Because the COBRA subsidy continues to be a very hot topic in conjunction with the various efforts to pass jobs legislation, Congress continues to fiddle with it. The extension of the COBRA subsidy to March 31, 2010, brings a new twist that will likely continue forward for future extensions (the latest being considered is through December 31, 2010) so employers and plan sponsors should pay careful attention to this new twist.
The latest legislation extended the COBRA premium reduction eligibility period for one month until March 31, 2010. But it also expanded eligibility to individuals who experience a qualifying event that is a reduction of hours occurring at any time from September 1, 2008 through March 31, 2010, which is followed by an involuntary termination of employment on or after March 2, 2010 through March 31, 2010. This expansion also includes a second election opportunity for these individuals who had a reduction of hours qualifying event followed by an involuntary termination, if they did not elect COBRA continuation coverage when it was first offered OR elected but subsequently discontinued COBRA.
What this change means is if an employee had a qualifying event that was a reduction of hours, and subsequent termination of employment AFTER March 1, 2010, that person would be eligible for the subsidy for the COBRA periods after the termination date. For example:
Employee has a qualifying event on August 1, 2009, based on a reduction of hours. Employee elects COBRA and pays premiums through March 1, 2010. Employee is terminated on March 15, 2010. Through March 2010, the employee has exhausted 8 months of COBRA coverage. Now, he is eligible for the premiums subsidy for the remaining 10 months of his COBRA coverage because he has had a second event, the termination. Also, the new law makes clear that the employee would not have even had to elect COBRA to be eligible for the subsidy now. If the employee had a qualifying event as a result of reduction of hours before 3/1/10, and either did not elect COBRA coverage, or let the COBRA coverage lapse because of non-payment of premiums and he subsequently has an involuntary termination of employment, he can elect COBRA for the remained of the 18 months AND get the subsidy.
So going forward, employers should be very cognizant of the need to provide the COBRA notice and the subsidy election form to any employee who was involuntarily terminated March 1, 2010, regardless of whether they were already COBRA eligible because of a reduction of hours. They will essentially be offered a second election period. It won't add to their 18 months, but it will make them eligible to get the premiums subsidy. Since this will likely be the case through the end of this year, so start paying attention now.