Client Briefing - March 2010
COBRA Subsidy: Clarification of
the March 2010 Extension
COBRA Subsidy Extension
March 2, 2010
By Patricia F. Weisberg
On March 2, 2010, the Temporary Extension Act of 2010 (the "Act"), extended the COBRA subsidy eligibility period through March 31, 2010.
It also expanded the subsidy for individuals who had a reduction of hours between September 1, 2008 and March 31, 2010, followed by an involuntary termination of employment on or after March 2, 2010. As such, these individuals will be eligible for the COBRA subsidy. The period of COBRA continuation coverage (i.e. generally 18 months), however, is determined as though the qualifying event was the reduction of hours.
This new group of employees will be entitled to the subsidy if:
- They have a COBRA qualifying event due to a reduction in hours between September 1, 2008 and March 31, 2010; and
- They have an involuntary termination of employment between March 2, 2010 and March 31, 2010.
The maximum duration of the subsidy remains at 15 months and COBRA coverage eligibility remains at 18 months (unless extensions apply).
- If an Assistance Eligible Individual's ("AEI") COBRA qualifying event is an involuntary termination of employment on or after March 2, 2010, the normal COBRA election period and process will apply.
- If an AEI had a reduction in hours which is followed by an involuntary termination on or after March 2, 2010 and the AEI elected and continued COBRA coverage following the reduction in hours, s/he does not need to elect again.
- If an AEI had a reduction in hours and did not elect COBRA coverage or elected coverage but discontinued it before the end of the 18 months and then has an involuntary termination of employment between March 2 and March 31, 2010, the involuntary termination will be a new "qualifying event" and will trigger a new round of COBRA notices, but the period of COBRA coverage will be deemed to have commenced upon the reduction of hours, not upon involuntary termination.
WHAT YOU NEED TO DO NOW:
Plan administrators and other applicable entities should:
- Track employees who have obtained COBRA rights as a result of a reduction in hours so that appropriate notices can be sent to provide AEIs with a new opportunity to elect if they have been or are later terminated during March 2010; and
- Track all employees who become eligible for COBRA because the Senate is currently considering legislation that would extend eligibility for the premium subsidy through December 31, 2010
If you have any questions or concerns about the COBRA subsidy, you should consult with an attorney who is familiar with employment law. The Labor and Employment attorneys at Walter & Haverfield will be pleased to help.
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