COBRA Subsidy Extension Legislation’s Effect on Employers

December 28, 2009 - by: HR Hero 0 COMMENTS

Last week, President Barack Obama signed legislation into law that extends the original federal COBRA subsidy created by the American Recovery and Reinvestment Act of 2009 (ARRA). The legislation extends:

  • the total allowable time an individual could receive the COBRA subsidy by six months (from nine to 15 months); and
  • the subsidy to individuals who are involuntarily terminated between January 1, 2010, and February 28, 2010.

Additionally, the legislation allows certain individuals whose subsidy periods already expired and who failed to pay their full unsubsidized premiums to retroactively pay them.

Employers will need to quickly revise previous documents and prepare new paperwork to meet the requirements of the new subsidy extension legislation. Among other things, employers will have to amend their current COBRA subsidy paperwork to reflect:

  • the extra six months of coverage;
  • the new February cut-off date to qualify for the subsidy; and
  • the fact that individuals’ eligibility for the subsidy is conditioned only on the date of their involuntary employment termination (instead of the date of their employment termination and the date their COBRA coverage period begins).

Employers will also need to include the above information in their standard COBRA package from this point on.

Additionally, employers will have to develop a notice to provide to current and future COBRA beneficiaries that details the premium subsidy extension created by the new legislation.  They will also have to provide additional notice to certain individuals whose subsidy periods expired and who failed to pay their full unsubsidized premiums. Such notice should inform applicable individuals about the new legislation and that they can make retroactive premium payments in order to maintain their COBRA coverage.

The COBRA subsidy extension legislation was part of the Department of Defense Appropriations Act, 2010 (H.R. 3326), a bill that appropriates funds for the Department of Defense. The bill passed the U.S. House of Representatives by a 395-34 vote and the U.S. Senate by an 88-10 vote, and the President signed it into law on December 21.

The U.S. House of Representatives also recently passed a major appropriations bill with a provision that would extend the COBRA premium subsidy to individuals who are involuntarily terminated through June 30, 2010. However, the Senate is not expected to act on this legislation until 2010.

Also, you can keep up with the latest legal changes affecting employer benefits and trends in employee benefits with the Benefits Complete Compliance

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