On Thursday, March 19, 2009, the Department of Labor (DOL) issued model notices for the COBRA premium reduction under the American Recovery and Reinvestment Act of 2009 (ARRA). Enacted on February 17, 2009, ARRA provides that certain qualified beneficiaries who are eligible for COBRA continuation of health coverage, or similar coverage under state law, may be eligible to pay 35% of the premium for a nine-month period following the date of the qualifying event, with the employer (or other responsible entity) receiving a payroll tax credit equal to the remaining 65% of the premium.
Under ARRA, a COBRA qualified beneficiary will be an assistance eligible individual (AEI) entitled to reduced premiums if:
- He or she is eligible for COBRA at any time during the period September 1, 2008, through December 31, 2009;
- His or her COBRA election opportunity is the result of an involuntary termination from employment during the period September 1, 2008, through December 31, 2009; and
- He or she is not eligible for Medicare or for coverage under any other group health plan, such as a plan sponsored by a successor employer or a spouse’s employer.
An AEI who elects COBRA will be required to pay only 35% of the COBRA premium for the first nine months following the AEI’s involuntary termination. The employer (or other responsible entity) may recover the remaining 65% of the premium by taking a credit on its IRS Form 941 quarterly employment tax return. ARRA also provides for a second COBRA election opportunity for all qualified beneficiaries who were involuntarily terminated during the period September 1, 2008, through February 16, 2009, who did not elect COBRA when it was first offered or who elected COBRA but subsequently discontinued coverage. These eligible individuals must receive a notice informing them of this second election by April 18, 2009, and the individuals have 60 days after the notice is provided in which to elect COBRA.
Under ARRA, employers must provide notice of the premium reduction to all individuals who had any COBRA qualifying event during the period September 1, 2008, through December 31, 2009. The notices must include the following information:
- The forms necessary for establishing eligibility for the premium reduction;
- Contact information for the plan administrator or other person maintaining relevant information in connection with the premium reduction;
- A description of the second election period, if applicable to the individual;
- A description of the requirement that the AEI notify the plan when he or she becomes eligible for coverage under another group health plan or Medicare and the penalty for failing to do so;
- A description of the right to receive the premium reduction and the conditions to the entitlement; and
- If offered by the employer, a description of the opportunity to enroll in a different coverage option available under the plan.
The DOL has issued the following model notices: (1) a model general notice; (2) an abbreviated model general notice; (3) a model notice in connection with the second election opportunity; and (4) a model alternative notice.
Model General Notice
- This notice incorporates notice of the ARRA premium reduction into the model COBRA election notice the DOL had previously published in the regulations. It is to be provided to all qualified beneficiaries who have not yet received a COBRA election notice who have qualifying events during the period September 1, 2008, through December 31, 2009.
- The notice must be completed with information specific to the individual, including the date the individual’s coverage will end if he or she does not elect COBRA, the number of months that COBRA coverage will continue, which family members are eligible for COBRA coverage, and how much COBRA coverage will cost.
- The notice also contains a question-and-answer section about the ARRA premium reduction and COBRA generally as well as a summary of the COBRA premium reduction.
- The notice provides several forms:
- A COBRA election form;
- A form for switching COBRA benefits, if the plan permits AEIs to elect to enroll in coverage that is different than coverage in which the individual was enrolled at the time of the involuntary termination; and
- A form for applying for the ARRA premium reduction.
Abbreviated Model General Notice
- This notice is for qualified beneficiaries currently enrolled in COBRA who had qualifying events that occurred on or after September 1, 2008, and advises them of the availability of the premium reduction.
- The notice eliminates the information in the model general notice that qualified beneficiaries received in the COBRA election notice and explains that the individuals may now elect the premium reduction.
Model Notice in Connection With the Second Election Opportunity
- This notice is for all qualified beneficiaries who are or would be an AEI but are not currently enrolled in COBRA, including all individuals who had a qualifying event under COBRA during the period September 1, 2008, through February 16, 2009, and who did not elect COBRA or who elected COBRA and then discontinued COBRA.
- The notice includes similar information and forms as the model general notice, and it provides information on the ability to elect COBRA at this time.
- This notice is for use where coverage is subject to state continuation requirements during the period September 1, 2008, through December 31, 2009.
- The notice includes similar information and forms to the model general notice, but it tailors the notice to state law rather than federal law.
- The notice is not state-specific, and employers may supplement the model with state-specific information.
To view the DOL model notices, click here.