WORKPLACE LAW -
COBRA Subsidy Extended Again
Question:
In the beginning of April, our business was forced to lay off two employees. It is my understanding that the subsidy for COBRA health plan continuation coverage created by the American Recovery and Reinvestment Act of 2009 has been extended a few times. Do the extensions cover employees laid off in April?
Answer:
Yes, due to numerous extensions that are explained in this article, the COBRA subsidy currently applies to any covered employee who was involuntarily terminated between September 1, 2008 and May 31, 2010 (including their spouses and dependent children who were covered by the health plan at the time of termination) who elects COBRA continuation coverage.
Under the original version of the American Recovery and Reinvestment Act of 2009 (ARRA), certain individuals who suffered from an involuntary termination of employment were generally eligible to elect COBRA coverage and receive a subsidy of 65% of their COBRA premiums for up to 9 months. Specifically, the COBRA subsidy is available to "assistance-eligible individuals" (AEIs). This critical term was originally defined as any covered employee who was involuntarily terminated between September 1, 2008 and December 31, 2009 (including their spouses and dependent children who were covered by the health plan at the time of termination) who elects COBRA continuation coverage. Notably, the COBRA subsidy has been extended three times to assist AEIs terminated after December 31, 2009.
On December 16, 2009, shortly before the subsidy’s scheduled expiration, a provision in the Department of Defense Appropriations Act of 2010 extended the COBRA subsidy to individuals who were involuntarily terminated between January 1, 2010 and February 28, 2010. In addition, the maximum amount of time an eligible individual can receive the subsidy increased from 9 to 15 months, and individuals who reached the end of the reduced premium period before the law extended it to 15 months have extra time to pay the reduced premium. If during the transition period, an AEI paid the full premium amount for coverage and did not receive a subsidy, the AEI’s employer must reimburse the AEI for the subsidy amount or provide a credit for future coverage.
Subsequently, on March 2, 2010, the Temporary Extension Act of 2010 extended the COBRA subsidy to AEI’s terminated through March 31, 2010. The Temporary Extension Act of 2010 also expanded the definition of AEIs to include individuals who: 1) experience a qualifying event based on a reduction in hours between September 1, 2008 and March 31, 2010; 2) did not elect COBRA continuation coverage when it was first offered or elected and later discontinued such coverage; and 3) are involuntarily terminated between March 2, 2010 and March 31, 2010.
And on April 15, 2010, President Obama signed the Continuing Extension Act of 2010, which extended all of the subsidy benefits described above to AEIs terminated through May 31, 2010. The Continuing Extension Act of 2010 is retroactive in that AEIs terminated between April 1, 2010 and April 14, 2010 are eligible for the subsidy and must be provided with the appropriate notice. So, the COBRA subsidy currently applies to any covered employee who was involuntarily terminated between September 1, 2008 and May 31, 2010 (including their spouses and dependent children who were covered by the health plan at the time of termination) who elects COBRA continuation coverage. Further, the subsidy extensions apply to state continuation coverage programs that are comparable to the continuation coverage provided by COBRA, including the Cal-COBRA program.
As a result of the subsidy extensions explained above, employers need to identify affected individuals, revise their COBRA notices to meet the requirements of the new laws, and provide AEIs with the appropriate notice. Additional information and resources, including revised model notices, are available on the United States Department of Labor’s website at
http://www.dol.gov/ebsa/COBRA.html.
Employers should be aware that the COBRA subsidy may be extended again. If H.R. 4213 (the American Workers, State, and Business Relief Act of 2010) becomes law, the subsidy benefits will apply to AEIs terminated through December 31, 2010. The House approved H.R. 4213 in December 2009, and the Senate approved it in March 2010 with amendments. Because of the amendments, H.R. 4213 is now in the hands of the House Ways and Means Committee. By visiting http://thomas.loc.gov or
http://www.govtrack.us,
employers can keep track the bill’s status.
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