The Department of Defense Appropriations Act for Fiscal Year 2010 was signed into law by President Obama on December 19, 2009. The Act extends the eligibility for and the duration of the temporary federal COBRA subsidy provided by the American Recovery and Reinvestment Act of 2009. The rules regarding the original subsidy provisions are summarized in Goodwin Procter’s February 20, 2009 Employee Benefits Update.
Generally Applicable Rules
Other than as described above, the existing rules regarding the amount of, eligibility for, and administration of the COBRA subsidy remain unchanged. These rules include circumstances which make an otherwise eligible individual ineligible for the subsidy and provide the mechanism for reimbursement of the subsidy extended by the employer (or the insurance carrier in the case of subsidized state law continuation coverage for small groups).
Special notices for individuals who were eligible for the subsidy on or after October 31, 2009 or who experienced a termination of employment (whether involuntary or voluntary) on or after October 31, 2009, and in either case before December 19, 2009, will be required to be distributed by February 17, 2010. In addition, the general COBRA notice for new terminations through February 28, 2010 should be updated to reflect the extension. It is expected that model notices will be published by the Secretary of Labor on or before January 19, 2010.
Special Considerations for Certain Individuals Participating in the Subsidy
Individuals who started receiving the COBRA subsidy on the original effective date of March 1, 2009, will have lost their eligibility for the subsidy effective December 1, 2009. If such an individual has paid the full COBRA amount for December (as opposed to the 35% required under the subsidy), the employer will be required to issue a refund or apply the excess payments to the individual’s future COBRA payments (as long as the credit can be used up in 180 days). If an eligible individual has dropped coverage due to the loss of the subsidy, the employer must offer the individual the right to be reinstated retroactive to the date of COBRA discontinuance. In such event, payment to cover the cost of the reinstated coverage must be made by the individual by February 17, 2010 or, if later, 30 days after notice is provided.
In addition, to avoid interruption of coverage, employers should review their health plan COBRA participant records and reach out to individuals whose nine-month COBRA subsidy is due to expire prior to the availability of the new model notices.
For more information about the contents of this alert, please contact:
+1 617 570 1169
Kristina Hansen Wardwell
+1 617 570 1148
Labor & Employment
ERISA & Executive Compensation
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