February 12, 2010 The Department of Defense Appropriations Act: COBRA Subsidy Extension
KEEPING YOU INFORMED…
This memorandum updates our April 2009 memorandum (copy attached) concerning amendments to the federal law that established a health insurance continuation coverage premium subsidy pursuant to COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985). The American Recovery and Reinvestment Act of 2009 (ARRA) provided certain individuals whose employment was terminated between September 1, 2008 and December 31, 2009 with a health insurance continuation coverage premium subsidy (i.e., 65% of the individual’s COBRA premium) for up to nine months. The recently enacted Department of Defense Appropriations Act of 2010 (“the Act”) extends and expands upon the ARRA premium subsidy as follows:
1. Individuals whose employment was involuntarily terminated between December 31, 2009 and February 28, 2010 are now eligible for the premium subsidy. In addition, an individual may qualify for the subsidy if (s)he is a COBRA “qualified beneficiary” whose qualifying event is an involuntary termination of employment that occurred between September 1, 2008 and February 28, 2010, even if his/her COBRA coverage does not commence until after February 28, 2010.
2. The maximum subsidized period has been extended from nine months to 15 months, retroactive to October 31, 2009.
3. Individuals who terminated COBRA coverage after the nine-month subsidy period expired must be given the opportunity to reinstate COBRA coverage, at the subsidized rate, retroactive to the date when they stopped paying for COBRA coverage. To reinstate COBRA continuation coverage, these individuals must pay 35% of the retroactive premium costs by February 17, 2010 or, if later, within 30 days after notice (see below) of their right to do so.
4. The future premium payments of assistance eligible individuals who paid the full premium amount for COBRA coverage after nine months of receiving the reduction must receive credit by their former employer toward future premiums or be reimbursed for the amount paid in excess of the subsidized premium.
New Notice Requirements
On or before February 17, 2010, the plan administrator must provide notice of the new extension rights to individuals who were eligible for the COBRA premium reduction during the period from October 31, 2009 through December 19, 2009.
For individuals who become eligible for the premium subsidy after December 19, 2009, the plan administrator must provide notice within 60 days of when the individual is or was involuntarily separated from employment.
For any individual who failed to pay a COBRA premium or who paid the full COBRA premium after receiving the COBRA subsidy for nine months, the plan administrator must provide notice explaining that the individual has the right to make retroactive payments to reinstate his/her COBRA coverage. The plan administrator must provide this notice within 60 days from the first day of the period during which the individual was no longer eligible for the subsidy.
The Department of Labor has developed model notices to be used by employers, which are available at http://www.dol.gov/ebsa/COBRAmodelnotice.html.
Please contact us if you have any questions regarding this new law.
THIS MEMORANDUM IS MEANT TO ASSIST IN GENERAL UNDERSTANDING OF THE CURRENT LAW. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. THOSE WITH PARTICULAR QUESTIONS SHOULD SEEK THE ADVICE OF COUNSEL.
© Lamb & Barnosky, LLP, 2010