Year end COBRA Subsidy Considerations
By Ryan T. Neumeyer Earlier this year the American Recovery and Reinvestment Act provided a COBRA subsidy to workers who experienced an involuntary termination between September 1, 2008 and December 31, 2009. One critical question is whether an employee who experiences an involuntary termination in December of 2009, but does not lose coverage until January 1, 2010, is still eligible for the subsidy. The answer is no.
Under the American Recovery & Reinvestment Act of 2009 ("ARRA"), COBRA premium subsidies are available for qualified beneficiaries (i) whose qualifying events are involuntary terminations occurring between September 1, 2008 and December 31, 2009, (ii) who are eligible for COBRA within this same time period, and (iii) who elect COBRA continuation coverage.
According to IRS guidance, qualified beneficiaries are eligible for COBRA only when they lose coverage as active employees and COBRA begins. (IRS Notice 2009-27, Q/A 13 "If the loss of coverage is after December 31, 2009, the individual cannot become" eligible for the subsidy.) When coverage is lost "depends on how the employer treats the provision of health coverage for the involuntarily terminated employee." If the employer provides some period of continued health plan coverage on the same basis it covers active employees and then the 18-month COBRA period starts, eligibility for COBRA (and the federal subsidy) "will be considered to occur when the employer's provision of health coverage on the same terms as for similarly situated active employees ends." IRS Notice 2009-27, Q/A-14. The United States Department of Labor recently posted two questions "regarding current eligibility for the COBRA premium reduction" on its website, which reinforce the IRS' position. See http://www.dol.gov/ebsa/faqs/faq-cobra-arra.html.
Thus, if an employee who is involuntarily terminated prior to December 31, 2009 does not lose coverage until January 1, 2010, he or she is not eligible for the subsidy. However, several bills have been introduced in Congress that would extend eligibility for the COBRA premium subsidy beyond December 31, 2009. While some of the proposed legislation includes additional COBRA rights (such as 15 months of subsidy), all propose to extend the current December 31, 2009 eligibility cutoff date to June 30, 2010. Ross Brittain and Schonberg will keep you updated on any changes. Please do not hesitate to contact Lynn Schonberg or Ryan Neumeyer with any questions you may have regarding wage and hour or other employment laws.
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