On December 21, 2009 President Obama signed into law an extension to the COBRA subsidy created by the American Recovery and Reinvestment Act ("ARRA"). This
new legislation, which is part of the 2010 appropriations bill for the
Defense Department ("the Act"), not only extended the period during
which involuntary terminations would trigger subsidy eligibility, it
also expanded the duration of the subsidy. What's New?
• The Acts expands the maximum subsidy period from 9 months to 15 months.
• The Act extends the period during which a COBRA-qualifying event resulting from an involuntary termination of employment can trigger eligibility for the subsidy. In essence, the period is extended from December 31, 2009 to February 28, 2010.
• The Act also resolves an issue that was created by the language of the ARRA regarding eligibility for the subsidy. Originally, the ARRA required that both the qualifying event and the beginning of the COBRA coverage period occur on or before December 31, 2009. As such, if an employee was terminated in December 2009, and COBRA coverage started on January 1, 2010,
the employee would not have been eligible for the subsidy. The new law
changes this by conditioning eligibility on the timing of the
qualifying event, which is the event causing the loss of coverage. Now, if an employee experiences an involuntary termination on or before February 28, 2010, the employee will be eligible for the subsidy regardless of when COBRA coverage would eventually start.
• The Act also makes special protections for
employees who exhausted their nine months of subsidized COBRA coverage
and did not elect to continue coverage by paying the full premiums. Under
the new law, those individuals will be able to continue COBRA coverage
by paying the premiums retroactively, so long as they do so by a
certain date. The new law requires the retroactive payments to be made by no later than February 19, 2010 or 30 days from receipt of a new required notice.
•
For those individuals who exhausted their nine-month COBRA subsidy and
elected to continue coverage by paying the full COBRA premiums, the new
law allows employers to apply the same refund or crediting rules that
were in the ARRA, so that these employees can take advantage of the
COBRA subsidy for the full 15 months.
New Notices Required
•
A new notice, explaining the new subsidy rules, must be issued to all
individuals who were or are assistance-eligible individuals on or after
October 31, 2009, or who are terminated from employment on or after
October 31, 2009.
•
A special notice must also be sent to those individuals who either
dropped COBRA or who paid the full premiums when their nine-month
subsidy expired, as explained above. This
notice must explain that they are now eligible to either reinstate
their coverage retroactively at the subsidized rate or receive a credit
or refund.
The
Department of Labor will be issuing new model notices in the next few
weeks. In the meantime, your firm contact is ready to assist you in
developing notices that comply with these new provisions.
The other provisions of the initial COBRA subsidy are still in effect (see our February 24, 2009 Compliance Matters). (2/24/09 CM)
Your contact at the Firm is ready to assist you if you have any questions about this new law.
For more information, call us today at (818) 508-3700,
or visit us on the web, at www.brgslaw.com.
Sincerely,
Richard S. Rosenberg
Partner
BRG&S, LLP
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The Management Side
Employment and Labor
Law Firm for Business
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