December 22nd, 2009 | By Paul Cherner
On December 21, 2009, President Obama signed the Department of Defense appropriations bill. Buried within that lengthy legislation are provisions that extend the COBRA subsidy for certain employees who have been or will be involuntarily terminated during a designated period of time.
The following are some of the key points of this new legislation, which becomes effective December 31, 2009:
1.) The subsidy (65% of the COBRA premium which is paid by the federal government through payroll tax credits) will be offered to employees who are involuntarily terminated and become eligible for COBRA before February 28, 2010.
2.) The length of time that an individual can receive the COBRA subsidy has been increased from the prior limit of nine (9) months to a new limit of fifteen (15) months.
3.) The extension to fifteen (15) months is retroactive to all individuals currently receiving the subsidy and will apply to any individuals whose initial nine (9) month subsidy expired.
4.) The extension is also retroactive to those individuals who lost COBRA coverage because they stopped paying premiums after their nine (9) month subsidy expired. Those individuals may be able to re-enroll in COBRA and receive the additional subsidy without any gaps in coverage. Plan Administrators will need to identify such individuals and send them a notice of their right to this option.
The U.S. Department of Labor continues to issue: updated Fact Sheet, FAQs, Job Lost Poster and Poster for Employees and new Model Notices. It is important for employers and plan administrators to carefully review and monitor the situation for any individuals who are or were eligible for the COBRA subsidy or who become eligible for it before February 28, 2010 and to ensure that timely notices of their rights are being sent. On January 22, 2010, the USDOL held a compliance webcast re the extension of the COBRA subsidy, which you can view by clicking on this archive.
April 22nd, 2009 | By Paul Cherner
On January 17, 2009, the Economic Stimulus Plan was enacted, a part of which provided for subsidies of COBRA premiums pursuant to certain criteria. See the postings in this blog of March 5 and 20, 2009 for a brief description of that criteria.
The U.S. Department of Labor and the Internal Revenue Service have continued to update information concerning this subsidy and employers should check these websites with respect to complying with the mandates of this program.
April 18, 2009 was the deadline for mailing Notices to all employees who have been involuntarily separated since September 1, 2008, whether they elected to take COBRA coverage or not. The DOL website contains model notices to be sent to former employees, as well as to employees who are involuntarily separated during the remainder of 2009.
March 20th, 2009 | By Paul Cherner
The U.S. Department of Labor has issued updated information for employers on complying with the new COBRA subsidy provisions that were contained in the Economic Stimulus Plan. You can review this information at the DOL web page on this subject.
There are model notices which must be sent to former covered employees (and their qualified beneficiaries) who were involuntarily terminated after September 1, 2008, whether or not they previously elected COBRA coverage. Individuals who were not eligible for COBRA, but were eligible for continuation of health care coverage under state or local law are also entitled to this subsidy and must also be sent an appropriate notice.
A notice must also be given to all covered employees (and their qualified beneficiaries) who are involuntarily separated from February 17, 2009 through December 31, 2009. For a detailed discussion of this subsidy see our posting of March 5, 2009. The DOL webpage also provides links to Frequently Asked Questions about this subsidy from the DOL and the IRS, as well as from the House Ways & Means Committee.
On March 24, 2009 at 11:30 (EDT), the DOL will be presenting a webcast about compliance with these new rules. You may register online for this free webcast.
March 5th, 2009 | By Paul Cherner
In our February 19, 2009 post, we alerted you to new COBRA rules that have been passed as part of the Stimulus Plan.
The U.S. Department of Labor (“DOL”) is required to provide guidance and a model notice to be used by no later than March 19, 2009. In the interim, the DOL has issued some preliminary guidance, including a COBRA Premium Reduction Fact Sheet, Frequently Asked Questions About COBRA Continuation for Employers, and Frequently Asked Questions for Workers and Their Families. The House Ways and Means Committee of the U.S. House of Representatives has also issued a list of Frequently Asked Questions about the provisions of this law.
The Internal Revenue Service (“IRS”) has issued an expanded list of Questions and Answers pertaining to the mechanism of funding the government subsidy for COBRA through a credit on the employer’s quarterly federal tax report.
Please click on any of these highlighted items and you will be directed to these documents on the government’s website on the COBRA subsidy issues.
All employers covered by COBRA need to promptly begin reviewing which former employees may be covered under this subsidy program, including which may need to be offered a “second chance” to elect COBRA at the subsidized rate. Within the next two weeks, there should be additional guidance and a model notice form issued by the DOL.
February 19th, 2009 | By Paul Cherner
The American Recovery and Reinvestment Act of 2009 (a/k/a “the stimulus plan”) contains several provisions intended to assist unemployed workers maintain their health insurance coverage pursuant to their COBRA rights. Essentially, the law provides that unemployed workers will only have to pay 35% of the cost of their COBRA coverage, with the remaining 65% to be subsidized by the federal government. This subsidy can last for a period of up to 9 months, unless certain specified events shorten the time period.
These provisions apply to almost all unemployed workers who are involuntarily terminated between September 1, 2008 and December 31, 2009. A “second chance” is provided to those individuals who were terminated during that time period but may have declined COBRA. These workers are allowed 60 days after receiving a new notice of these enhanced rights to decide to take COBRA coverage at the subsidized rate. It is very important that these workers receive a detailed “enhanced notice” about their rights under this new law as soon as possible. The Secretary of Labor is directed to issue a model enhanced notice by March 19, 2009 and employers must send an enhanced notice by April 18, 2009. All COBRA notices issued after February 17, 2009 must also include an explanation of the rights granted under this new law.
Employees who previously elected COBRA, if eligible for this subsidy, will be entitled to reimbursement or a credit for the 65% of COBRA premiums that they may pay for the period beginning February 17, 2009. High income individuals are not eligible for this subsidy.
There are many additional details included in these provisions and the Secretary of Labor will also be issuing regulations to further define these rights and obligations and the procedures to follow. Employers should consult with legal counsel or a knowledgable COBRA administrator as to how to proceed to implement these new requirements.
Pursuant to IRS requirements, you are hereby informed that this information is not intended to be tax advice that should be relied upon for purposes of avoiding taxes and/or penalties.
