COBRA Subsidy Extended!!

December 22, 2009

Yesterday President Obama signed the Fiscal Year 2010 Defense Appropriations Act, and included within that law is an extension of the COBRA premium subsidy enacted last February as part of the American Recovery and Reinvestment Act of 2009 (“ARRA”). Our earlier updates on the ARRA COBRA premium subsidy can be found in “COBRA Provisions in the American Recovery and Reinvestment Act of 2009 (ARRA),” “COBRA Provisions Q&A and IRS Form 941,” “Employee Benefits Security Administration Issues Model COBRA Notices,” “IRS Hints at What an “Involuntary Termination” Means for Purposes of ARRA,”, and “Has the EBSA Played Scrooge with the ARRA COBRA Subsidy??,”
The COBRA subsidy extension enacted yesterday extends the eligibility period for the subsidy for two months (through February 28, 2010), and extends the maximum period for receiving the subsidy from nine months to 15 months. This means that an individual who loses group health plan coverage due to an employee’s involuntary termination of employment that occurs through February 28, 2010 will be eligible for the subsidy. Prior to this amendment, the termination of employment had to occur prior to December 31, 2009. In addition, a technical amendment in the new legislation takes care of an unexpected result of the ARRA legislation, that is, individuals who were involuntarily terminated during December 2009 but who did not begin COBRA until 2010 were NOT eligible for the subsidy according to the Department of Labor. As amended, the COBRA premium subsidy rules only require that the qualifying event occur prior to February 28, 2010, not that COBRA actually begin prior to that date.
The extension of the maximum period of the subsidy from nine months to 15 months is welcome relief to individuals who were for the first time faced with an unsubsidized COBRA premium for December. Group health plans will be required to refund/credit any excess premium paid, under rules similar to the refund/credit provisions of the original COBRA premium subsidy in ARRA. For those eligible assistance individuals who dropped COBRA (perhaps due to the loss of the premium subsidy), a second chance at subsidized COBRA must now be offered. Within 60 days of the enactment of this new legislation, group health plan administrators must notify all individuals who were either eligible for the COBRA premium subsidy on or after October 31, 2009, or who experience a qualifying event after that date due to termination of employment, that this second chance election is available.
In order to minimize the use of refunds or credits, group health plan administrators are encouraged to issue the required notices as soon as possible. Previously issued model notices from the Department of Labor can be used (with some modification to reflect the extension) to communicate these changes to affected assistance eligible individuals.
If you have questions regarding the above, please contact Mary Ellen Schill, the author of this article, or any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.

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