COBRA Subsidy Extended, New Notice Requirements Imposed
As discussed in our February 18, 2009 Special Employee Benefits Alert as well as our October 16, 2009 Employee Benefits Update, the Stimulus Bill, also known as the American Recovery and Reinvestment Act of 2009 ("ARRA"), provides a temporary COBRA subsidy intended to help unemployed workers and their families afford continuation health coverage. Under the ARRA, this COBRA subsidy (i.e., federal subsidization of 65% of the applicable COBRA premium) lasted for 9 months of COBRA coverage and was available to employees who were involuntarily terminated anytime between September 1, 2008 and December 31, 2009. In light of both the persistently high unemployment rates and the rapidly approaching closing of the window for eligibility for this subsidy, Congress enacted and, on December 21, 2009, President Obama signed into law, an extension of the COBRA subsidy. The extension appears as part of the Fiscal Year 2010 Defense Appropriations Act ("DAA") and is effective immediately.
The subsidy extension makes several important changes to the COBRA subsidy:
- First, eligibility for the COBRA subsidy has been extended until February 28, 2010. As a result of this law, the COBRA subsidy will now be available to employees who are involuntarily terminated at any time between September 1, 2008 and February 28, 2010.
- Second, the COBRA subsidy benefit has been extended from nine months of the COBRA period to fifteen months of the COBRA period, with the change being made retroactive to the effective date of the ARRA.
- Third, the DAA provides that a COBRA beneficiary whose subsidy had expired before enactment of the DAA and who did not pay the full premium must be given the opportunity to receive retroactive coverage. Such individuals will be entitled to continue their coverage as if there had been no lapse provided they pay 35% of the past-due premiums and provided such payment is made within 60 days of enactment of the DAA or, if later, within 30 days after notice of the COBRA subsidy extension is provided by their plan administrator.
- Fourth, plan administrators are required to provide assistance eligible individuals with notice, within 60 days of the enactment of the DAA, that the COBRA subsidy has been extended. In the case of individuals who experience a COBRA qualifying event after the enactment of the DAA, that notice can be provided as a part of regular COBRA notices.
- Fifth, plan administrators are also required to notify any assistance eligible individuals who did not pay COBRA premiums because they had already exhausted their subsidy eligibility that they may make retroactive payments of the subsidized COBRA premiums under the DAA.
- Six, plan administrators are also required to notify any assistance-eligible individuals who paid full COBRA premiums once their initial nine-month eligibility ran out that they are entitled to either a refund of premiums or an offset against future premiums, at the discretion of their employer or plan administrator.
As with the previous changes in this area, the current changes to the COBRA subsidy add additional levels of complexity to COBRA administration, and the primary monetary and administrative burden continues to fall on employers (and, to a lesser extent, insurance companies). We will continue to monitor this area and will report any significant developments to you, including any new guidance from the Department of Labor on employer and plan administrator notice requirements.
If you have any questions about these COBRA developments, or about any other employee benefits matter, please contact the attorneys listed to the left or your usual Crowell & Moring contact.
For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.