Congress has approved measures to extend the COBRA subsidy rules that were initially enacted under the American Recovery and Reinvestment Act of 2009 (ARRA). This extension is included in the Department of Defense Appropriations Act, 2010 (Appropriations Act), which President Obama is expected to sign into law soon.

Employers will need to act promptly to provide appropriate notices and make appropriate systems changes to accommodate the extension. For earlier Ballard Spahr alerts on the COBRA subsidy rules under ARRA, please click here.

The Appropriations Act introduced several significant changes to the COBRA subsidy rules:

  • The latest date for incurring an involuntary termination of employment that qualifies for the COBRA subsidy is pushed back from December 31, 2009, to February 28, 2010. An individual will no longer have to begin COBRA before that date as long as the qualifying event occurs before the expiration date.
  • The maximum period for receiving assistance with COBRA premiums is extended from nine months to 15 months.
  • Transition rules allow individuals who lost coverage when the COBRA subsidy expired to reinstate that coverage retroactively through the payment of the subsidized premium and individuals who paid full COBRA premiums upon losing the subsidy to obtain a refund or credit for their overpayments.
  • Employers are required to provide appropriate notification of the revised rules.

Further changes to the COBRA subsidy rules may be on the horizon. The Jobs for Main Street bill that is still before Congress includes provisions that would allow individuals whose involuntary termination of employment occurs as late as June 30, 2010, to qualify for the COBRA subsidy and make certain other modifications to the subsidy rules. We will continue to track these developments.