Legal Bulletins

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COBRA Subsidy Extension

Last February, COBRA was amended to add a premium subsidy to assist certain individuals who had been involuntarily terminated (and their families) with paying their COBRA premiums. On December 19, 2009, the subsidy program was expanded as follows:

Extension of the Eligibility Period (the period during which an individual’s involuntary termination occurs). Previously, the eligibility period was from September 1, 2008 through December 31, 2009. The eligibility period has been extended for an additional 2 months — and now applies to involuntary terminations of employment which occur though February 28, 2010.

Extension of the Maximum Duration (the length of time an individual may receive the subsidy). Previously, the individual was entitled to a subsidized premium for a maximum duration of up to 9 months. The duration has been extended for an additional 6 months – up to a total of 15 months. Note that the right to a subsidy will end on the earliest of the date (1) the individual becomes eligible for coverage under another group health plan, (2) the individual becomes eligible for Medicare, or (3) the individual’s 15 months of subsidy ends.

Transition. Individuals who exhausted their 9 months of subsidy before December 19, 2009 (date the subsidy period was extended to 15 months) will be allowed to benefit from the extended duration. Such individuals fall into two groups and are affected as follows:

Individuals who dropped COBRA coverage when their original 9-month subsidy period ended. Such individuals may now “re-elect” COBRA, pay the back premiums at the subsidized rate, and continue the subsidy for a maximum of 15 months. (The deadline for paying back premiums ends on February 17, 2010 or, if later, 30 days after receiving the special notice discussed below).

Individuals who paid full COBRA premiums after their original 9-month subsidy period ended. Such individuals are entitled to have the excess refunded or credited against their future premiums, and resume the subsidized rate for a maximum of 15 months.

Special Notification Requirement. A notice explaining the changes to the subsidy program must be provided by February 17, 2010 to:

• Individuals who are eligible for the COBRA subsidy on or after October 31, 2009, and
• Individuals who have a COBRA qualifying event consisting of a termination of
employment (voluntary or involuntary) on or after October 31, 2009.

A notice must be provided, within the normal timeframes for providing COBRA notices, to individuals who experience a COBRA qualifying event after December 19, 2009 (or the language may be included in the sponsor’s regular COBRA election notice).
The Department of Labor is expected to issue updated FAQs on its website (www.dol.gov/COBRA) and new model notices by next week.

In addition to timely providing the special notices and revising COBRA notices and forms, plan sponsors should confirm that their COBRA administrators will comply with the COBRA subsidy extension rules.

To read Gordon Feinblatt’s previous Legal Bulletin, “Economic Stimulus Act Imposes New COBRA Obligations on Employers,” issued on February 26, 2009, please click here.