By: Jon D. Hoag, Wessels Sherman, P.C.
On December 19, 2009, President Obama signed legislation into law extending the eligibility date for the COBRA premium subsidy, which was originally established under the American Recovery and Reinvestment Act (ARRA). Prior to this extension, only individuals who were involuntarily terminated and who lost coverage before December 31, 2009 were eligible to receive the 9-month COBRA subsidy.
Eligibility Period
The new law extends the eligibility for the COBRA subsidy for two (2) additional months, through February 28, 2010. The law also clarifies that an individual only need qualify (e.g. be involuntarily terminated) on or before February 28, 2010. That is, the requirement that the individual also become eligible for COBRA prior to the February 28, 2010 deadline has been eliminated.
Length of Subsidy
In addition, the new law lengthens the maximum period for receiving the subsidy from 9 months to 15 months. This provision applies to individuals whose subsidy expired prior to the extension and allows retroactive payment at the 35% subsidized rate. For those that allowed COBRA to lapse because they chose not to continue paying COBRA at the unsubsidized rate must be given notice of the opportunity to pay the subsidized amount retroactively. The individual is required to pay the premiums by February 17, 2010 or within 30 days after the individual receives notice, whichever is later.
Employers must reimburse those individuals who continued to pay COBRA at the unsubsidized rate after the 9-month period expired, or the employer may provide a credit to the individual for future payments.
Notice Requirements
The law sets forth additional notice requirements and deadlines for providing such notice.
• Individuals whose 9-month subsidy expired prior to enactment of the new law must be provided notice (within the first 60 days of this transition period) of the option to continue (including the retroactive period) at the subsidized rate;
• Individuals who continued to pay the unsubsidized rate after the 9-month period expired must be given notice that they will be reimbursed or credited for the amount of overpayment.
• Employers must provide notice of the extension to all individuals who were “assistance eligible individuals” (AEI) or who experienced a COBRA qualifying event on or after October 31, 2009.
• Individuals whose qualifying event occurs after December 19, 2009, must receive information about the extension within the COBRA notice sent within the standard periods set forth in COBRA regulations (typically within 44 days).
Conclusion
Employers should begin to identify those individuals that were AEIs or experienced a qualifying event on or after October 31, 2009 and identify those who will be provided the opportunity for retroactive subsidy coverage, as well as those who will need to be reimbursed or given a credit. Additional information, including form notices is expected in the near future.
If you have immediate questions about the COBRA subsidy extension or any other employment-related issue, please contact Jon D. Hoag at (630) 377-1554 or by email at johoag@wesselssherman.com