On December 19, 2009, President Obama signed into law an extension of the COBRA subsidy program, as part of the 2010 Department of Defense Appropriations Act. This extension applies to the COBRA subsidy program that was created in the American Recovery and Reinvestment Act of 2009 (ARRA). Due to the extension of the subsidy program, the Department of Labor has issued updated COBRA notices. This summary will provide a brief overview of the subsidy extension and the new COBRA notices.
Extension of COBRA Benefits. The COBRA subsidy program extension does the following:
- Extends the maximum duration of the COBRA subsidy from nine months to fifteen months. This applies to newly terminated employees and qualified beneficiaries, individuals who are currently receiving the COBRA subsidy, individuals who continued coverage by paying full COBRA premiums after exhausting the nine-month subsidy period, and individuals who discontinued paying premiums after exhausting the nine-month subsidy period.
- Extends the eligibility period by an additional two months. Under the original COBRA subsidy program, an employee had to have been involuntarily terminated between September 1, 2008 and December 31, 2009 to qualify for subsidized COBRA premiums. The extension will now allow employees who are terminated through February 28, 2010 to qualify for subsidized coverage.
- Allows employers to apply the ARRA refund rules to those individuals who kept their coverage after exhausting the subsidy period. These individuals paid the full monthly premium in order to retain coverage. These individuals can now receive a refund of the difference between the full premium and the subsidized premium or credits against future payments, and will have the option to re-enroll.
- Allows individuals who discontinued their coverage by failing to pay premiums after exhausting the subsidy period to retroactively pay their premiums by a certain date and re-obtain COBRA coverage. The payments must be made by the later of February 17, 2010 or thirty (30) days from the receipt of notice (see below).
- Clarifies the language of the ARRA so that the sole eligibility factor is the timing of the employee’s separation. Prior to this change, it was unclear whether the date on which COBRA coverage commenced was also a criterion for eligibility, which could have disqualified otherwise eligible individuals from coverage.
Notice Requirements. Employers will be required to send notices to three groups of individuals outlining the new COBRA subsidy extension rules:
1. Notice to newly-separated employees (termination after December 19, 2009) must be provided within the normal time frames for sending continuing coverage notifications.
2. Individuals who were eligible for the subsidy at any time on or after October 31, 2009 or whose qualifying event (termination of employment) occurred between October 31, 2009 and December 19, 2009 must be notified of the COBRA subsidy extension by February 17, 2010.
3. Employers must notify all individuals who either paid their full COBRA premiums after exhausting the nine-month subsidy period or whose COBRA coverage ended for failure to pay the premium after exhausting the nine-month subsidy period, to inform them that they are now eligible to reinstate their coverage by paying the 35% premium retroactively (by the later of February 17, 2010 or 30 days from receipt of the new notice) or receive a credit or refund of the difference between the full and subsidized premiums, as explained above. This notice must be provided within sixty (60) days after the employee’s nine-month subsidy period ended. (For example, if an eligible individual’s nine-month subsidy period ended November 30, 2009 (nine months after March 1, 2009) this notice must be sent within 60 days after December 1, 2009, i.e., by January 29, 2010.)
The DOL has posted a new set of model notices which incorporate the subsidy extension rules, available at: http://www.dol.gov/ebsa/COBRAmodelnotice.html
The DOL has also updated its Fact Sheet regarding the COBRA Premium Reduction, available at: http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html
The COBRA subsidy may continue to evolve, as further expansion is rumored.
All other terms and conditions of the original ARRA COBRA subsidy program, as described in our March 23, 2009 e-update, will remain unchanged. Additional information can be found on the U.S. Department of Labor’s website at: http://www.dol.gov/ebsa/cobra.html
Please feel free to contact an attorney in the Ahlers & Cooney Employment Practice Group for assistance with these issues or any other matter.
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