COBRA SUBSIDY EXTENDED
By Ryan T. Neumeyer On December 21, 2009, President Obama has signed the Fiscal Year 2010 Defense Appropriations Act into law, which contained an extension to the COBRA subsidy. Generally, the extension to the COBRA subsidy law does the following:
- Extends the nine-month, 65% premium subsidy by six months to a total of 15 months;
- extends the subsidy to those individuals who are involuntarily terminated on or before February 28, 2010; and
- conditions the subsidy only on experiencing a qualifying event (involuntary termination) on or before February 28, 2010, and not on the qualifying event and the loss of coverage. Therefore, if an individual is involuntarily terminated on or before February 28, 2010, such individual would be eligible for the subsidy regardless of when they actually lose coverage. Prior to the extension, an individual who was involuntarily terminated on or before December 31, 2009, but did not lose coverage until on or after January 1, 2010 was not eligible for the subsidy.
The extension to the subsidy provides for special notices to certain individuals. The Department of Labor will be coming out with model notices within 30 days of December 21, 2009. There are three categories of individuals which must receive notice of the subsidy extension.
First, plan administrators must provide notices of the new extension rights to individuals who became assistance eligible individuals (“AEI”) on or after Oct. 31, 2009, or experience a qualifying event on or after that date. The notice must be provided within 60 days after the extension’s enactment date or, in the case of a qualifying event occurring after the enactment date, consistent with the timing of COBRA notices. For all those individuals who are currently on COBRA and receiving the subsidy, and for those who received notice on or after October 31, 2009, the notice should inform them of the extension of their subsidized payments. Such notice should recalculate the end date of the subsidized payments and re-state the end date of COBRA benefits.
Second, notice of the extension must go out to those individuals who used nine months of the subsidy and did not remain on COBRA even though they were still eligible. The extension gives these individuals at least 60 days in which to make retroactive payment for the periods of coverage which they missed. The notice to these indviduals should state the amount of time an AEI is eligible for the subsidy, re-state the date on which their COBRA coverage ends, and state the date which such AEI’s retroactive payment is due, which is the longer of 60 days from December 21, 2009 or 30 days from the date of notice. Please be advised that these individuals may not be taken off your coverage until the time limitation for receiving their retroactive payment has passed.
Finally, plan administrators must provide notice to individuals who continued COBRA benefits by paying the full amount after losing the nine-month subsidy. The notice must state that the subsidy rate now applies due to the extension. Further, at the employer’s discretion, it can either apply the amounts paid that were greater than the subsidy amount to the AEI’s subsequent premium payments or reimburse the AEI for any overpayment. Also, the notice should include the new end date for the AEI’s subsidy period under the extension and re-state the AEI’s COBRA benefit end date. 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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