The Department of Labor yesterday issued new model COBRA notices incorporating the extension of eligibility for COBRA premium assistance. As reported in an earlier Ballard Spahr alert, the Temporary Extension Act of 2010 extended the date for incurring an involuntary termination of employment that qualifies for the COBRA premium subsidy from February 28, 2010, to March 31, 2010.

Termination Following Reduction in Hours

The Act expanded eligibility for COBRA premium subsidy assistance to certain individuals who have a reduction in hours on or after September 1, 2008, followed by an involuntary termination of employment between March 2, 2010, and March 31, 2010. The model COBRA notices offer guidance on issues relating to the COBRA subsidy provisions for these individuals. For example:

  • An individual who elects and maintains COBRA continuation coverage on account of a reduction in hours may qualify for the subsidy and should be provided notice of its availability.
  • An individual who has a reduction in hours and does not elect COBRA continuation coverage, or who elects but later drops the coverage, is entitled to a second chance to elect COBRA coverage when employment terminates. If the individual makes a second-chance COBRA election, the coverage will begin as of the first day of the first coverage period following termination of employment.
  • The 18-month maximum COBRA continuation period will be measured from the date of the reduction in hours.
  • The 15-month maximum premium reduction period will begin as of the date the individual becomes "assistance eligible," which is generally the date employment terminates or the beginning of the first coverage period following termination of employment.

Notice Requirements

Certain current and former plan participants and beneficiaries must be notified about the availability of COBRA premium assistance. Plans should update existing COBRA notices to comply with changes to the subsidy requirements made by the Act. Individuals who received a COBRA election notice that did not include information about the Act’s changes to the COBRA subsidy rules are required to receive information about the changes.

In addition, notice of a new election period must be provided within 60 days of employment being terminated to all individuals who:

  • Experienced a qualifying event that was a reduction of hours at any time from September 1, 2008, through March 31, 2010; and
  • Subsequently experience a termination of employment between March 2, 2010, through March 31, 2010; and
  • Either did not elect COBRA continuation coverage when it was first offered or elected COBRA but later discontinued that coverage.

Future Guidance

Both the U.S. House of Representatives and the Senate have introduced bills that would further extend the COBRA subsidy provisions. It is possible that additional extension(s) of COBRA premium assistance will be forthcoming.

For more information on the COBRA subsidy rules, click here.