On December 19, 2009, the COBRA premium subsidy law was extended to apply to qualifying involuntary terminations occurring through February 28, 2010.
Congress has also extended the maximum duration of the subsidy from 9 to 15 months.
The extension further provides that employees whose involuntary terminations occur on or before February 28, 2010 can be eligible for the subsidy, even if their COBRA coverage commences after February 28. This provision reverses the guidance recently issued by the Department of Labor on this point.
It is possible that the February 28, 2010 extension will be further extended through subsequent legislation.
Employers will want to work with their COBRA administrators on the following matters:
1. Update COBRA notices with the provisions of the premium subsidy extension.
2. Review 2009 year end involuntary terminations. Such terminations will be eligible for the COBRA premium subsidy. Employers and their COBRA administrators must make sure that these qualified beneficiaries either receive updated election notices or receive the additional notice discussed below.
3. New notice requirements. Employers must provide additional notice of the COBRA premium subsidy extension to the groups set forth below. For qualifying events through December 19, 2009, these notices should be sent by February 17, 2010. For qualifying events occurring after December 19, 2009, the additional notice must be provided by the regular COBRA notice deadlines.
- All those who have been assistance eligible individuals (AEIs) at any time on or after October 31, 2009.
- Special rule for AEIs who have exhausted the 9-month COBRA subsidy (e.g. qualified beneficiaries who began receiving the premium subsidy on March 1, 2009 and who stopped receiving it on November 30). Notify qualified beneficiaries in this situation that they may now be eligible to pay reduced premiums for retroactive coverage (or receive credits for overpayments). AEIs who have exhausted the subsidy should get this notice regardless of whether their COBRA has lapsed, as long as they are still eligible for COBRA. These AEIs must be provided the notice within the first 60 days of their “transition period,” defined as the period before December 19, 2009 when, by operation of the extension, they are again eligible for the COBRA premium subsidy.
- Example: Jack, an AEI, terminated on February 5, 2009. His COBRA began on March 1, 2009. He paid 35% of the full premium through November 30, 2009. In December, when his subsidy expired, he paid nothing. Jack must receive a notice of the up to 6-month extension of the subsidy and information about how he can obtain retroactive coverage to December 1, 2009. His maximum 15-month subsidized period will end on May 31, 2010.
- All those who experience a termination of employment as qualfying event on or after October 31, 2009.