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Stop-Gap Legislation Extends COBRA
Subsidy
March 3, 2010
Last night, President Obama signed
legislation that extends the eligibility period for the
federal COBRA premium subsidy through March 31, 2010. Absent
this legislation, employees involuntarily terminated after
February 28, 2010 would not have been eligible for the COBRA
subsidy. Future extensions of the premium subsidy are likely.
Indeed, the Senate is currently considering legislation that
will continue the extension through the remainder of 2010.
In addition to extending the COBRA subsidy
period, the newly-signed legislation also expands the definition
of "assistance eligible individual" to include individuals who
are terminated after experiencing a reduction in hours. As
originally enacted, the subsidy applied only to individuals (and
their qualified dependents) who were eligible for COBRA because
of an involuntary termination during the subsidy eligibility
period. Now, if an individual experiences (or has experienced) a
COBRA-qualifying reduction in hours on or after September 1,
2008, and is subsequently terminated, the individual (and
his/her qualified dependents) will be eligible for the subsidy
on the basis of the reduction in hours.
Finally, the legislation also provides that
government agencies may assess monetary penalties and file civil
actions for violations of the COBRA subsidy provisions.
What This Means
Covered employers will be required to provide a
new round of COBRA subsidy notices to individuals who are
eligible for the subsidy as a result of a reduction in hours
followed by an involuntary termination. In addition, COBRA
notices for newly-terminated employees should be updated to
reflect the new COBRA subsidy extension. It is likely the
Department of Labor will issue new model COBRA subsidy notices
soon. Finally, employers should expect additional extensions of
the subsidy period in coming weeks.
This E-Update was authored by
Lisa Frank
and
Brenda
Kasper. For more information, please contact Ms.
Frank, Ms. Kasper or any other Paul,
Plevin attorney by calling (619) 237-5200.
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