On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (the “Act”) into law. The Act, in part, provided a 65 percent government subsidy for up to nine months toward payment of COBRA premiums for certain employees who are involuntarily terminated from employment during the period beginning September 1, 2008, and ending December 31, 2009, and for their qualifying dependents. The 65 percent premium payment must be initially paid by employers, who then recoup the payment from the federal government. In part, the Act requires employers to inform COBRA-eligible individuals about their new COBRA rights under the Act by April 18, 2009. This information must be provided to any individual who becomes a qualified beneficiary, including those who were involuntarily terminated by their employer during the period beginning September 1, 2008, and ending December 31, 2009.
On March 19, 2009, the Department of Labor (“DOL”) issued model notices that employers may use to alert COBRA-eligible individuals of the new COBRA premium subsidy. The model notices are available here. In particular, the Department of Labor issued four forms of the notice, each of which addresses the specific concerns of a particular group of qualified beneficiaries. Each notice includes all the information needed to satisfy the Act’s notice requirements. The four forms of notice are as follows:
- General Notice. This notice should be sent to all qualified beneficiaries who experienced a qualifying event between September 1, 2008 and December 1, 2009, not just those whose qualifying event was an involuntary termination from the employer-plan sponsor. The notice should be sent both to qualifying beneficiaries who have not yet received a notice, as well as those whose earlier COBRA notice did not include information on the COBRA premium subsidy. The general notice contains all information needed to satisfy COBRA’s existing notice requirements, as well as the Act’s notice requirements specifically regarding the premium subsidy.
- Abbreviated General Notice. This notice may be sent to qualified beneficiaries who elected COBRA and are still covered as a result of a qualifying event on or after September 1, 2008. This notice provides information specifically on the Act’s COBRA premium subsidy, and does not include the more general information on COBRA coverage required by the DOL.
- Alternative Notice. This notice should be sent by insurance issuers that offer group health insurance coverage to individuals that may be eligible for continuation coverage under a State law. Generally, this notice should be sent to persons whose (former) employer was not subject to the COBRA laws because the employer’s group health plan covered fewer than 20 employees.
- Special Election Notice. This notice may be sent to qualified beneficiaries who experienced a qualifying event between September 1, 2008 and February 16, 2009, and would otherwise be eligible for the COBRA premium subsidy, had they previously elected COBRA, or had they not previously discontinued COBRA.
Employers may need to customize the forms to address their group health plan’s particular needs and requirements. For example, employers who have previously agreed to pay a portion of the total COBRA premium as a part of a severance agreement may need to revise the model notice to explain the effect of that severance agreement on the qualified beneficiary’s COBRA premium subsidy.