The Department of Labor (“DOL”) has issued three model notices which can be used to notify qualified beneficiaries about the extension of the 65% COBRA subsidy:
- an updated general notice;
- a premium assistance extension notice; and
- an updated alternative notice.
Under the Department of Defense Appropriations Act of 2010 (“DOD Act”), enacted December 19, 2009, the 65% COBRA subsidy was extended to individuals whose involuntary termination of employment occurs on or before February 28, 2010. In addition, the 9-month subsidy period was extended to 15 months. These new model notices may be used to communicate these changes to potentially eligible individuals.
The DOL’s guidance on providing the notice is confusing. We offer the following guidelines which should work for most situations.
Updated General Notice -- This is a general COBRA notice; it has been updated to reflect the DOD Act. It is intended to be sent (in accordance with standard timing for COBRA election notices) to:
- All individuals who experience any COBRA qualifying event after December 19, 2009; and
- All qualified beneficiaries who (i) experienced any COBRA qualifying event (not just involuntary termination of employment) at any time between September 1, 2008 and December 19, 2009, AND (ii) have not yet received a COBRA election notice (which might include, for example, anyone who had a qualifying event (A) in the last 60 days, or (B) on or after September 1, 2008 but who has not yet received a COBRA notice because health coverage was automatically extended under the terms of the plan without regard to COBRA).
Premium Assistance Extension Notice – This notice is intended for those former employees (and their beneficiaries) who were eligible for the COBRA subsidy on October 31, 2009 (because they (A) were involuntarily terminated after September 1, 2008, (B) previously received a COBRA notice, (C) timely elected, or still can timely elect, COBRA coverage, and (D) did not drop such COBRA coverage prior to the end of the initial 9-month subsidy period). This notice should be given:
- By February 17, 2010 – for those individuals whose 9-month subsidy ended before December 19, 2009; or
- Within 60 days following the end of the original 9-month subsidy period – for those individuals whose 9-month subsidy ends on or after December 19, 2009.
Updated Alternative Notice -- This notice is intended for individuals who receive extended health coverage not under COBRA but under State continuation coverage requirements (“mini-COBRA laws”) and had a qualifying event between September 1, 2008 and February 28, 2010. The DOL’s guidance does not provide a specific timeframe as to when this notice should be distributed. However, it is likely that the DOL expects plan sponsors and administrators to follow the same notification requirements as specified in regards to the Updated General Notice (see above).
Action Steps for Plan Sponsors and Administrators:
- Prepare updated COBRA notices (using the DOL model notices or otherwise), and establish a procedure for delivering the appropriate notice to each individual.
- Identify former employees (and their beneficiaries) who were eligible for the COBRA subsidy, previously elected COBRA coverage and either (A) dropped the coverage after their 9-month subsidy ended, or (B) continued the coverage (paying more than 35% of the COBRA premium) after their 9-month subsidy ended.
- For those individuals who dropped COBRA after the expiration of the initial 9-month subsidy period, establish procedures for reinstating COBRA coverage retroactively (including processing retroactive COBRA premiums), assuming they elect to do so.
- For those individuals who continued COBRA after the expiration of the initial 9-month subsidy period (paying more than 35% of the COBRA premium), establish a policy for reimbursing them for the excess premiums (amounts over 35%) which they paid for November 2009, December 2009 and/or January 2010.
- Continue to identify all involuntary terminations of employment through February 28, 2010.