The President signed into law the Department of Defense Appropriations Act of 2010 (Act) which includes an extension of the COBRA premium subsidy enacted earlier this year in the American Recovery and Reinvestment Act (ARRA). The Act extends the period of eligibility for the COBRA subsidy from December 31, 2009, to February 28, 2010, and clarifies that the qualifying event (involuntary termination, other than for gross misconduct, or reduction in hours which causes a loss of coverage), rather than eligibility for COBRA coverage, must occur on or before February 28, 2010, in order for individuals to be eligible for the subsidy. It also increases from nine months to 15 months the period of time for which the subsidy is available.

The Act also permits assistance eligible individuals (AEIs) to elect to pay COBRA premiums retroactively and maintain their COBRA coverage. An AEI who pays a premium at the 35 percent subsidized rate for any period of coverage during his or her transition period (which is any period of coverage that begins before December 19, 2009, and that is extended pursuant to the Act) by the later of February 17, 2010, or 30 days after receiving notice of the Act's change is treated as having timely paid the premium amount.

Finally, the Act creates additional notice requirements. A group health plan administrator must provide a notice to individuals: (1) who were AEIs at any time on or after October 31, 2009, or (2) who experienced a qualifying event on or after October 31, 2009, informing them of the changes made by the Act by February 17, 2010, or, in the case of a qualifying event occurring after December 19, 2009, consistent with the notice requirements under the ARRA. A group health plan administrator also must provide an additional notice to AEIs within the first 60 days of their transition period (described above) containing information regarding changes made by the Act and about the ability to retroactively pay premiums. This notice must be provided to AEIs (1) who were covered under COBRA immediately before their transition period, and (2) who did not timely pay the premium for coverage during the transition period or who paid the full COBRA premium during that period.