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Client Alert: DOL ISSUES NEW MODEL COBRA SUBSIDY NOTICES

March 20, 2009


The U.S. Department of Labor (“DOL”) yesterday issued four new COBRA notices.  These new notices were mandated by the American Recovery and Reinvestment Act of 2009 (“ARRA”) enacted February 17th, 2009. 

As reported in an earlier Montgomery McCracken Benefits Alert, the ARRA temporarily provides subsidized COBRA payments (among other things) for certain qualified beneficiaries who are terminated from employment on or after September 1st, 2008 through December 31st, 2009.  The subsidy is 65% of the premium the eligible qualified beneficiary might otherwise pay and it lasts for up to 9 months.

The ARRA also obligated the DOL to prepare and issue new model COBRA notices to assist plan administrators in complying with these new COBRA rules.  The DOL’s four model notices are summarized below with a link to each:

General Notice: This notice includes general information regarding the new COBRA rules and election information.  It should be sent to all employees and all qualified beneficiaries who experience(d) a qualifying event (any qualifying event) any time from September 1st, 2008 through December 31st, 2009.  It is designed to (1) provide all employees with general information regarding the new COBRA rules; and (2) provide newly qualified beneficiaries with a chance to elect COBRA with the subsidy.

Abbreviated General Notice: This notice only has general information regarding the new COBRA rules.  It does not include any election information.  It should be sent only to qualified beneficiaries who have already elected and continue to have COBRA coverage.  It is designed to inform current qualified beneficiaries that (1) if eligible (i.e., if their employment was terminated on or after September 1st, 2008), they will be receiving the subsidy; or (2) that they are not eligible for the subsidy because they either were not terminated or were not terminated on or after September 1st, 2008.   This notice could also be sent to all covered employees (i.e., not newly qualified beneficiaries) in lieu of providing the General Notice discussed above and may be more appropriate because it does not contain any election information.

Insurer’s Notice for Non-COBRA Plans: This notice is for issuers obligated by a state’s “mini-COBRA” law to provide extended coverage to participants covered by small plans not subject to COBRA (because the employer sponsoring the plan has fewer than 20 employees).

Extended Election Notice: This notice provides an additional 60 days in which to elect COBRA with the new subsidy and should only be sent to qualified beneficiaries who experienced a job termination on or after September 1st, 2008 but before February 16th, 2009 and who either (1) did not initially elect COBRA; or (2) elected COBRA but let it lapse prematurely.  This notice is designed to give eligible qualified beneficiaries a second chance to elect COBRA again now that it comes with the subsidy.  This notice must be sent no later than April 18th, 2009. 

Each of these notices will take some revising and should be reviewed by counsel.  Please let us know if you have any questions or if we may be of assistance in preparing these notices and complying with the new COBRA rules.