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New Law Extends COBRA Subsidy
December 28, 2009
Last week, President Obama signed a new law
that extends the eligibility period for the federal COBRA
premium subsidy originally put in place under the American
Recovery and Reinvestment Act of 2009.
Click here to see a copy of the new law. The law takes
effect immediately and includes new COBRA subsidy notice
requirements.
COBRA Subsidy Extension
The new law extends the eligibility period for
the federal COBRA subsidy for an additional two months, through
February 28, 2010. The subsidy was originally set to expire on
December 31, 2009. This means that employees (and their
dependents) who were otherwise eligible for federal COBRA and
who were involuntarily terminated between September 1, 2008 and
February 28, 2010 will be eligible for the subsidy. The law
also extends the maximum period an eligible individual may
receive the COBRA subsidy from 9 to 15 months. Thus, eligible
individuals whose COBRA subsidy periods had previously expired
or who are presently receiving the COBRA subsidy will be
eligible for the extension.
"Transition" individuals whose COBRA coverage
ended because they stopped paying their premium at the time the
original subsidy expired must be given the opportunity to
retroactively pay COBRA premiums at the subsidized rate, up to a
total of 15 months. To continue their coverage, they must pay
the COBRA premium cost at the 35% subsidized rate by the later
of February 19, 2010 or 30 days after they receive notice of the
subsidy extension. "Overpayment" individuals who maintained
COBRA coverage after expiration of the original subsidy period
must be reimbursed for the difference between the amount paid
and the subsidized COBRA amount via either a refund or credit
toward future COBRA premium payments.
New COBRA Notices
By February 17, 2010, "transition" and
"overpayment" individuals must receive notice that they are
eligible either to reinstate their coverage retroactively by
paying the subsidized premiums or to receive a credit or refund
for premiums paid. Also by February 17, 2010, notice of the
COBRA subsidy extension must be provided to anyone who was an
"assistance eligible individual" on or after October 31, 2009,
or who was terminated from employment on or after October 31,
2009. Finally, for all qualifying events that occur after the
law's December 19, 2009 passage, COBRA notices must include
information about the subsidy extension.
What This Means
To comply with the new COBRA subsidy extension
obligations, covered employers should compile a list of
employees and their eligible dependents who must receive notice
of the COBRA subsidy extension. Employers acting as plan
administrators must also prepare or obtain COBRA subsidy
extension notices and make sure the notices are delivered to the
appropriate employees and their eligible dependents. Finally,
they must ensure that COBRA notices for all newly terminated
employees (those terminated after December 19, 2009) contain the
correct information about the new COBRA subsidy extension.
This E-Update was authored by
Brenda
Kasper and
Lisa Frank. For more information, please contact Ms.
Kasper, Ms. Frank or any other Paul,
Plevin attorney by calling (619) 237-5200.
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