The information below is intended to provide an explanation of "COBRA" continuation coverage; describe when it becomes available to an employee or retired College employee and/or eligible dependents; and describe what an employee or retiree and his/her covered dependents must do to protect the right to elect continued health coverage through COBRA, if coverage through the Plan is lost.

Employees and retirees of Franklin & Marshall College, and their dependents, who are covered under the Plan have the right to temporary continuation of their health coverage if coverage is lost due to a "Qualifying Event", as required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA). COBRA guarantees an opportunity to elect temporary continuation of health coverage at group rates. No evidence of insurability is required to choose continuation coverage. Coverage is the same as that for active employees or retired employees, and includes prescription drug coverage.

Qualifying Events-- An employee of Franklin & Marshall College enrolled in the Plan has the right to choose continuation coverage for him/herself, his/her covered spouse, and any covered dependent children, if the employee, spouse, or dependent children lose coverage under the Plan due to:

• a reduction in the employee's hours of work that leads to loss of eligibility for coverage through the Plan (such as during a personal leave of absence or a change from full-time to part-time status), or

• termination of the employee's employment (except for termination due to gross misconduct).

An employee who loses coverage under this Plan, due to a Qualifying Event outlined above, becomes a "Qualified Beneficiary" and is entitled to elect temporary continuation of coverage through COBRA.

The covered spouse of a College employee or retiree has the right to choose continuation coverage for him/herself and his/her covered dependent children, if the spouse or his/her covered dependent children lose coverage through the College's Plan for any of the following reasons:

• the death of the College employee or retiree,

• the reduction of the employee's hours of work,

• the termination of the employee's employment (except for termination due to gross misconduct),

• the employee or retiree becomes entitled to Medicare benefits (Medicare Part A, Part B or both), or

• the employee or retiree and his/her spouse divorce or legally separate.

A spouse who loses coverage under the Plan, due to a Qualifying Event outlined above, becomes a "Qualified Beneficiary" entitled to elect temporary continuation of coverage through COBRA.

The covered dependent child of a College employee or retiree has the right to elect COBRA continuation coverage, if coverage through the Plan is lost for any of the following reasons:

• the death of the parent (employee or retiree),

• a reduction in the parent's (employee's) work hours,

• termination of the parent's (employee's) employment (except for termination due to gross misconduct),

• the parent (employee or retiree) becomes entitled to Medicare benefits (Medicare Part A, Part B or both),

• the parents' divorce or legal separation, or

• the child ceases to be a dependent child eligible for coverage under the terms of the College's Plan (child reaching his/her age limitation, or any other “Change in Status” which effects eligibility for coverage).

A dependent child who loses coverage under the Shared Services Plan, due to a Qualifying Event outlined above, becomes a "Qualified Beneficiary" entitled to elect temporary continuation of coverage through COBRA. If a proceeding under Title 11 (bankruptcy) is filed with respect to Franklin & Marshall College, and that bankruptcy results in the loss of coverage of any retired employee covered under the Plan, the retired employee will become a Qualified Beneficiary with respect to the bankruptcy. The retired employee's spouse, surviving spouse, and dependent children will also become Qualified Beneficiaries if bankruptcy results in the loss of their coverage under the Plan. In this case, the Qualified Beneficiary(ies) may elect continued coverage via COBRA.

Notification Requirements—Continuation of coverage through COBRA will be offered upon timely and proper notice that a Qualifying Event has occurred or will occur. The covered employee/former employee or College retiree, spouse, and/or dependent child has the responsibility to inform the Plan Administrator (via Franklin & Marshall College's Human Resources department) of a Qualifying Event that results in loss of coverage under the College's Plan, such as a divorce or legal separation or loss of dependent status. Written notice to the Plan Administrator must be made within 60 calendar days of the later of: (1) the date of the Qualifying Event, (2) the date that coverage is lost due to a Qualifying Event, or (3) the date the Qualified Beneficiary is informed, through the Summary Plan Description or initial COBRA notice, of the Plan's procedures for providing notice of loss of coverage due to a Qualifying Event.

