Examples 3, 4, and 5 in paragraph (b)(4) as follows:

(a) Special enrollment for certain individuals who lose coverage—(1) In general. A group health plan, and a health insurance issuer offering health insurance coverage in connection with a group health plan, is required to permit current employees and dependents (as defined in § 2590.701-2) who are described in paragraph (a)(2) of this section to enroll for coverage under the terms of the plan if the conditions in paragraph (a)(3) of this section are satisfied. Paragraph (a)(4) of this section describes procedures that a plan or issuer may require an employee to follow and describes the date by which coverage must begin. The special enrollment rights under this paragraph (a) apply without regard to the dates on which an individual would otherwise be able to enroll under the plan.

(4) Applying for special enrollment and effective date of coverage—(i) Request. A plan or issuer must allow an employee a period of at least 30 days after an event described in paragraph (a)(3) of this section (loss of eligibility for coverage, termination of employer contributions, or exhaustion of COBRA continuation coverage) to request enrollment (for the employee or the employee's dependent). For this purpose, any written or oral request made to any of the following constitutes a request for enrollment—

(A) The plan administrator;

(B) The issuer;

(C) A person who customarily handles claims for the plan (such as a third party administrator); or

(D) Any other designated representative.

(ii) Tolling of period for requesting special enrollment. (A) In the case of an individual whose coverage ceases, if a certificate of creditable coverage with respect to that cessation is not provided on or before the date coverage ceases, then the period for requesting special enrollment described in paragraph (a)(4)(i) of this section does not end until 30 days after the earlier of —

(1) The date that a certificate of creditable coverage with respect to that cessation is provided; or

(2) The date 44 days after coverage ceases.

(B) For purposes of this paragraph (a)(4), if an individual's coverage ceases due to the operation of a lifetime limit on all benefits, coverage is considered to cease on the earliest date that a claim is denied due to the operation of the lifetime limit. (Nonetheless, the date of a loss of eligibility for coverage is determined under the rules of paragraph (a)(3) of this section, which provides that a loss of eligibility occurs when a claim that would meet or exceed a lifetime limit on all benefits is incurred, not when it is denied.)

(C) The rules of this paragraph (a)(4)(ii) are illustrated by the following examples:

Example 1.

(i) Facts. Employer V provides group health coverage through a policy provided by Issuer M. Individual D works for V and is covered under V's plan. V fails to pay M the premiums for the coverage period beginning March 1. Consistent with applicable state law, M terminates the policy so that the last day of coverage is April 30. On May 15, M provides D with a certificate of creditable coverage with respect to D's cessation of coverage under V's plan.

(ii) Conclusion. In this Example 1, the period to request special enrollment ends no earlier than June 14 (which is 30 days after May 15, the day a certificate of creditable coverage is provided with respect to D).

Example 2.

(i) Facts. Same facts as Example 1, except D is never provided with a certificate of creditable coverage.

(ii) Conclusion. In this Example 2, the period to request special enrollment ends no earlier than July 13. (July 13 is 74 days after April 30, the date coverage ceases. That is, July 13 is 30 days after the end of the 44-day maximum tolling period.)

Example 3.

(i) Facts. Individual E works for Employer W and has coverage under W's plan. W's plan has a lifetime limit of $1 million on all benefits under the plan. On September 13, E incurs a claim that would exceed the plan's lifetime limit. On September 28, W denies the claim due to the operation of the lifetime limit and a certificate of creditable coverage is provided on October 3. E is otherwise eligible to enroll in the group health plan of the employer of E's spouse.

(ii) Conclusion. In this Example 3, the period to request special enrollment in the plan of the employer of E's spouse ends no earlier than November 2 (30 days after the date the certificate is provided) and begins not later than September 13, the date E lost eligibility for coverage.

(iii) Reasonable procedures for special enrollment. After an individual has requested enrollment under paragraph (a)(4)(i) of this section, a plan or issuer may require the individual to complete enrollment materials within a reasonable time after the end of the 30-day period described in paragraph (a)(4)(i) of this section. In these enrollment materials, the plan or issuer may require the individual only to provide information required of individuals who enroll when first eligible and information about the event giving rise to the special enrollment right. A plan or issuer may establish a deadline for receiving completed enrollment materials, but such a deadline must be extended for information that an individual making reasonable efforts does not obtain by that deadline.

(iv) Date coverage must begin. If the plan or issuer requires completion of additional enrollment materials in accordance with paragraph (a)(4)(iii) of this section, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives enrollment materials that are substantially complete. If the plan or issuer does not require completion of additional enrollment materials, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives the request for special enrollment under paragraph (a)(4)(i) of this section.

