IMPORTANT E-ALERT – COBRA SUBSIDY EXTENDED BY TWO MONTHS

The 2010 Defense Appropriations Act, which President Obama just signed into law on December 19, 2009, has extended the eligibility date for the COBRA subsidy by two months until February 28, 2010. Under the American Recovery and Reinvestment Act of 2009, the eligibility period for the subsidy was slated to end on December 31, 2009.

In addition to extending the eligibility date, the Act also lengthens the COBRA subsidy period from 9 months to 15 months. This means that former employees who are currently receiving the COBRA subsidy are eligible to have it continue. This also means that former employees who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. In order to continue their coverage, they must pay the 35% premium costs by 60 days after enactment or, if later, 30 days after notice of the extension is provided by the plan administrator.

The Act also provides that eligibility for COBRA does not need to occur by February 28, 2010 in order for the former employee to be eligible for the subsidy; rather, the qualifying event that makes the former employee eligible for the subsidy (i.e., termination) must occur on or before February 28, 2010.

Further, the Act creates new notice requirements. Per the Department of Labor’s press release on December 21, which can be accessed at www.dol.gov/ebsa/newsroom/2009/ebsa122109.html new sample notices, updated guidance and frequently asked questions will be available on DOL’s COBRA website. Unfortunately, that information has not been posted yet, but hopefully will soon be available at www.dol.gov/ebsa/cobra.

In the meantime, employers should begin taking stock of:

• their former employees who are currently receiving the subsidy as they will need to be notified that the subsidy period has been lengthened;
• their former employees who were receiving the subsidy until the nine months of eligibility expired as they will need to be notified that they now can continue COBRA; and
• any employees who were eligible for COBRA but were not going to receive a subsidy before the eligibility period expired.

If you have any questions about the new COBRA extension or require assistance in complying with the requirements under it, please contact Amy B. Royal or Kimberly A. Klimczuk at (413) 586-2288.