Written notice must be provided to the Plan Administrator by the employee/former employee or retiree who has lost or will lose coverage through the College's Plan, the spouse or dependent child who is losing coverage through the College's Plan, or a representative acting on behalf of the employee, retiree, spouse, or dependent child. Such notice must be sent via fax, mail, or hand-delivered to Human Resources, Franklin & Marshall College, P.O. Box 3003, Lancaster, PA 17604-3003, fax: (717) 291-3969. The written notice must include:

1. the full name of the College employee, former employee, or retired employee and his/her social security number and mailing address,

2. the name and mailing address of all dependents who have lost or will lose coverage through the Plan due to a Qualifying Event,

3. a brief description of the Qualifying Event that has resulted, or will result, in loss ofhealth coverage through the Plan (i.e., divorce, legal separation, child's loss of dependent status, etc.) and, as required, verification of the Qualifying Event,

4. the date the Qualifying Event occurred/will occur,

5. other relevant information necessary for the Plan Administrator to verify that a Qualifying Event that will lead to loss of health coverage through the College's Plan has occurred or will occur, and the date of the Qualifying Event.

When notice of a Qualifying Event is properly submitted to the Plan Administrator (via Human Resources), the Plan Administrator, or the administrator designated by the Plan Administrator, will notify the individual within 14 days of receiving the notice, if the individual is not eligible for continuation coverage through COBRA. The notice of ineligibility will include the reason(s) that continuation coverage is not available.

Employer Responsibility—When the Qualifying Event is the termination of employment or reduction of hours of employment, death of the employee, commencement of a proceeding in bankruptcy with respect to Franklin & Marshall College, or the employee's becoming entitled to Medicare benefits (under Part A, Part B, or both), the employer is responsible for notifying the Plan Administrator of the Qualifying Event.

Birth or Adoption—If a child is born, adopted, or placed for adoption with a formerly covered employee or retired employee during the COBRA period, the employee or retiree must notify the Plan Administrator within 31 calendar days of the birth or adoption in order to elect COBRA coverage for the child.

Notice of Disability—If the Qualifying Event that resulted in the COBRA election is termination of employment or reduction in work hours, the temporary COBRA continuation period may be extended due to the disability of any Qualified Beneficiary. In the case of disability, written notice of disability must be provided by the Qualified Beneficiary to the Plan Administrator within 60 calendar days of the latest of: (a) the date of the Social Security Administration's disability determination; (b) the date of the Qualifying Event: the employee's termination of employment or reduction of hours; (c) the date on which the Qualified Beneficiary loses (or would lose) coverage under the terms of the Plan as a result of the employee's termination of employment or reduction of work hours; or (d) the date on which the individual is informed of the obligation to provide the disability notice, and the procedures for providing such notice, through the Plan's Summary Plan Description or the initial COBRA notice.

If disability status changes, the Plan Administrator must be notified within 30 days after the later of the date of the final determination by the Social Security Administration, or the date the Qualified Beneficiary is informed of the Plan's procedures for providing such notice.

Failure to Provide Timely and Proper Notice of a Qualifying Event If proper, timely written notice is not made to the Plan Administrator, all rights to continue health and prescription coverage will terminate. If proper notice of a Qualifying Event is not provided, if continuation coverage through COBRA is not elected in a timely manner, or if COBRA premiums are not paid in a timely manner by the employee/former employee, retired employee, or Qualified Beneficiary(ies), all group health and prescription coverage will terminate at the end of the calendar month in which the employment termination or other Qualifying Event occurred, in accordance with the provisions outlined in the Plan Document.