(b) Special enrollment with respect to certain dependent beneficiaries—(1) In general. A group health plan, and a health insurance issuer offering health insurance coverage in connection with a group health plan, that makes coverage available with respect to dependents is required to permit individuals described in paragraph (b)(2) of this section to be enrolled for coverage in a benefit package under the terms of the plan. Paragraph (b)(3) of this section describes procedures that a plan or issuer may require an individual to follow and describes the date by which coverage must begin. The special enrollment rights under this paragraph (b) apply without regard to the dates on which an individual would otherwise be able to enroll under the plan.

(3) Applying for special enrollment and effective date of coverage—(i) Request. A plan or issuer must allow an individual a period of at least 30 days after the date of the marriage, birth, adoption, or placement for adoption (or, if dependent coverage is not generally made available at the time of the marriage, birth, adoption, or placement for adoption, a period of at least 30 days after the date the plan makes dependent coverage generally available) to request enrollment (for the individual or the individual's dependent). For this purpose, any written or oral request made to any of the following constitutes a request for enrollment—

(A) The plan administrator;

(B) The issuer;

(C) A person who customarily handles claims for the plan (such as a third party administrator); or

(D) Any other designated representative.

(ii) Reasonable procedures for special enrollment. After an individual has requested enrollment under paragraph (b)(3)(i) of this section, a plan or issuer may require the individual to complete enrollment materials within a reasonable time after the end of the 30-day period described in paragraph (b)(3)(i) of this section. In these enrollment materials, the plan or issuer may require the individual only to provide information required of individuals who enroll when first eligible and information about the event giving rise to the special enrollment right. A plan or issuer may establish a deadline for receiving completed enrollment materials, but such a deadline must be extended for information that an individual making reasonable efforts does not obtain by that deadline.

(iii) Date coverage must begin—(A) Marriage. In the case of marriage, if the plan or issuer requires completion of additional enrollment materials in accordance with paragraph (b)(3)(ii) of this section, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives enrollment materials that are substantially complete. If the plan or issuer does not require such additional enrollment materials, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives the request for special enrollment under paragraph (b)(3)(i) of this section.

(B) Birth, adoption, or placement for adoption. Coverage must begin in the case of a dependent's birth on the date of birth and in the case of a dependent's adoption or placement for adoption no later than the date of such adoption or placement for adoption (or, if dependent coverage is not made generally available at the time of the birth, adoption, or placement for adoption, the date the plan makes dependent coverage available). If the plan or issuer requires completion of additional enrollment materials in accordance with paragraph (b)(3)(ii) of this section, the plan or issuer must provide benefits (including benefits retroactively to the date of birth, adoption, or placement for adoption) once the plan or issuer receives enrollment materials that are substantially complete.

(4) Examples. * * *

Example 2.

(i) Facts. Individual D works for Employer X. X maintains a group health plan with two benefit packages—an HMO option and an indemnity option. Self-only and family coverage are available under both options. D enrolls for self-only coverage in the HMO option. Then, a child, E, is placed for adoption with D. Within 30 days of the placement of E for adoption, D requests enrollment for D and E under the plan's indemnity option and submits completed enrollment materials timely.

(ii) Conclusion. In this Example 2, D and E satisfy the conditions for special enrollment under paragraphs (b)(2)(v) and (b)(3) of this section. Therefore, the plan must allow D and E to enroll in the indemnity coverage, effective as of the date of the placement for adoption.

Example 3.

(i) Facts. Same facts as Example 1. On March 17 (two days after the birth of C), A telephones the plan administrator and requests special enrollment of A, B, and C. The plan administrator sends A an enrollment form. Under the terms of the plan, enrollment is denied unless a completed form is submitted within 30 days of the event giving rise to the special enrollment right (in this case, C's birth).

(ii) Conclusion. In this Example 3, the plan does not satisfy paragraph (b)(3) of this section. The plan may require only that A request enrollment during the 30-day period after C's birth. A did so by telephoning the plan administrator. The plan may not condition special enrollment on filing additional enrollment materials during the 30-day period. To comply with paragraph (b)(3) of this section, the plan must allow A a reasonable time after the end of the 30-day period to submit any additional enrollment materials. Once these enrollment materials are received, the plan must allow whatever coverage is chosen to begin on March 15, the date of C's birth.

Example 4.

(i) Facts. Same facts as Example 3, except that A telephones the plan administrator to request enrollment on April 13 (29 days after C's birth). Also, under the terms of the plan, the deadline for submitting the enrollment form is 14 days after the end of the 30-day period for requesting special enrollment (thus, in this case, April 28, which is 44 days after C's birth). The form requests the same information for A, B, and C (name, date of birth, and place of birth) as well as a copy of C's birth certificate. A fills out the enrollment form and delivers it to the plan administrator on April 28. At that time A does not have a birth certificate for C but applies on that day for one from the appropriate government office. A receives the birth certificate on June 1 and furnishes a copy of the birth certificate to the plan administrator shortly thereafter.

