As expected, the COBRA subsidy has been extended. Under the original subsidy law, individuals who had a COBRA qualifying event based on an involuntary termination of employment from September 1, 2008 to December 31, 2009, were generally eligible for a 65% subsidy toward their COBRA premiums for billing periods beginning on or after February 17, 2009, for up to nine months. View our earlier COBRA Subsidy Alert >>

The Department of Defense Appropriations Act, 2010 (the DOD Act) extended the subsidy eligibility period by two months (to February 28, 2010) and increased the maximum subsidy period by six months (to 15 months). Employers face a major challenge in providing the following notices on an expedited basis:

  • General COBRA Notice.The general COBRA notice provided to qualified beneficiaries must be updated to reflect the changes made by the DOD Act. For qualifying events occurring after December 19, 2009, an updated general COBRA notice must be provided within the normal timeframe for providing a COBRA election notice. Department of Labor guidance also provides that individuals who experienced a qualifying event that was a termination of employment in December 2009, but who were not eligible for COBRA coverage until January 2010, should receive the updated notice. The 60-day COBRA election period does not start to run until the participant receives the updated notice, so these notices should be issued as soon as practicable to limit any adverse selection.
  • Premium Assistance Extension Notice. Additional information must be provided to those individuals who received COBRA election notices that did not contain information required by the DOD Act. This notice must be provided to two groups:
    • Individuals who, on or after October 31, 2009, were either eligible for the COBRA subsidy or experienced a termination of employment. The notice must be provided to these individuals by February 17, 2010.
    • Individuals who received the subsidy for the maximum period (generally nine months) and are eligible to continue receiving the subsidy under the DOD Act for the additional subsidy period (generally six months and referred to as the “transition period”). These individuals may have dropped coverage after the expiration of the nine-month period or may have continued COBRA coverage without the subsidy. The notice must be provided to these individuals within 60 days of the beginning of the transition period. Individuals paying monthly who started receiving the subsidy on March 1, 2009, must be provided the notice by January 29, 2010.

As with the original subsidy law, the extension does not extend coverage beyond the period an individual would otherwise be entitled to receive COBRA coverage under a plan or under State law for those plans not subject to Federal COBRA requirements.