On March 19, 2009, the Department of Labor issued model COBRA notices that are required to be furnished to certain employees, former employees, and their beneficiaries, pursuant to the American Recovery and Reinvestment Act of 2009 ("ARRA").
The ARRA, signed by President Obama on February 17, 2009, provides a subsidy for COBRA premiums for certain employees who are involuntarily terminated from employment on or after September 1, 2008, and before January 1, 2010. For a description of eligible COBRA employees, please see our alert entitled "Summary of COBRA Provisions of the 2009 Stimulus Package."
Under ARRA, employers are required to provide a 65% subsidy to the eligible COBRA employees. Employers will recoup the subsidy by taking a credit against their liability for income tax withholding from wages or FICA taxes. However, for multi-employer plans, the plan is entitled to recoup the COBRA subsidy, and for insured plans that are not subject to federal COBRA, the insurer is entitled to recoup the COBRA subsidy. The subsidy is provided for a nine-month period, unless the eligible COBRA employee's period of COBRA coverage ends sooner, or the eligible COBRA employee becomes eligible for Medicare benefits or coverage under another group health plan prior to the expiration of the nine-month period.
The U.S. Department of Labor ("DOL") has issued four model notices:
- General Notice. This notice includes the information that is in the "normal" COBRA notice and information related to the COBRA subsidy. This notice is to be provided to all COBRA qualified beneficiaries who experience any COBRA qualifying event (not only terminations from employment) during the period September 1, 2008, through December 31, 2009, and who either have not yet been provided an election notice or who were provided an election notice on or after February 17, 2009 that did not include the COBRA subsidy information. See General Notice here
- Abbreviated General Notice. This notice includes the same information as the General Notice, except for the COBRA coverage election information. This notice is to be provided to eligible COBRA employees who experience a qualifying event on or after September 1, 2008, who have already elected COBRA coverage, and still maintain COBRA coverage. See Abbreviated General Notice here
- Alternative Notice. This notice is to be provided to terminated employees who are not eligible for federal COBRA coverage, but who are eligible for state COBRA coverage (commonly referred to as "mini-COBRA") during the period September 1, 2008, through December 31, 2009. See Alternative Notice here
- Notice in Connection with Extended Election Periods. This notice is to be provided to any eligible COBRA employee who had a qualifying event from September 1, 2008, through February 16, 2009, and either did not elect COBRA coverage at the time of the qualifying event, or who elected COBRA coverage, but subsequently discontinued COBRA coverage. See Notice in Connection with Extended Election Periods here
The COBRA subsidy applies for COBRA coverage provided beginning on March 1, 2009. However, employers have until April 30, 2009, to furnish the required COBRA subsidy notices and give effect to the eligible COBRA employees' elections.
The Internal Revenue Service is expected to issue guidance regarding the definition of involuntary termination during the week of March 30, 2009.