(ii) Conclusion. In this Example 4, A, B, and C are entitled to special enrollment under the plan even though A did not satisfy the plan's requirement of providing a copy of C's birth certificate by the plan's 14-day deadline. While a plan may establish such a deadline, the plan must extend the deadline for information that an individual making reasonable efforts does not obtain by that deadline. A delivered the enrollment form to the plan administrator by the deadline and made reasonable efforts to furnish the birth certificate that the plan requires.

Example 5.

(i) Facts. Same facts as Example 4. On May 3 (after A has delivered the enrollment form to the plan administrator but before A provides the birth certificate), A submits claims for all medical expenses incurred for B and C from the date of C's birth.

(ii) Conclusion. In this Example 5, the plan must pay all of the claims submitted by A. Because the plan requires that individuals seeking special enrollment complete additional enrollment materials, it is required to provide benefits once it receives enrollment materials that are substantially complete. The form that A submitted on April 28 was substantially complete. Because C's birth is the event giving rise to the special enrollment right, on April 28 A, B, and C become entitled to benefits under the plan retroactive to the date of C's birth.

5. Section 2590.701-8 is added to read as follows:

(a) In general. The rules of §§ 2590.701-1 through 2590.701-7 apply with respect to an individual on leave under the Family and Medical Leave Act of 1993 (29 U.S.C. 2601) (FMLA), and apply with respect to a dependent of such an individual, except to the extent otherwise provided in this section.

(b) Tolling of significant break in coverage during FMLA leave. In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and does not continue group health coverage for any period of FMLA leave, that period is not taken into account in determining whether a significant break in coverage has occurred under § 2590.701-4(b)(2)(iii).

(c) Application of certification provisions—(1) Timing of issuance of certificate—(i) In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and the individual's group health coverage is terminated during FMLA leave, an automatic certificate must be provided in accordance with the timing rules set forth in § 2590.701-5(a)(2)(ii)(B) (which generally require plans and issuers to provide certificates within a reasonable time after coverage ceases).

(ii) In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and continues group health coverage for the period of FMLA leave, but then ceases coverage under the plan at the end of FMLA leave, an automatic certificate must be provided in accordance with the timing rules set forth in § 2590.701-5(a)(2)(ii)(A) (which generally require plans and issuers to provide a certificate no later than the time a notice is required to be furnished for a qualifying event under a COBRA continuation provision).

(2) Demonstrating FMLA leave. (i) A plan or issuer is required to take into account all information about FMLA leave that it obtains or that is presented on behalf of an individual. A plan or issuer must treat the individual as having been on FMLA leave for a period if—

(A) The individual attests to the period of FMLA leave; and

(B) The individual cooperates with the plan's or issuer's efforts to verify the individual's FMLA leave.

(ii) Nothing in this section prevents a plan or issuer from modifying its initial determination of FMLA leave if it determines that the individual did not have the claimed FMLA leave, provided that the plan or issuer follows procedures for reconsideration similar to those set forth in § 2590.701-3(f).

(d) Relationship to loss of eligibility special enrollment rules. In the case of an individual (or a dependent of the individual) who is covered under a group health plan and who takes FMLA leave, a loss of eligibility for coverage under § 2590.701-6(a) occurs when the period of FMLA leave ends if —

(1) The individual's group health coverage is terminated at any time during FMLA leave; and

(2) The individual does not return to work for the employer at the end of FMLA leave.

6. Section 2590.732 is amended by adding paragraphs (a)(2) and (e) to read as follows:

(a) Group health plan. * * *

(2) Determination of number of plans. The number of group health plans that an employer or employee organization (including for this purpose a joint board of trustees of a multiemployer trust affiliated with one or more multiemployer plans) maintains is determined under the rules of this paragraph (a)(2).

(i) Except as provided in paragraph (a)(2)(ii) or (iii) of this section, medical care benefits provided by a corporation, partnership, or other entity or trade or business, or by an employee organization, constitute one group health plan, unless—

(A) It is clear from the instruments governing the arrangement or arrangements to provide medical care benefits that the benefits are being provided under separate plans; and

(B) The arrangement or arrangements are operated pursuant to such instruments as separate plans.

(ii) A multiemployer plan and a nonmultiemployer plan are always separate plans.

