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COBRA Subsidy Extended Through May 31, 2010

On April 15, 2010, the COBRA premium subsidy was extended yet again.

A COBRA subsidy was originally adopted in February, 2009 to assist certain individuals who had been involuntarily terminated (and their families) with paying their COBRA premiums. Generally, the subsidy allows eligible individuals to pay only 35% of their COBRA premiums and the remaining 65% is reimbursed to the plan sponsor through a tax credit. Eligibility for the subsidy was extended in December, 2009. On March 3, 2010, the subsidy eligibility period was extended for involuntary terminations occurring on or before March 31, 2010 and the Department of Labor issued revised model notices. The subsidy eligibility period has now been extended for involuntary terminations occurring on or before May 31, 2010.

Any employee who is involuntarily terminated on or before May 31, 2010 may be eligible for up to fifteen months of subsidized COBRA premiums. Employers and group health plans should update their current COBRA notices and forms now to reflect the extended eligibility period. All employees who incur a qualifying event from April 1, 2010 through May 31, 2010 must receive the updated notice. Employees who were terminated (whether or not the termination was involuntary) between April 1, 2010 and April 19, 2010 and who were previously sent a qualifying event notice must also receive the updated notice to let them know of the subsidy eligibility period extension and enable them to apply for it.

Legislation is currently pending which would extend the subsidy eligibility period through December 31, 2010. If the legislation is passed, employers will again need to update their COBRA forms.

The Premium Assistance Period (the length of time an individual may receive the subsidized premium) remains at 15 months. The right to a subsidized premium will end on the earlier of the date the individual (1) becomes eligible for another group health plan, (2) becomes eligible for Medicare, (3) reaches the last day of the 15-month premium assistance period, or (4) reaches the last day of their COBRA coverage period.

To read Gordon Feinblatt’s earlier Legal Bulletins regarding the COBRA subsidy, “Economic Stimulus Act Imposes New COBRA Obligations on Employers” issued February 26, 2009, “COBRA Subsidy Extension” issued December 30, 2009, “Model Notices for COBRA Subsidy Extension” issued January 25, 2010, and “COBRA Subsidy Extended – Again” issued March 16, 2010, please go to www.gfrlaw.com, click on News & Resources, Publications, and Legal Bulletins.

If you have any questions regarding the subsidy or your obligations under COBRA, or if you would like assistance in updating your COBRA notice, please contact one of the Members of the Employee Benefits Group:

James T. Kimble, 410-576-4178

Mary L. Porter, 410-576-4003

Matthew P. Mellin, 410-576-4047

Robert C. Kellner, 410-576-4239