COBRA Subsidy Extended

On December 19, 2009, president Obama signed into law the Fiscal Year 2010 Department of Defense (DOD) Appropriations Act. The 2010 DOD Act, among many other things, extended and expanded the COBRA subsidy program originally begun under the American Recovery and Reinvestment Act of 2009 (also known as the "Stimulus Bill").

Under the 2010 DOD Act, the Stimulus Bill's original COBRA premium subsidy period was expanded from nine to fifteen months - six additional months of subsidized coverage. The eligibility cutoff date for the subsidy also was extended from December 31, 2009 to February 28, 2010. (It is certainly possible that additional extensions may follow before this new deadline passes.)

The 2010 DOD Act also put in place a new sixty day retroactive period for payment of premiums for eligible employees and dependents whose subsidy period expired on November 30, 2009.

Lastly, the new law requires yet another special notice outlining these changes to all eligible individuals either on COBRA as of October 31, 2009, or who are terminated from employment with health insurance benefits after that date and up to February 28, 2010. We anticipate that the Department of Labor will issue a form notice in the coming weeks.

Posted by Thamer E. "Chip" Temple III

Stimulus Bill Provides COBRA Changes

The American Recovery and Reinvestment Act of 2009, better known as the "Stimulus Bill," will be signed into law on February 17, 2009. Although the primary thrust of the Stimulus Bill is aimed at the current economy, among its many varied provisions are important changes to employer COBRA obligations.

COBRA provides employees and their dependents who otherwise might lose health benefits the right to continue benefits at group rates for up to eighteen months (and sometimes longer). In most instances, the employee pays the cost of COBRA - the monthly insurance premiums.

The Stimulus Bill provides a COBRA subsidy for eligible employees and former employees, and a corresponding payroll tax credit to employers for the cost of the subsidy. Specifically, the employer will pay sixty-five percent of the health insurance premiums for up to nine months. The amount paid then will be applied as a credit towards the employer's payroll taxes. The employee would remain responsible for the remaining thirty-five percent of the premium cost.

Eligible employees for the subsidy are those who have been involuntarily terminated from employment between September 1, 2008 and December 31, 2009, and who have an annual individual income of less than $125,000 or a family income of less than $250,000.

Since the COBRA changes apply retroactively to those employees involuntarily terminated on or after September 1, 2008, eligible employees who initially declined COBRA coverage must be given an additional sixty day period to elect COBRA coverage with the new subsidy. Employers will need to send qualified employees and their beneficiaries amended COBRA notices. For those who then elect coverage, the coverage period would begin on February 17, 2009, not on the original date of employee termination.

Employers also will need to amend their standard COBRA notices for the remainder of 2009. The U.S. Department of Labor is expected to issue model notices by mid-March.

Posted by Thamer E. "Chip" Temple, III