(iii) If a principal purpose of establishing separate plans is to evade any requirement of law, then the separate plans will be considered a single plan to the extent necessary to prevent the evasion.

(e) Determining the average number of employees—(1) Scope. Whenever the application of a rule in this part depends upon the average number of employees employed by an employer, the determination of that number is made in accordance with the rules of this paragraph (e).

(2) Full-time equivalents. The average number of employees is determined by calculating the average number of full-time equivalents on business days during the preceding calendar year.

(3) Methodology. For the preceding calendar year, the average number of full-time equivalents is determined by—

(i) Determining the number of employees who were employed full-time by the employer throughout the entire calendar year;

(ii) Totaling all employment hours (not to exceed 40 hours per week) for each part-time employee, and for each full-time employee who was not employed full-time with the employer throughout the entire calendar year;

(iii) Dividing the total determined under paragraph (e)(3)(ii) of this section by a figure that represents the annual full-time hours under the employer's general employment practices, such as 2,080 hours (although for this purpose not more than 40 hours per week may be used); and

(iv) Adding the quotient determined under paragraph (e)(3)(iii) of this section to the number determined under paragraph (e)(3)(i).

(4) Rounding. For purposes of paragraph (e)(3)(iv) of this section, all fractions are disregarded. For instance, a figure of 50.9 is deemed to be 50.

(5) Employers not in existence in the preceding year. In the case of an employer that was in existence for less than the entire preceding calendar year (including an employer that was not in existence at all), a determination of the average number of employees that the employer employs is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year.

(6) Scope of the term “employer”. For purposes of this paragraph (e), employer includes any predecessor of the employer. In addition, all persons treated as a single employer under section 414(b), (c), (m), or (o) of the Internal Revenue Code are treated as one employer.

(7) Special rule for multiemployer plans. (i) With respect to the application of a rule in this part to a multiemployer plan (as defined in section 3(37) of the Act), each employer with at least one employee participating in the plan is considered to employ the same average number of employees. That number is the highest number that results by applying the rules of paragraphs (e)(1) through (6) of this section separately to each of the employers.

(ii) The rules of this paragraph (e)(7) are illustrated by the following example:

Example.

(i) Facts. Twenty five employers have at least one employee who participates in Multiemployer Plan M. Among these 25 employers, Employer K has 51 employees, determined under the rules of paragraphs (e)(1) through (6) of this section. Each of the other 24 employers has fewer than 50 employees.

(ii) Conclusion. With respect to the application of a rule in this part to M, each of the 25 employers is considered to employ 51 employees.

Signed at Washington, DC, this 1st day of December, 2004.

Ann L. Combs,

Assistant Secretary, Employee Benefits Security Administration, U.S. Department of Labor.

(b) Standard method. * * *

(2) Counting creditable coverage. * * *

(iii) Significant break in coverage defined. A significant break in coverage means a period of 63 consecutive days during each of which an individual does not have any creditable coverage, except that periods described in paragraph (b)(2)(iv) of this section are not taken into account in determining a significant break in coverage. (See also § 146.143(c)(2)(iii) regarding the applicability to issuers of State insurance laws that require a break of more than 63 days before an individual has a significant break in coverage for purposes of State insurance law.)

(iv) Periods that toll a significant break. Days in a waiting period and days in an affiliation period are not taken into account in determining whether a significant break in coverage has occurred. In addition, for an individual who elects COBRA continuation coverage during the second election period provided under the Trade Act of 2002, the days between the date the individual lost group health plan coverage and the first day of the second COBRA election period are not taken into account in determining whether a significant break in coverage has occurred. Moreover, in the case of an individual whose coverage ceases, if a certificate of creditable coverage with respect to that cessation is not provided on or before the date coverage ceases, then the period that begins on the first date that an individual has no creditable coverage and that continues through the earlier of the following two dates is not taken into account in determining whether a significant break in coverage has occurred:

(A) The date that a certificate of creditable coverage with respect to that cessation is provided; or

(B) The date 44 days after coverage ceases.

(v) Examples. * * *

Example 4.

(i) Facts. Individual B terminates coverage under a group health plan, and a certificate of creditable coverage is provided 10 days later. B begins employment with Employer R and begins enrollment in R's plan 60 days after the certificate is provided.

(ii) Conclusion. In this Example 4, even though B had no coverage for 69 days, the 10 days before the certificate of creditable coverage is provided are not taken into account in determining a significant break in coverage. Therefore, B's break in coverage is only 59 days and is not a significant break in coverage. Accordingly, B's prior coverage must be counted by R's plan.

Example 6.

