Congress Extends Deadline for Eligibility for COBRA Subsidy Again and Again
May 1, 2010
As discussed in previous Levenfeld Pearlstein Data Points from March, 2009, The American Recovery and Reinvestment Act of 2009 ( “ARRA”), which was the economic stimulus bill that was signed into law by President Obama on February 17, 2009, made significant changes to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) which requires employer-sponsored health plans to provide continuation of group health coverage to terminated employees. AARA provided for a subsidy of 65% of the premiums for continued health care coverage under COBRA for certain employees (and their family members) who were terminated by their employer (other than as a result of gross misconduct) between September 1, 2008 and December 31, 2009 and who elected to receive COBRA coverage (referred to in ARRA as “Assistance Eligible Individuals”). Under ARRA, Assistance Eligible Individuals were entitled to pay only 35 percent (35%) of the monthly COBRA premiums for up to nine (9) months of COBRA coverage. Employers were required to pay the other 65 percent (65%) of these COBRA premiums, but they could recoup that payment as an offset against payroll taxes.
As further discussed in another Levenfeld Pearlstein Data Point from earlier this year, the original date upon which the COBRA subsidy rights were to be terminated was extended when President Obama signed into law The Department of Defense Appropriations Act, 2010 (“DODAA”) which included amendments to the rules governing the COBRA subsidy requirements under ARRA. Under DODAA, employees who were involuntarily terminated up to February 28, 2010 were still eligible for the COBRA subsidy.
The February 28, 2010 cut-of date for eligibility for the COBRA subsidy rights was extended again by the Temporary Extension Act of 2010 and was also recently extended for a third time by the Continuing Extension Act of 2010. The new deadline for termination of employment for which subsidized COBRA coverage will be available is now May 31, 2010. However, it is likely that the COBRA subsidy eligibility deadline will be extended yet again as there are currently two separate bills pending ion Congress which could extend the COBRA subsidy to the end of 2010.
In light of the continued extension of the COBRA subsidiary eligibility deadline, employers need to be aware of the various notice requirements with respect to employees who have terminated employment during the periods between the various extensions of the deadlines. Employers also have to amend their COBRA notices that will be sent to newly terminated employees which reflect the proper COBRA subsidy deadline dates. The Labor and Employment attorneys at LP are happy to assist you in tailoring your health plan administrative procedures in order to comply with the COBRA subsidy rules and notice requirements. We will also continue to monitor the legislative developments in this area and provide further updates if new legislation affecting the COBRA subsidy rights are enacted into law.