• The extension of the eligibility period for the COBRA subsidy through May 31, 2010.
• A new special election period and related notice requirement for individuals who experience a qualifying event that is related to a termination of employment on or after April 1, 2010, and before April 15, 2010.

The excerpts below are from an article posted by the law firm of Drinker Biddle, a large national law firm.

Special Election Period

A health plan must extend a special COBRA election period to an individual who experienced an involuntary termination of employment on or after April 1, 2010, and prior to April 15, 2010, and who would be an “assistance eligible individual” (AEI) but who does not have a COBRA election in effect on April 15, 2010. The special election period runs from April 15, 2010, through the date 60 days after the Notice of Special Election Period is provided to that individual.

Note about effective date of COBRA subsidy. Although not specifically addressed in the Act, due to the short, 15-day gap between the expiration of the COBRA subsidy on March 31, 2010, and enactment of the Act, we believe that an individual’s COBRA subsidy becomes effective as of the first day of COBRA coverage if he or she elects coverage during the special election period.

Notice of Special Election Period

In the case of any individual who experienced a qualifying event related to a termination of employment on or after April 1, 2010, and prior to April 15, 2010, a plan administrator must provide the general COBRA notice, including a description of the availability of premium reduction in the case of a qualifying event that is an involuntary termination of employment, within 60 days of enactment of the Act (i.e., by June 14, 2010). If the plan administrator has already distributed the general COBRA notice to such individuals, then the plan administrator may simply supplement it with an additional notice describing the extension of the availability of premium reduction with respect to involuntary terminations through May 31, 2010, and the special election period.

Note about the notice requirement. The Act is not clear on whether this notice applies only to AEIs, or to any individual who has a qualifying event related to a termination of employment, whether voluntary or involuntary, during the period April 1, 2010, through April 14, 2010. The more conservative approach is for a plan administrator to provide the special election notice to any individual who experienced a qualifying event related to a termination of employment on or after April 1, 2010, and prior to April 15, 2010, in order to notify all individuals who may potentially be eligible for the COBRA subsidy, including those who an employer may have incorrectly classified as voluntarily terminated.

A Reminder – Expansion of Assistance Eligible Individuals

Under ARRA, only individuals who experienced a qualifying event that was an employee’s involuntary termination of employment could become AEIs and take advantage of the COBRA premium subsidy. The Temporary Extension Act of 2010 expanded the premium subsidy to include as a qualifying event for purposes of the subsidy, a reduction of hours that occurred at any time on or after September 1, 2008, and is followed by an involuntary termination of employment that occurs on or after March 2, 2010 (and before June 1, 2010). Individuals who experience a qualifying event that falls under this expanded definition and are otherwise eligible AEIs (Reduced Hours AEIs) will be eligible for the COBRA subsidy beginning with the first day of the first period of coverage for which the individual is a Reduced Hours AEI. The Reduced Hours AEI’s maximum continuation coverage period is determined as if the individual had elected COBRA when initially eligible due to the reduction of hours.

Action Items

Plan sponsors and administrators should consider the following immediate action items:

• Notices. Plan administrators should update their COBRA notices and other plan communications to include the extension of the eligibility period to May 31, 2010.
• Assess Prior Terminations. Identify covered employees (and their qualified beneficiaries) who became eligible for COBRA on or after April 1, 2010, and before April 15, 2010, as well as their COBRA elections. Provide an updated COBRA notice to these individuals that includes a description of the extended eligibility period and the special election period. Identify those employees and beneficiaries in the group whose qualifying event is the employee’s involuntary termination of employment and who are eligible for the COBRA subsidy.
• Continue to Monitor Reduced Hours AEIs. Plan administrators should continue to identify any Reduced Hours AEIs, and provide a new notice to them upon involuntary termination. An individual in this group may be eligible for the special election period if, upon a reduction in hours the individual did not elect, or elected and later discontinued, COBRA.
• Stay Tuned. Two separate bills in Congress propose to further extend the COBRA subsidy eligibility period through June 30, 2010, or year end.

COBRA Update, Again…]]> http://reddingbusinessandemploymentlawblog.com/2010/04/cobra-update-again/feed/ 0 http://reddingbusinessandemploymentlawblog.com/2010/01/cobra-subsidy-to-continue/ http://reddingbusinessandemploymentlawblog.com/2010/01/cobra-subsidy-to-continue/#comments Wed, 06 Jan 2010 18:00:21 +0000 Shawn McCammon http://reddingbusinessandemploymentlawblog.com/?p=157 As many of you know, when an employee is terminated the employee may be eligible to continue their participation in the company sponsored health plan through what is often referred to as COBRA.  COBRA is a federal law that allows workers who leave their jobs to continue their former employer’s health insurance coverage for up to 18 months. Ordinarily, though, individuals must pay the entire premium, plus an administrative fee, making COBRA unaffordable for many unemployed workers. The economic stimulus package enacted in February 2009 subsidized 65% of COBRA premiums for workers laid off between September 1, 2008, and December 31, 2009. This legislation required employers to pay the 65% subsidy and then reclaim those dollars through a quarterly tax credit.

Recently, however, the government signed the Defense Department’s 2010 appropriations bill (“2010 DOD Act”) that will allow laid-off workers to receive subsidized COBRA premiums for up to 15 months, which previously expired after 9 months.

The Department of Labor’s Employee Benefits Security Administration (EBSA) has released a fact sheet explaining how the 2010 DOD Act extends the COBRA subsidy enacted during the earlier economic stimulus package. In general, the 2010 DOD Act extended the COBRA premium reduction eligibility period for two months, through February 28, 2010 and increased the maximum period for receiving the subsidy from 9 to 15 months.

Also, the fact sheet reviews the eligibility requirements for the subsidy, the new period of coverage, and notice requirements that plan administrators must provide. The fact sheet explains that plan administrators are now required to provide notice about the changes made to the COBRA premium subsidy provisions to individuals who have already been provided a COBRA election notice, unless the election notice included the updated premium reduction information. The notices must be given to eligible individuals by February 17, 2010. Individuals who have been terminated on or after October 31, 2009 and will lose health coverage must be provided this notice “within the normal timeframes for providing continuation coverage notices.” Those who had reached the end of the reduced premium period before the legislation extended it to 15 months must be provided this notice within 60 days of the last day they were eligible to receive COBRA premium assistance under the old rules.