(i) Facts. Employer V sponsors a group health plan. Under the terms of the plan, the only benefits provided are those provided under an insurance policy. Individual D works for V and has creditable coverage under V's plan. V fails to pay the issuer the premiums for the coverage period beginning March 1. Consistent with applicable State law, the issuer terminates the policy so that the last day of coverage is April 30. V goes out of business on July 31. On August 15 D begins employment with Employer W and enrolls in W's group health plan. W's plan imposes a 12-month preexisting condition exclusion on all enrollees. D never receives a certificate of creditable coverage for coverage under V's plan.

(ii) Conclusion. In this Example 6, the period from May 1 (the first day without coverage) through June 13 (the date 44 days after coverage under V's plan ceases) is not taken into account in determining a 63-day break in coverage. This is because, in cases in which a certificate of creditable coverage is not provided by the date coverage is lost, the break begins on the date the certificate is provided, or the date 44 days after coverage ceases, if earlier. Therefore, even though D's actual period without coverage was 106 days (May 1 through August 14), because the period from May 1 through June 13 is not taken into account, D's break in coverage is only 62 days (June 14 through August 14). Thus, D has not experienced a significant break in coverage, and D's prior coverage must be counted by W's plan.

3. In § 146.115, revise paragraphs (a)(3)(ii)(H)(5) and (6) and add paragraph (a)(3)(ii)(H)(7) to read as follows:

(a) Certificate of creditable coverage. * * *

(3) Form and content of certificate. * * *

(ii) Required information. * * *

(H) * * *

(5) The interaction with the Family and Medical Leave Act;

(6) The fact that State law may require issuers to provide additional protections to individuals in that State; and

(7) Where to get more information.

4. In § 146.117, revise paragraphs (a)(1), (a)(4), (b)(1), (b)(3), and example 2 in paragraph (b)(4), and add examples 3, 4, and 5 in paragraph (b)(4), to read as follows:

(a) Special enrollment for certain individuals who lose coverage—(1) In general. A group health plan, and a health insurance issuer offering health insurance coverage in connection with a group health plan, is required to permit current employees and dependents (as defined in § 144.103 of this chapter) who are described in paragraph (a)(2) of this section to enroll for coverage under the terms of the plan if the conditions in paragraph (a)(3) of this section are satisfied. Paragraph (a)(4) of this section describes procedures that a plan or issuer may require an employee to follow and describes the date by which coverage must begin. The special enrollment rights under this paragraph (a) apply without regard to the dates on which an individual would otherwise be able to enroll under the plan.

(4) Applying for special enrollment and effective date of coverage—(i) Request. A plan or issuer must allow an employee a period of at least 30 days after an event described in paragraph (a)(3) of this section (loss of eligibility for coverage, termination of employer contributions, or exhaustion of COBRA continuation coverage) to request enrollment (for the employee or the employee's dependent). For this purpose, any written or oral request made to any of the following constitutes a request for enrollment —

(A) The plan administrator;

(B) The issuer;

(C) A person who customarily handles claims for the plan (such as a third party administrator); or

(D) Any other designated representative.

(ii) Tolling of period for requesting special enrollment. (A) In the case of an individual whose coverage ceases, if a certificate of creditable coverage with respect to that cessation is not provided on or before the date coverage ceases, then the period for requesting special enrollment described in paragraph (a)(4)(i) of this section does not end until 30 days after the earlier of—

(1) The date that a certificate of creditable coverage with respect to that cessation is provided; or

(2) The date 44 days after coverage ceases.

(B) For purposes of this paragraph (a)(4), if an individual's coverage ceases due to the operation of a lifetime limit on all benefits, coverage is considered to cease on the earliest date that a claim is denied due to the operation of the lifetime limit.

(Nonetheless, the date of a loss of eligibility for coverage is determined under the rules of paragraph (a)(3) of this section, which provides that a loss of eligibility occurs when a claim that would meet or exceed a lifetime limit on all benefits is incurred, not when it is denied.)

(C) The rules of this paragraph (a)(4)(ii) are illustrated by the following examples:

Example 1.

(i) Facts. Employer V provides group health coverage through a policy provided by Issuer M. Individual D works for V and is covered under V's plan. V fails to pay M the premiums for the coverage period beginning March 1. Consistent with applicable state law, M terminates the policy so that the last day of coverage is April 30. On May 15, M provides D with a certificate of creditable coverage with respect to D's cessation of coverage under V's plan.

(ii) Conclusion. In this Example 1, the period to request special enrollment ends no earlier than June 14 (which is 30 days after May 15, the day a certificate of creditable coverage is provided with respect to D).

Example 2.

(i) Facts. Same facts as Example 1, except D is never provided with a certificate of creditable coverage.

