On Saturday, December 19, 2009, President Obama signed into law the Department of Defense Appropriations Act of 2010 (the “Act”). Added very late to the back of this military-oriented Act were provisions extending the COBRA premium subsidy eligibility period through February 28, 2010, provisions extending the COBRA premium subsidy from nine (9) months to fifteen (15) months and new notice requirements for plan administrators to consider.

I. Eligibility Extended Through February 28, 2010

Previously: Employees involuntarily terminated from employment between September 1, 2008 and December 31, 2009 were generally eligible for the 65% COBRA premium subsidy, which meant that they were only responsible for paying 35% of the required COBRA premium. These eligible employees and their dependents were referred to as “Assistance Eligible Individuals” or “AEI’s.”

New Act: Employees involuntarily terminated from employment beginning September 1, 2008 and ending February 28, 2010 are now eligible for the 65% COBRA premium subsidy. As a result, employees involuntarily terminated during the first two months of 2010 are also eligible for the premium subsidy for up to 15 months.

II. Duration Extended From 9 Months to 15 Months

Previously: The COBRA premium subsidy was available for up to nine (9) months. The premium subsidy could end earlier if an AEI became “eligible” for another group health plan, Medicare, or was no longer eligible for COBRA continuation coverage.

New Act: The COBRA premium subsidy is now available for up to fifteen (15) months. The premium subsidy can still end earlier if an AEI becomes “eligible” for another group health plan, Medicare, or is no longer eligible for COBRA continuation coverage.

III. Two Additional Notification Requirements

(1) In the case of an individual who was an AEI at any time on or after October 31, 2009, or who experiences a qualifying event relating to COBRA continuation coverage, the plan administrator must provide an additional notice with information regarding the amendments made by the Act within 60-days of December 19, 2009, or in the case of a qualifying event after such date, consistent with the requirements to notify former employees about the availability of the COBRA premium reduction.

(2) In the case of an AEI who did not timely pay the premium for any period of coverage during their transition period or who paid the full premium without regard to the subsidy, the plan administrator must provide an additional notice with information regarding the amendments made by the Act and permit the AEI to make retroactive premium payments to maintain COBRA coverage or to receive a credit or refund for any overpayment.

IV. Next Steps

Although not in the Act’s requirements, we expect that the U.S. Department of Labor (“DOL”) will provide additional guidance and model notification notices in early 2010.