As widely reported in the press, on March 2, President Obama signed into law the Temporary Extension Act of 2010, which provides short extensions for a number of government programs, including the COBRA subsidy rules and unemployment compensation benefits. Employers will need to consider how these extensions affect the administration of their benefits for terminated employees.
COBRA Subsidy Rules. The date for incurring an involuntary termination of employment that qualifies for the subsidy has been extended by one month, from February 28, 2010, to March 31, 2010. Further extensions are almost certain to be considered in future legislation.
The Act makes a few other significant changes. In particular, an individual who does not elect (or elects and then discontinues) COBRA continuation coverage following a reduction in hours will be given a second opportunity to elect continuation coverage and qualify for the subsidy if his or her employment is involuntarily terminated at a later date. The maximum continuation coverage period will be deemed to start as of the date hours were reduced, even though the actual continuation coverage will typically begin when employment terminates. Special notice and election provisions will apply. This change applies only to involuntary terminations of employment that occur on or after the date of enactment.
On a favorable note, the Act provides that deference will be given to an employer's reasonable determination that an involuntary termination has occurred. Employers should retain appropriate documentation supporting the determination, including an attestation by the employer of the involuntary termination of employment.
The Act also builds on relevant enforcement provisions, authorizing the government to impose a civil penalty of up to $110 per day if an employer takes more than 10 days to implement a government appeal determination that an individual is eligible for the subsidy.
We expect further regulatory guidance on these new rules to be issued. For more information on the COBRA subsidy rules, click here.
Unemployment Compensation. The Act's unemployment insurance provisions extend various benefit periods. Specifically, the period during which individuals may apply for federal emergency unemployment compensation has been extended from February 28, 2010, to April 5, 2010. Federal emergency unemployment compensation is now payable through September 4, 2010, rather than July 31, 2010.
The Act also extends the period during which individuals may qualify for the federal additional compensation, i.e., the amount to which the employee would be entitled under state unemployment compensation law plus an additional $25, from February 28, 2010, to April 5, 2010. Additional compensation shall now be payable through the week ending October 5, 2010, rather than August 31, 2010.
The Act extends the period during which extended benefits are 100 percent federally funded to April 5, 2010. States may opt to continue the period of extended benefits to September 4, 2010, rather than July 31, 2010.