(ii) Conclusion. In this Example 2, the period to request special enrollment ends no earlier than July 13. (July 13 is 74 days after April 30, the date coverage ceases. That is, July 13 is 30 days after the end of the 44-day maximum tolling period.)

Example 3.

(i) Facts. Individual E works for Employer W and has coverage under W's plan. W's plan has a lifetime limit of $1 million on all benefits under the plan. On September 13, E incurs a claim that would exceed the plan's lifetime limit. On September 28, W denies the claim due to the operation of the lifetime limit and a certificate of creditable coverage is provided on October 3. E is otherwise eligible to enroll in the group health plan of the employer of E's spouse.

(ii) Conclusion. In this Example 3, the period to request special enrollment in the plan of the employer of E's spouse ends no earlier than November 2 (30 days after the date the certificate is provided) and begins not later than September 13, the date E lost eligibility for coverage.

(iii) Reasonable procedures for special enrollment. After an individual has requested enrollment under paragraph (a)(4)(i) of this section, a plan or issuer may require the individual to complete enrollment materials within a reasonable time after the end of the 30-day period described in paragraph (a)(4)(i) of this section. In these enrollment materials, the plan or issuer may require the individual only to provide information required of individuals who enroll when first eligible and information about the event giving rise to the special enrollment right. A plan or issuer may establish a deadline for receiving completed enrollment materials, but such a deadline must be extended for information that an individual making reasonable efforts does not obtain by that deadline.

(iv) Date coverage must begin. If the plan or issuer requires completion of additional enrollment materials in accordance with paragraph (a)(4)(iii) of this section, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives enrollment materials that are substantially complete. If the plan or issuer does not require completion of additional enrollment materials, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives the request for special enrollment under paragraph (a)(4)(i) of this section.

(b) Special enrollment with respect to certain dependent beneficiaries—(1) In general. A group health plan, and a health insurance issuer offering health insurance coverage in connection with a group health plan, that makes coverage available with respect to dependents is required to permit individuals described in paragraph (b)(2) of this section to be enrolled for coverage in a benefit package under the terms of the plan. Paragraph (b)(3) of this section describes procedures that a plan or issuer may require an individual to follow and describes the date by which coverage must begin. The special enrollment rights under this paragraph (b) apply without regard to the dates on which an individual would otherwise be able to enroll under the plan.

(3) Applying for special enrollment and effective date of coverage—(i) Request. A plan or issuer must allow an individual a period of at least 30 days after the date of the marriage, birth, adoption, or placement for adoption (or, if dependent coverage is not generally made available at the time of the marriage, birth, adoption, or placement for adoption, a period of at least 30 days after the date the plan makes dependent coverage generally available) to request enrollment (for the individual or the individual's dependent). For this purpose, any written or oral request made to any of the following constitutes a request for enrollment—

(A) The plan administrator;

(B) The issuer;

(C) A person who customarily handles claims for the plan (such as a third party administrator); or

(D) Any other designated representative.

(ii) Reasonable procedures for special enrollment. After an individual has requested enrollment under paragraph (b)(3)(i) of this section, a plan or issuer may require the individual to complete enrollment materials within a reasonable time after the end of the 30-day period described in paragraph (b)(3)(i) of this section. In these enrollment materials, the plan or issuer may require the individual only to provide information required of individuals who enroll when first eligible and information about the event giving rise to the special enrollment right. A plan or issuer may establish a deadline for receiving completed enrollment materials, but such a deadline must be extended for information that an individual making reasonable efforts does not obtain by that deadline.

(iii) Date coverage must begin—(A) Marriage. In the case of marriage, if the plan or issuer requires completion of additional enrollment materials in accordance with paragraph (b)(3)(ii) of this section, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives enrollment materials that are substantially complete. If the plan or issuer does not require such additional enrollment materials, coverage must begin no later than the first day of the first calendar month beginning after the date the plan or issuer receives the request for special enrollment under paragraph (b)(3)(i) of this section.

(B) Birth, adoption, or placement for adoption. Coverage must begin in the case of a dependent's birth on the date of birth and in the case of a dependent's adoption or placement for adoption no later than the date of such adoption or placement for adoption (or, if dependent coverage is not made generally available at the time of the birth, adoption, or placement for adoption, the date the plan makes dependent coverage available). If the plan or issuer requires completion of additional enrollment materials in accordance with paragraph (b)(3)(ii) of this section, the plan or issuer must provide benefits (including benefits retroactively to the date of birth, adoption, or placement for adoption) once the plan or issuer receives enrollment materials that are substantially complete.

(4) Examples. * * *

Example 2.