Electing COBRA Continuation Coverage—Following a Qualifying Event, and when proper and timely written notification of a Qualifying Event that leads to loss of coverage through the Plan is provided to the Plan Administrator as required, the Qualified Beneficiary will receive a detailed notice of his/her COBRA rights, and instructions for electing COBRA coverage and paying premiums. Such notice will be sent by the College's third party COBRA administrator. To elect continuation coverage, a Qualified Beneficiary must complete an election form and furnish it within 60 calendar days according to instructions on the form. Each Qualified Beneficiary has a separate right to elect continuation coverage.

A failure to elect COBRA coverage may affect future rights under federal law, including the right to avoid having pre-existing condition exclusions applied by other group health plans.

An employee/former employee, retired employee, spouse, or covered dependent who can obtain other group health insurance coverage may request special enrollment rights within 30 days of loss of coverage through the Health Plan through the other plan.

Coverage Periods— Continuation coverage through COBRA may be elected for a maximum period as follows:

• If the person affected by loss of coverage through Plan is the employee, and loss of coverage is due to a reduction in the employee's work hours or employment termination for reasons other than gross misconduct, the period of continuation coverage is a maximum of 18 months.

• If the person affected by loss of coverage through the Plan is an employee's or retiree's spouse, and the reason for loss of coverage is the employee's/retiree's death, divorce or legal separation, or entitlement to Medicare benefits, the period of continuation coverage is a maximum of 36 months. If an employee's hours are reduced or employment ends for reasons other than gross misconduct, the period of continuation coverage is 18 months.

• If the person affected by loss of coverage is an employee's or retiree's dependent child, and the reason for loss of coverage is the employee's/retiree's death, divorce or legal separation, entitlement to Medicare benefits, or the dependent child ceases to be a dependent eligible for coverage through the Plan, the period of continuation coverage is a maximum of 36 months. If an employee's hours are reduced or employment is terminated for reasons other than gross misconduct, the period of continuation coverage is 18 months. The period of continuation coverage described above may be shorter than expected if:

(a) the College ceases to provide any group health plan for its employees and/or retirees,

(b) the premium for continuation coverage is not paid on time by the covered individual,

(c) the individual becomes covered under another group health plan after the date COBRA is elected, unless the other coverage has certain exclusions or limitations with respect to a pre-existing condition of the individual, or

(d) the individual becomes entitled to Medicare benefits (under Part A, Part B, or both) after the date COBRA is elected. Continuation coverage may also be terminated for any reason the Plan would terminate coverage of a participant or beneficiary not receiving continuation coverage, such as due to fraud.

When the Qualifying Event is the end of employment or reduction of the employee's hours of employment, and the employee became entitled to Medicare benefits less than 18 months before the Qualifying Event, COBRA continuation coverage for Qualified Beneficiaries other than the employee lasts until 36 months after the date of Medicare entitlement. For example, if a covered employee becomes entitled to Medicare 8 months before the date on which his/her employment terminates, COBRA continuation coverage for the spouse and dependent children can last up to 36 months after the date of Medicare entitlement, which is equal to 28 months after the date of the Qualifying Event. Otherwise, when the Qualifying Event is the end of employment or reduction of the employee's hours of employment, COBRA continuation coverage generally lasts for only up to a total of 18 months.

Extension of COBRA Period Due to Disability— If an employee loses coverage through the Plan due to termination of employment or reduction in work hours, he/she may qualify to extend the COBRA continuation period from 18 months to a maximum of 29 months if disabled. This extension applies if all of the following conditions are met:

(1) the Qualifying Event was the covered employee's termination of employment or reduction of hours;

(2) a Qualified Beneficiary (who may be the covered employee, his/her spouse, or his/her dependent child) has been issued a determination by the Social Security Administration, establishing that he/she was disabled at any time during the first 60 days of COBRA coverage;

(3) a Qualified Beneficiary notifies the Plan Administrator, via the Human Resources office, of the Social Security Administration's determination within the 18 month period that begins on the date of the Qualifying Event; and

(4) a Qualified Beneficiary notifies the Plan Administrator of the Social Security Administration's determination within 60 days after the latest of:

(a) the date of the Social Security Administration's disability determination;

(b) the date of the Qualifying Event: the employee's termination of employment or reduction of hours;

(c) the date on which the Qualified Beneficiary loses (or would lose) coverage under the terms of the Plan as a result of the employee's termination of employment or reduction of work hours; or

(d) the date on which the individual is informed of the obligation to provide the disability notice, and the procedures for providing such notice, through the Plan's Summary Plan Description or the initial COBRA notice.

