The U.S. Department of Labor ("DOL") has issued four Model Notices to help employers implement the new mandatory COBRA subsidy provisions of the "The American Recovery and Reinvestment Act of 2009," also known as the Stimulus Bill.  These notices require immediate attention by employers.  Among other things, the Notices modify the current COBRA election notices, include additional subsidy-related forms, and impose an April 18, 2009 deadline for distributing the so-called "Extended Election Period" notice to affected employees and their eligible dependents.

 

As previously reported, the Stimulus Bill provides a temporary, employer-paid subsidy of 65% for COBRA continuation coverage to employees terminated on or after September 1, 2008 through December 31, 2009.  (See CM - 2/24/09).  Employers are responsible for paying 65% of the COBRA premium for employees and their eligible dependents, which will be reimbursed through a tax credit taken on IRS Form 941, Employer's Quarterly Federal Tax Return.  The employee is only responsible for the remaining 35%.

 

Significantly, although the premium subsidy applies only to eligible individuals involuntarily terminated between September 1, 2008 and December 31, 2009 and their dependents, the new notice of the subsidy must be given to all COBRA-eligible individuals (and their dependents) who experience a qualifying event during that time period.

 

The Model Notices provide employers and plan administrators much needed guidance in notifying employees of this significant benefit.  Each model notice is part of a notice package tailored to accommodate different types of health plans and individuals.  Each distinct notice package includes not only the notice of election of COBRA, but also some or all of the following documents required by the new law: a summary of the new premium subsidy/reduction provisions, questions and answers describing important information about COBRA continuation coverage rights, and informational and administrative forms to use in requesting the premium reduction and (if applicable) electing COBRA coverage.

 

The four Model Notices are:

 

General Notice (full version):  Group health plans subject to COBRA must send this notice to all COBRA-qualified individuals (including former employees and their covered dependents), who between September 1, 2008 through December 31, 2009, experienced a qualifying event such as a termination, death, divorce, or birth, and who (1) have not yet been provided an election notice or (2) were provided such notice on or after February 17, 2009 [the new law's effective date] that did not include the information required by the new law. Notice: Full Version.

 

General Notice (abbreviated version):  This notice is intended for individuals who (1) experienced a qualifying event on or after September 1, 2008, (2) elected COBRA continuation coverage, and (3) and continue to receive COBRA.  This abbreviated version of the General Notice contains only the premium subsidy information and omits the forms concerning COBRA coverage election. Notice: Abbreviated Version.

 

Notice of Extended Election Period ("Second Chance Election Period"):  This notice is for individuals who experienced a qualifying event between September 1, 2008 through February 16, 2009 and who (1) declined COBRA continuation coverage or (2) elected COBRA but subsequently cancelled it.  The new law provides these individuals a "second chance" to elect COBRA by giving them an additional 60-day period to elect COBRA continuation coverage with the subsidy.  Plans subject to COBRA continuation coverage under federal law must provide this notice by April 18, 2009.  Extended Election Period Notice.

 

Alternative Coverage Continuation Election Notice:  This notice is for eligible individuals who work for companies with fewer than 20 employees.  For those employers, continuation coverage is governed by state continuation coverage programs or so-called state mini-COBRA laws such as Cal-COBRA.  These state laws require small employers to provide continuation coverage similar to that of the Federal COBRA.  The Alternative Notice may be modified to conform to the applicable state law and must be provided to all qualified beneficiaries experiencing a qualifying event between September 1, 2008 and December 31, 2009. Alternative Coverage Notice.