(i) Facts. Individual D works for Employer X. X maintains a group health plan with two benefit packages—an HMO option and an indemnity option. Self-only and family coverage are available under both options. D enrolls for self-only coverage in the HMO option. Then, a child, E, is placed for adoption with D. Within 30 days of the placement of E for adoption, D requests enrollment for D and E under the plan's indemnity option and submits completed enrollment materials timely.

(ii) Conclusion. In this Example 2, D and E satisfy the conditions for special enrollment under paragraphs (b)(2)(v) and (b)(3) of this section. Therefore, the plan must allow D and E to enroll in the indemnity coverage, effective as of the date of the placement for adoption.

Example 3.

(i) Facts. Same facts as Example 1. On March 17 (two days after the birth of C), A telephones the plan administrator and requests special enrollment of A, B, and C. The plan administrator sends A an enrollment form. Under the terms of the plan, enrollment is denied unless a completed form is submitted within 30 days of the event giving rise to the special enrollment right (in this case, C's birth).

(ii) Conclusion. In this Example 3, the plan does not satisfy paragraph (b)(3) of this section. The plan may require only that A request enrollment during the 30-day period after C's birth. A did so by telephoning the plan administrator. The plan may not condition special enrollment on filing additional enrollment materials during the 30-day period. To comply with paragraph (b)(3) of this section, the plan must allow A a reasonable time after the end of the 30-day period to submit any additional enrollment materials. Once these enrollment materials are received, the plan must allow whatever coverage is chosen to begin on March 15, the date of C's birth.

Example 4.

(i) Facts. Same facts as Example 3, except that A telephones the plan administrator to request enrollment on April 13 (29 days after C's birth). Also, under the terms of the plan, the deadline for submitting the enrollment form is 14 days after the end of the 30-day period for requesting special enrollment (thus, in this case, April 28, which is 44 days after C's birth). The form requests the same information for A, B, and C (name, date of birth, and place of birth) as well as a copy of C's birth certificate. A fills out the enrollment form and delivers it to the plan administrator on April 28. At that time A does not have a birth certificate for C but applies on that day for one from the appropriate government office. A receives the birth certificate on June 1 and furnishes a copy of the birth certificate to the plan administrator shortly thereafter.

(ii) Conclusion. In this Example 4, A, B, and C are entitled to special enrollment under the plan even though A did not satisfy the plan's requirement of providing a copy of C's birth certificate by the plan's 14-day deadline. While a plan may establish such a deadline, the plan must extend the deadline for information that an individual making reasonable efforts does not obtain by that deadline. A delivered the enrollment form to the plan administrator by the deadline and made reasonable efforts to furnish the birth certificate that the plan requires.

Example 5.

(i) Facts. Same facts as Example 4. On May 3 (after A has delivered the enrollment form to the plan administrator but before A provides the birth certificate) A submits claims for all medical expenses incurred for B and C from the date of C's birth.

(ii) Conclusion. In this Example 5, the plan must pay all of the claims submitted by A. Because the plan requires that individuals seeking special enrollment complete additional enrollment materials, it is required to provide benefits once it receives enrollment materials that are substantially complete. The form that A submitted on April 28 was substantially complete. Because C's birth is the event giving rise to the special enrollment right, on April 28 A, B, and C become entitled to benefits under the plan retroactive to the date of C's birth.

5. Add new § 146.120 to read as follows:

(a) In general. The rules of this part apply with respect to an individual on leave under the Family and Medical Leave Act of 1993 (29 U.S.C. 2601) (FMLA), and apply with respect to a dependent of such an individual, except to the extent otherwise provided in this section.

(b) Tolling of significant break in coverage during FMLA leave. In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and does not continue group health coverage for any period of FMLA leave, that period is not taken into account in determining whether a significant break in coverage has occurred under § 146.113(b)(2)(iii).

(c) Application of certification provisions—(1) Timing of issuance of certificate—(i) In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and the individual's group health coverage is terminated during FMLA leave, an automatic certificate must be provided in accordance with the timing rules set forth in § 146.115(a)(2)(ii)(B) (which generally require plans and issuers to provide certificates within a reasonable time after coverage ceases).

(ii) In the case of an individual (or a dependent of the individual) who is covered under a group health plan, if the individual takes FMLA leave and continues group health coverage for the period of FMLA leave, but then ceases coverage under the plan at the end of FMLA leave, an automatic certificate must be provided in accordance with the timing rules set forth in § 146.115(a)(2)(ii)(A) (which generally require plans and issuers to provide a certificate no later than the time a notice is required to be furnished for a qualifying event under a COBRA continuation provision).

