COBRA Subsidy Extension – Employer Action Required by end of January 2010

January 15, 2010

President Obama recently signed into law an extension and expansion of the COBRA premium subsidy that was introduced by American Recovery and Reinvestment Act of 2009.

The subsidy originally entitled covered employees whose employment was terminated between September 1, 2008 and December 31, 2009 up to nine months of 65% subsidized health coverage.  It was due to expire on Dec. 31, 2009.

With the extension, however, the eligibility period expires February 28, 2010 and the nine months of subsidized coverage can now last as long as 15 months.

Administratively, plan administrators must provide two notices:

1.  Updated General Notice.  This must go to any employee or qualified beneficiary who experienced a “qualifying event” (any qualifying event) between September 1, 2008 and February 28, 2010 and who has not yet been provided an election notice.  This notice should be sent no later than January 31, 2010.

2.  Premium Assistance Extension Notice.  This must go to: (1) all individuals who were “assistance eligible individuals” as of October 31, 2009; and (2) any individuals who experience a termination of employment on or after October 31, 2009.  This notice should be sent no later than February 17, 2010.

There is an opportunity for eligible employees who paid the full (non-subsidized) COBRA premium to obtain reimbursement of the excess amounts paid.

Finally, the COBRA subsidy extension legislation clarifies that an “assistance eligible individual” is someone who (among other things) is eligible for COBRA related to a qualifying event that occurs during the September 1, 2008 through February 28, 2010 period.  So a participant is eligible for the subsidy if, for example, they are laid off February 25th but lose actual coverage sometime after February 28, 2010.