COBRA Subsidy Extension Law
Chard Snyder responds to new COBRA subsidy extension law affecting employers and participants
The U.S. Congress passed legislation (H.R. 3326) extending the original federal COBRA subsidy created by the American Recovery and Reinvestment Act of 2009 (ARRA) and President Obama signed it into law on Saturday, December 19, 2009.
Background
Under the ARRA, the federal government pays sixty-five (65%) percent of COBRA premiums for up to nine (9) months for employees who were involuntarily terminated between September 1, 2008, and December 31, 2009. This subsidy was set to expire at the end of this year and has already started to end for individuals who have been receiving it since March.
New Extension
Assistance-eligible individuals ("AEIs") involuntarily terminated from employment on or before February 28, 2010, can now receive the subsidy. The subsidy will remain at sixty-five 65% percent of the premium, but the maximum subsidy period will expand from nine (9) months to fifteen (15) months. Only those individuals losing health coverage due to involuntary employment termination will continue to qualify for the COBRA subsidy. Following is a summary of the new law as well as a description of the steps Chard Snyder is taking to keep your company in compliance with it:
New Extended Eligibility Period: AEIs involuntarily terminated on or before February 28, 2010 will now be eligible for the subsidy. The law eliminates the requirement that COBRA coverage must commence before a COBRA subsidy sunset date of December 31, 2009 before the new law became effective. Eligibility for the COBRA subsidy will be conditioned on a qualifying event occurring on or before February 28, 2010, without regard to when the COBRA coverage period begins. This means that AEIs involuntarily terminated on or before December 31, 2009, who become eligible for COBRA coverage after December 31, 2009 will now be COBRA subsidy eligible. This new law reverses earlier guidance (IRS Notice 2009-27, Q/A-10).
- Chard Snyder will send subsidy applications with election forms for all qualifying events occurring through February 28, 2010.
Longer Subsidy Period: The maximum COBRA subsidy period has been extended from nine (9) months to fifteen (15) months. Please remember that the new law does not change the maximum COBRA period that an individual is entitled to under COBRA or state continuation.
- Election forms and letters are currently being revised by Chard Snyder to incorporate the new 15-month provision and will be sent for all new qualifying events.
Notices For Those Who Exhausted Their COBRA Subsidy: Any AEI who exhausted their original nine (9) month COBRA subsidy period before the new law takes effect may receive the COBRA subsidy for another six (6) months if they remain an AEI and their maximum COBRA period has not ended. AEIs who dropped their COBRA coverage or kept their coverage but paid the full unsubsidized premiums must be notified that they may pay reduced premiums for retroactive coverage or receive credit for or reimbursement of overpayment. These notices must be provided within sixty (60) days of the AEI dropping or first overpaying for COBRA. Such AEI must pay for coverage no later than sixty (60) days after enactment (December 19, 2009) or February 17, 2010 (or if later, thirty (30) days after the notice was provided).
- Subsidy and Termination reports will be reviewed to identify AEIs who exhausted their original nine month COBRA subsidy period, dropped their COBRA coverage or paid the full premium.
- Identified participants will receive an updated coupon book and explanatory letter from Chard Snyder.
Other Notice Requirements: Anyone eligible for the COBRA subsidy or terminated from employment (voluntarily or not) on or after October 31, 2009 must be provided with a notice describing the revised program within sixty (60) days of the law's enactment (December 19, 2009) or February 17, 2010 or, if later, the usual deadline for furnishing materials to individuals experiencing a COBRA qualifying event.
- AEIs who became eligible for COBRA on or after November 1, 2009 will receive a new Election form from Chard Snyder explaining the new 15-month subsidy.
Please call your Account Executive to discuss applicable fees.
--James Rumple, Chard Snyder COBRA Department Manager and Larry Grudzien, Attorney-At-Law