(2) Demonstrating FMLA leave. (i) A plan or issuer is required to take into account all information about FMLA leave that it obtains or that is presented on behalf of an individual. A plan or issuer must treat the individual as having been on FMLA leave for a period if—

(A) The individual attests to the period of FMLA leave; and

(B) The individual cooperates with the plan's or issuer's efforts to verify the individual's FMLA leave.

(ii) Nothing in this section prevents a plan or issuer from modifying its initial determination of FMLA leave if it determines that the individual did not have the claimed FMLA leave, provided that the plan or issuer follows procedures for reconsideration similar to those set forth in § 146.111(f).

(d) Relationship to loss of eligibility special enrollment rules. In the case of an individual (or a dependent of the individual) who is covered under a group health plan and who takes FMLA leave, a loss of eligibility for coverage under § 146.117(a) occurs when the period of FMLA leave ends if—

(1) The individual's group health coverage is terminated at any time during FMLA leave; and

(2) The individual does not return to work for the employer at the end of FMLA leave.

6. In § 146.145, add paragraphs (a)(2) and (e) to read as follows:

(a) Group health plan. * * *

(2) Determination of number of plans. The number of group health plans that an employer or employee organization (including for this purpose a joint board of trustees of a multiemployer trust affiliated with one or more multiemployer plans) maintains is determined under the rules of this paragraph (a)(2).

(i) Except as provided in paragraph (a)(2)(ii) or (iii) of this section, medical care benefits provided by a corporation, partnership, or other entity or trade or business, or by an employee organization, constitute one group health plan, unless—

(A) It is clear from the instruments governing the arrangement or arrangements to provide medical care benefits that the benefits are being provided under separate plans; and

(B) The arrangement or arrangements are operated pursuant to such instruments as separate plans.

(ii) A multiemployer plan and a nonmultiemployer plan are always separate plans.

(iii) If a principal purpose of establishing separate plans is to evade any requirement of law, then the separate plans will be considered a single plan to the extent necessary to prevent the evasion.

(e) Determining the average number of employees—(1) Scope. Whenever the application of a rule in this part depends upon the average number of employees employed by an employer, the determination of that number is made in accordance with the rules of this paragraph (e).

(2) Full-time equivalents. The average number of employees is determined by calculating the average number of full-time equivalents on business days during the preceding calendar year.

(3) Methodology. For the preceding calendar year, the average number of full-time equivalents is determined by—

(i) Determining the number of employees who were employed full-time by the employer throughout the entire calendar year;

(ii) Totaling all employment hours (not to exceed 40 hours per week) for each part-time employee, and for each full-time employee who was not employed full-time with the employer throughout the entire calendar year;

(iii) Dividing the total determined under paragraph (e)(3)(ii) of this section by a figure that represents the annual full-time hours under the employer's general employment practices, such as 2,080 hours (although for this purpose not more than 40 hours per week may be used); and

(iv) Adding the quotient determined under paragraph (e)(3)(iii) of this section to the number determined under paragraph (e)(3)(i).

(4) Rounding. For purposes of paragraph (e)(3)(iv) of this section, all fractions are disregarded. For instance, a figure of 50.9 is deemed to be 50.

(5) Employers not in existence in the preceding year. In the case of an employer that was in existence for less than the entire preceding calendar year (including an employer that was not in existence at all), a determination of the average number of employees that the employer employs is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current calendar year.

(6) Scope of the term “employer”. For purposes of this paragraph (e), employer includes any predecessor of the employer. In addition, all persons treated as a single employer under section 414(b), (c), (m), or (o) of the Internal Revenue Code are treated as one employer.

(7) Special rule for multiemployer plans. (i) With respect to the application of a rule in this part to a multiemployer plan (as defined in section 3(37) of ERISA), each employer with at least one employee participating in the plan is considered to employ the same average number of employees. That number is the highest number that results by applying the rules of paragraphs (e)(1) through (6) of this section separately to each of the employers.

(ii) The rules of this paragraph (e)(7) are illustrated by the following example:

Example.

(i) Facts. Twenty five employers have at least one employee who participates in Multiemployer Plan M. Among these 25 employers, Employer K has 51 employees, determined under the rules of paragraphs (e)(1) through (6) of this section. Each of the other 24 employers has fewer than 50 employees.

(ii) Conclusion. With respect to the application of a rule in this part to M, each of the 25 employers is considered to employ 51 employees.

Dated: November 24, 2004.

Mark B. McClellan,

Administrator, Centers for Medicare & Medicaid Services.

Approved: December 2, 2004.

Tommy G. Thompson,

Secretary, Department of Health and Human Services.

BILLING CODE 4830-01-P

BILLING CODE 4830-01-C

[FR Doc. 04-28113 Filed 12-29-04; 8:45 am]

BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P