News
COBRA Subsidies Extended
December, 23 2009
Update: Since posting the article below, the Department of Labor has issued updated model notices for use in complying with the law's requirement that employers provide notice to affected individuals. For more information on the notices and to obtain copies of them, please visit the Department of Labor's website, or view our article on the notices by clicking here.Background
The American Recovery and Reinvestment Act of 2009 (ARRA), popularly known as the “Stimulus Bill,” provided for subsidies for premiums paid for health benefits under COBRA. We previously posted concerning the COBRA subsidies when the ARRA was passed in February. For more information about the subsidies, please click here.
Under the ARRA provisions, eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applied to periods of health coverage beginning on or after February 17, 2009. Prior to the recent passage of the 2010 Defense Appropriations Act, the subsidy lasted for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period.
President Obama signed the Fiscal Year 2010 Defense Appropriations Act on December 21, 2009. That law extends the eligibility period and duration of COBRA subsidies available to employees under the ARRA.
Subsidy eligibility period extended
The Act extends the end of the eligibility period from December 31, 2009 to February 28, 2010. Any eligible employee involuntary terminated on or before February 28, 2010 is eligible for the subsidy even if their COBRA coverage would not start until March.
Subsidy duration expanded
The Act also extends the maximum subsidy period from nine months to 15 months. The expansion applies both to those individuals currently receiving subsidized COBRA coverage and those who are involuntarily terminated from the time the Act goes into effect until February 28, 2010.
Retroactive payment and refunds/credits
Individuals who previously exhausted their nine months of subsidized COBRA coverage prior to the Act going into effect but who did not continue coverage after such exhaustion by paying full COBRA premiums are permitted by the Act to pay the subsidized premiums retroactively. The individuals must do so by either February 19, 2010, or 30 days after notice of the extension is provided by their plan administrator, whichever comes later.
Individuals who exhausted their nine months of subsidized COBRA coverage prior to the Act going into effect and then paid for unsubsidized COBRA coverage will be eligible for a refund or credit for the amount they paid above the subsidized payment amount.
Notice
New notices will be required to be sent to all individuals who were assistance-eligible as of October 31, 2009, or who became or subsequently become assistance eligible after that date. Such notice will inform those individuals of the extension of the subsidies provided for by the Act.
An additional notice which describes the retroactive payment and refund provisions of the Act will be required to be sent to individuals involuntarily terminated after September 1, 2008 who either did not continue their COBRA coverage or who exhausted their nine months of subsidized COBRA coverage and then paid for unsubsidized COBRA coverage.
The Department of Labor has yet to issue new notices. (Update: DOL has issued updated model notices, which are available from DOL's website, or from our article by clicking here.)
What do I need to do?
Employers should prepare to send the new notices once they become available by identifying those assistance-eligible individuals who must receive the notices and making the necessary preparations so that the new notices can be sent out quickly. If you have any questions about your organizations obligations under COBRA or the COBRA subsidy laws, please contact your employment counsel or contact us.
Gignilliat, Savitz & Bettis, LLP
900 Elmwood Avenue, Suite 100
Columbia, South Carolina 29201
p. 803-799-9311 f. 803-254-6951
firm@gsblaw.net Contact Us
900 Elmwood Avenue, Suite 100
Columbia, South Carolina 29201
p. 803-799-9311 f. 803-254-6951
firm@gsblaw.net Contact Us