Background: On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (the “ARRA”). In accordance with ARRA, assistance eligible individuals, who are eligible for COBRA coverage because of their own or a family member's involuntary termination from employment that occurred from September 1, 2008 through December 31, 2009 and who elect COBRA, may be eligible to pay a reduced premium. Pursuant to ARRA, assistance-eligible individuals pay only 35% of the full COBRA premiums under their plans for up to 9 months and employers (or other responsible entity) must pay the remaining 65% of the premium, which it can recover by taking the subsidy amount as a credit on its quarterly employment tax return.

Notices: On Thursday, March 19, 2009, the Department of Labor (“DOL”) provided model COBRA continuation notices. These model notices (General Notice (Full Version), General Notice (Abbreviated Version), Notice in Connection with Extended Election Periods and Alternative Notice) contain important information about the mechanics of the premium subsidy and provide assistance eligible individuals with information regarding their eligibility, obligations and restrictions in order to obtain the premium subsidy.  

These model notices are available on the DOL’s website at: http://www.dol.gov/ebsa/COBRAmodelnotice.html. The DOL has also provided a FAQ for Employers About COBRA Premium Reduction Under ARRA which is available at: http://www.dol.gov/ebsa/COBRA.html.  

Frank J. Del Barto recommends that all employers that sponsor a group plan that is subject to the Federal COBRA provisions should review the content and requirements of these model notices. Although employers are not required to use the DOL’s model notices, Frank suggests that it may be prudent to consider using these model notices due to the unique requirements and obligations related to the premium subsidy. For more information or assistance in complying with the new COBRA premium subsidy requirements, please contact your Masuda Funai relationship attorney.