TLP Announcements

COBRA Rears Its Ugly Head Again

 The COBRA subsidy created by the American Recovery and Reinvestment Act of 2009 (“ARRA”) has been extended. The extension applies in the following two ways:

• The maximum period of subsidized premium payments is extended from 9 months to 15 months; and

• The subsidy applies for people who were involuntarily terminated between September 1, 2008 and February 28, 2010 (rather than December 31, 2009).

Given the extension of the maximum period of subsidized premiums, an additional notice explaining the subsidy must be provided no later than February 19, 2010. Unlike the initial legislation that mandated a model notice be created by the Department of Labor, the extension legislation contains no such mandate. As such, it is unclear whether the Department of Labor will create such a notice.

Additionally, individuals who dropped coverage as a result of previously using their entire 9 month subsidy must be given an additional opportunity to retroactively elect continued coverage. There may also be individuals who are eligible for a premium refund or credit toward future premiums, if they continued COBRA coverage after the 9 month subsidy expired.

The legislation also clarified that eligibility for the subsidy is based on the date of the qualifying event as opposed to the date coverage would be lost as a result of the qualifying event. This clarification eliminates a problem created by the interpretation of both the IRS and DOL that the prior legislation required both the involuntary termination of employment and loss of coverage to occur on or before December 31, 2009. Under the revised legislation, if an employee is involuntarily terminated on February 20, 2010 but does not lose coverage until March 1, 2010, such employee will be eligible for the subsidy as long as they meet the other qualifications.

If you have questions on the COBRA subsidy, please do not hesitate to contact any of the lawyers at the Lowenbaum Partnership, L.L.C.

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