As we recently reported in “New Stimulus Package Creates Subsidy for Health Care Continuation Coverage” (SRZ Alert, March 9, 2009) (hereinafter referred to as the “Previous Alert”), President Obama on Feb. 17, 2009, signed into law the American Recovery and Reinvestment Act of 2009 (the “ARRA”). The ARRA expands the rights of terminated employees and their eligible beneficiaries under the Consolidated Omnibus Budget and Reconciliation Act of 1985, as amended (“COBRA”). Specifically, the COBRA provisions of the ARRA provide that 65 percent of an assistance eligible individual’s COBRA premiums will be subsidized by the U.S. government. While the employer or other plan sponsor is initially required to front the cost of the subsidy, the government will reimburse the entity by providing it with a credit against its payroll taxes and/or a refund.1
Also, as noted in the Previous Alert, the ARRA requires employers and other plan sponsors to amend existing COBRA election notices or provide a supplemental notice to all individuals who became entitled to COBRA coverage (regardless of the reason for such entitlement) during the period beginning on Sept. 1, 2008, and ending on Dec. 31, 2009. Notice must be provided by April 18, 2009. Failure to timely provide notice may result in financial penalties.
On March 19, 2009, the Department of Labor published four (4) model notices on its website:
- General Notice (full version). This model provides comprehensive information regarding COBRA notice requirements that must be provided to all qualified beneficiaries who experienced a qualifying event at any time from Sept. 1, 2008, through Dec. 31, 2009, regardless of the type of qualifying event. This notice includes information on the premium reduction under the ARRA, as well as information generally required in a COBRA notice and/or election form. This model notice is available online at http://www.dol.gov/ebsa/COBRAgeneralnoticefullversion.doc.
- Abbreviated General Notice. This notice is an abbreviated version of the General Notice and may be sent in lieu of the full version to individuals who (i) experienced a qualifying event on or after Sept. 1, 2008, (ii) have already elected COBRA coverage, and (iii) are still receiving COBRA coverage. This notice supplements an employer’s already existing COBRA notice and election form. This notice includes the same information as the General Notice (full version) regarding the availability of the subsidized premium and other rights under the ARRA, but does not include the general COBRA coverage election information. This model notice is available online at http://www.dol.gov/ebsa/COBRAgeneralnoticeabbreviatedversion.doc.
- Notice in Connection with Extended Election Periods. Employers and/or plan sponsors should provide this notice to any individual who had a qualifying event at any time from Sept. 1, 2008, through Feb. 16, 2009, and either (i) did not elect COBRA continuation coverage, or (ii) elected COBRA coverage, but subsequently discontinued the coverage.2 This model notice is available at http://www.dol.gov/ebsa/COBRAextendedelectionperiodnotice.doc.
- Alternative Notice (for Small Employers). This notice should be used by employers who have less than twenty (20) employees and are therefore not subject to COBRA, but who are obligated to provide continuation coverage under a state law. This model, which should be modified as necessary to conform it to the applicable state law, is available at http://www.dol.gov/ebsa/COBRAalternativenotice.doc.
For additional information regarding the model notices, go to http://www.dol.gov/ebsa/pdf/2009-06131_PI.pdf and/or http://www.dol.gov/ebsa/COBRAmodelnotice.html.