Wednesday, December 23, 2009

Expansion and extension of COBRA subsidy

President Obama has enacted legislation that both expands and extends the original federal COBRA subsidy created by the American Recovery and Reinvestment Act of 2009. If you recall, employees who were involuntarily terminated prior to December 31, 2009, received a 65% subsidy of their COBRA premiums for up to nine months. The new legislation:

  • Expands the total allowable time an individual can claim the COBRA subsidy by six months (from nine to 15 months); and

  • Extends the subsidy to individuals who are involuntarily terminated between January 1, 2010, and February 28, 2010.

The legislation also includes two new notification requirements for plan administrators within 60 days:

  • To any individual who was eligible for the COBRA subsidy or who becomes eligible for COBRA at any time on or after October 31, 2009, notice of the expanded benefits.

  • To any individuals who lost their subsidy because they reached the 9-month limit and failed to make timely payments of COBRA premiums thereafter, notice regarding the expanded benefits, including information on the ability to make retroactive premium payments.

Employers will have to amend their current COBRA paperwork to reflect these changes. Dan Schwartz at Connecticut Employment Law lists 5 steps employers should be taking now, in light of these changes:

    1. Compile a list of individuals who are currently receiving the COBRA subsidy. Those individuals are going to need to be informed that the period is going to be extended by 15 months and that to receive the subsidy they will need to continue to pay the premium as they have.

    2. Compile a list of individuals who were receiving the COBRA subsidy but whose nine months of eligibility had expired. For those individuals, they will need to be informed that they can "re-start" COBRA. Sample notices from the DOL should be available for this purpose in the next few days.

    3. Compile a list of individuals are COBRA eligible, but who were not going to receive the COBRA subsidy because the time period was going to expire beforehand. This will typically include those who were terminated within the last month, who were likely continuing on the employer's health plan until December 31, 2009. Those individuals will now need to receive new notices that they will be eligible for the COBRA subsidy; again, the DOL should be preparing sample notices in the next few days.

    4. In the interim, employers may want to send out a letter to all such individuals informing them that changes are on the way and that you will be providing them with updates as they become available. This might keep your HR staff a little less busy answering phone calls and give them some more time to comply with this law.

    5. Going forward for the next 75 days or so, employers will need to inform those who are laid off that they may be eligible for this COBRA subsidy. Again, those terminated by 2/28/10 will be eligible regardless of when the actual COBRA period is scheduled to begin.

Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or