The eligibility period for subsidized COBRA premiums for certain “assistance eligible individuals” (AEIs) has been extended through February 28, 2010 and the maximum period for receiving the subsidy has been extended from nine months to 15 months. Without such extension, the eligibility period for the COBRA premium subsidy would have ended on December 31, 2009. Many of the AEIs who received the subsidy in 2009 have already exhausted or were close to exhausting their nine months of subsidized premiums. (See our Client Alert No 820. “New Law Requires Immediate Changes to COBRA Continuation Coverage” for a summary of the requirements of the COBRA premium subsidy).

Previously AEIs were eligible for the COBRA premium subsidy if they were involuntarily terminated and were eligible for COBRA by December 31, 2009. Accordingly, individuals who were terminated but who had not lost their prior coverage and, therefore, were not eligible for COBRA by December 31, 2009 would not eligible for the subsidized COBRA premiums. Under the extended subsidy, an AEI must only be involuntarily terminated by February 28, 2010. They are not required also to be eligible for COBRA coverage by that date.

AEIs who qualified for the subsidy but had reached the end of the subsidized premium period prior the extension, and who did not continue COBRA coverage due to the increased premium, will have the opportunity to reinstate their COBRA coverage by paying the premiums retroactively. Such premiums will need to be paid by February 17, 2010 (60 days after enactment of extension) or, if later, 30 days after the AEI is notified by the plan administrator of the extension. For example, a COBRA beneficiary whose nine months of subsidized coverage ran out November 30, 2009, and who didn’t pay the unsubsidized premium for December, could pay his or her subsidized COBRA premium (at the 35 percent rate) percent share by February 17, 2010 and receive COBRA coverage for December, January and February.

For AEIs who had reached the end of their subsidized premium period prior to the extension, and who continued COBRA premiums with the increased premiums, employers may either provide the subsidy for prior moths by reducing such individual’s future COBRA premiums or issue refund checks. For example, an AEI whose subsidy ran out November 30, 2009 and paid the full premium in December could receive a refund for the difference between the full COBRA premium and the 35 percent rate for December or his or her employer could reduce future COBRA premiums by such amount.

Plan administrators must provide notices of the new extension rights to individuals who became AEIs on or after October 31, 2009 or experience a COBRA qualifying involuntary termination of employment on or after that date. The notice must be provided by February 17, 2010 or in the case of a qualifying event occurring after December 21, 2009, consistent with the timing of COBRA notices.

The Employee Benefits Security Administration (EBSA) is expected to issue more information on the notice requirements, updated guidance, fact sheets and frequently asked questions on the COBRA extension. Such information can be found on the EBSA’s Web site