COBRA Subsidy Update
As you are aware, the American Recovery & Reinvestment Act of 2009, provides for a 65 percent COBRA premium subsidy for a period of up to 15 months for eligible employees who were INVOLUNTARILY terminated from employment during the period from September 1, 2008, through February 28, 2010, and their eligible family members.
On March 2, President Obama signed the Temporary Extension Act of 2010 (TEA), which extends the COBRA subsidy eligibility period, expands the group individuals who may receive the subsidy, and makes other changes and clairfications to the premium subsidy provisions originally included in the American Recovery & Reinvestment Act (ARRA). The TEA amends ARRA to extend the eligibility period for one additional month (through March 31, 2010) however it is being reported that this is a temporary fix with the intent to have it extended through 2010. Employers and administrators should watch for additional legislation and should identify any qualified beneficiaries who were previously notified of COBRA rights due to involuntary termination of employment occurring after February 28, 2010. If these individuals were previously notified of their COBRA rights and were informed that the subsidy was not available to them, they should be contacted immediately and informed of the change.
It should also be noted, that the TEA expands the group of individuals who may be eligible for the subsidy by including employees who experienced a COBRA qualifying event of reduction of hours of employment occurring some time after September 1, 2008, followed by an involutary termination occurring on or after the date of the TEA (after March 2, 2010). However, please note that a COBRA subsidy for these individuals only applies to periods of coverage beginning after March 2, 2010, and the maximum period of COBRA coverage for these individuals still will be counted from the date of the earlier reduction in hours of employment. For example, assume that of the affected individuals elected COBRA at the time of his or her reduction in hours and is still receiving COBRA coverage at the time of involutary termination from employment (occurring between March 2, and March 31,). This person may now claim the subsidy for periods of coverage beginning after March 2, 2010. If the individual did not make a COBRA election at the time of the loss of coverage due to reduced hours of employment, he or she will have additional COBRA election rights under the act to get back on coverage and start claiming a subsidy beginning with the period of coverage that starts March 2, 2010 (but remember the maximum period of coverage will be measured from the earlier reduction in hours of employment).
Whew!! I tried to make this as simple as possible. This information was gathered from the Proskauer news alert and has more detailed information if you need it (www.proskauer.com).