COBRA Subsidy Extension
Background
The period during which an individual may qualify for the COBRA premium subsidy that was due to expire on December 31, 2009 under the American Recovery and Reinvestment Act (ARRA) (see ErisaALERT 2009-1) has been extended for six months as part of the Department of Defense Appropriations Act (the Act) for a total of 15 months.
What it means to Plan Sponsors
The Act results in:
- up to a total of fifteen months of subsidized COBRA coverage for assistance eligible individuals
- extended eligibility through February 28, 2010, sweeping in employees who were involuntarily terminated after December 31, 2009 but before March 1, 2010 and
- additional notice requirements to participants.
Eligibility Rules for Subsidized COBRA coverage
The subsidy, or premium reduction, is available to assistance eligible individuals. Assistance eligible individuals include the employee and the employee’s family members who:
- Are eligible for federal or state COBRA continuation coverage as a result of the employee’s involuntary termination of employment (qualifying event) anytime from September 1, 2008 through February 28, 2010, and
- Elect COBRA coverage timely
Subsidized COBRA coverage is not available to those who are eligible for other group health coverage (such as a spouse’s plan) or Medicare. The subsidy is available as of the first COBRA coverage period beginning on or after February 17, 2009. There is no subsidy available for periods of coverage that began prior to February 17, 2009.
The extension provision introduces the term “transition period”. People in the transition period may require notices as soon as January 29, 2010! The transition period is the period that begins immediately after the end of the maximum ARRA provision (generally, nine months). A person is in the transition period if the subsidy continues to apply only because of the extension; basically, people for whom the ARRA extension has expired. A transition notice must be provided within 60 days of the first day of the transition period. For example, if someone’s ARRA extension expired on 11/30/2009; the transition period begins December 1, 2009, the transition notice must be provided by January 29, 2010!!!
The Notices
| The Notice | Who must receive | When must it be distributed |
| Updated General Notice (contains information on the premium reduction as well as information required in a COBRA notice) |
|
Normal timeframes for providing COBRA notices |
| Premium Assistance Extension Notice | Individuals who were assistance eligible individuals as of October 31, 2009 (unless they are in a transition period described above) and individuals who lost health coverage as a result of termination of employment on or after October 31, 2009 (unless they have already received a timely updated General Notice) | February 17, 2010 |
| Premium Assistance Extension Notice Transition Notices | Individuals who are in a transition period (described above) and to whom the premium reduction continues to apply as a result of the extension from nine to fifteen months of subsidized coverage. | Within 60 days of the first day of the transition period |
| Alternative Notice | Persons who become eligible for continuation coverage under state law (model notice may be modified as necessary to conform to applicable state law) | Check applicable state law |
Special Circumstances
- Individuals who are in transition and who did not timely pay the premium for any period of coverage during the transition period may retroactively pay the 35 per cent of premium costs by the later of February 17, 2010, thirty days after the plan administrator provides the Premium Assistance Extension Notice, or the end of the otherwise applicable payment grace period.
- Individuals who lost their subsidy and who subsequently paid the full COBRA premium for December 2009 and/or January 2010 should contact their COBRA administrator or former employer to discuss a credit for future months or reimbursement of the overpayment.
What Should Plan Sponsors Do Now?
- Visit the COBRA page on the DOL website and review the FAQs for employees and other available information.
- Update Notices – If you outsource your COBRA administration, make sure the vendor has a plan for complying with the new requirements. If you administer COBRA in-house, revise notices as required.
- Identify people in transition and provide notices as required.
- Decide how to handle COBRA overpayments (transition individuals who have paid the full 100 percent COBRA premium for December 2009 and January 2010).
Note: all links are active as of the date of issuance of this ErisaALERT.
Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 773-857-1137 and ask for Leanne Fosbre or 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