Each Qualified Beneficiary who has elected COBRA continuation coverage will be entitled to the 11 month extension if one of them qualifies.

Extension of COBRA Period Due to Second Qualifying Event— If a spouse or dependent child experiences a second Qualifying Event while receiving health coverage through COBRA, he/she may be eligible to extend the COBRA period, up to a maximum of 36 months, but only if the event would have caused the spouse or dependent child to lose coverage under the Plan had the first Qualifying Event not occurred. This extension is available to the spouse and eligible dependent children if the College employee/former employee, or retired employee dies, becomes entitled to Medicare benefits (Part A, Part B, or both), gets divorced or legally separated, or if the dependent child stops being eligible under the Plan as a dependent child, but only if the event would have caused the spouse or dependent child to lose coverage under the Plan had the first Qualifying Event not occurred. Proper written notice of a second Qualifying Event must be made to the Plan Administrator, as outlined above under "Notification Requirements", within 60 calendar days of the second Qualifying Event.

Continuation of Coverage under USERRA

The Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA") requires employers to provide coverage during qualified service of an employee in the Uniformed Services. This continued coverage, although similar to COBRA, may in certain circumstances provide rights in addition to those under COBRA. If an employee is on a qualified leave of absence under USERRA, when making an election to continue coverage under COBRA, the employee will also be making an election under USERRA. Where COBRA and USERRA provide different benefit protections, the law that provides greater protection will apply. For example, under USERRA if an employee is on a qualified leave of absence that lasts less than 31 days, the employee cannot be required to pay an insurance premium greater than what he/she would have paid if the employee had remained at work during this period.

During a Service leave, a full-time College employee will be eligible for coverage through this Plan for him/herself and covered dependents, at active employee rates, for up to 30 calendar days, if the employee is enrolled in the PPO Health Plan $1,000. In the case of Service leave exceeding 30 calendar days, USERRA requires the College to extend insurance coverage to the employee and his/her covered dependents, at 102% of the full premium, until the lesser of 24 months from the date the employee's civilian employment ended, or until the end of the period allowed for the individual to apply for reemployment. COBRA rights also apply to the employee and each of his/her covered dependents.

COBRA Premiums— COBRA participants / beneficiaries pay 100% of the group rate premium for continuation coverage (100% of the actuarially-derived premium equivalent), plus a 2% administrative fee.

Making COBRA Payments— When an employee/former employee, spouse, and/or dependent child elects COBRA coverage, he/she, or a third party representing the COBRA recipient, must make the first payment for such coverage not later than 45 calendar days after the date of his/her election of continued coverage. If the first payment is not made in full in a timely manner, rights to continued coverage will be forfeited.

Subsequent payments, after the first payment, are subject to a 30 day grace period; continuation coverage will be provided for each coverage period as long as payment is made before the end of the grace period. However, if payment is made later than the first day of the coverage period, but before the end of the grace period, COBRA coverage will be suspended as of the first day of the coverage period and then reinstated, retroactively, when proper payment is received. If a COBRA participant fails to make a periodic payment before the end of the grace period, he/she will lose all rights to COBRA continuation coverage.

Under the Health Insurance Portability & Accountability Act, in certain circumstances, such as when COBRA coverage terminates, an individual may have the right to buy individual health coverage with no pre-existing condition exclusion, and without providing evidence of good health.

Questions about COBRA may be directed to the Franklin & Marshall College Human Resources office, Conexis, the College's 3rd party COBRA administrator, (888) 678-4881, or the U.S. Department of Labor's Employee Benefits Security Administration, www.dol.gov/ebsa.