• Congress Further Extends Subsidy for COBRA Continuation Coverage
  • March 19, 2010 | Authors: Katharina E. Babich; Pamela Baker; Michael R. Maryn; Martin J. Moderson; Margo C. Soulé; Frank P. VanderPloeg
  • Law Firms: SNR Denton - Chicago Office ; SNR Denton - Kansas City Office ; SNR Denton - Chicago Office ; SNR Denton - Kansas City Office ; SNR Denton - Chicago Office
  • The Temporary Extension Act of 2010, which President Obama signed into law on March 2, 2010, extends the period in which individuals may become eligible for subsidized COBRA continuation coverage from February 28, 2010 to March 31, 2010.

    Background

    The American Recovery and Reinvestment Act of 2009 ("ARRA") introduced a COBRA subsidy for individuals who lost group health coverage due to an employee's involuntary loss of employment between September 1, 2008, and December 31, 2009, later extended to February 28, 2010.  Please see the following Sonnenschein In Briefs for further information regarding the COBRA subsidy:

    • New COBRA Rules Under Stimulus Bill Require Immediate Attention by Employers, Insurers and Third Party Administrators
    • Department of Labor Issues Model Notices Under New COBRA Subsidy Rules - Immediate Action is Required
    • Congress Extends Subsidy for COBRA Continuation Coverage

    Extension of Subsidy for COBRA Continuation Coverage

    Employers and employees had awaited word on whether the subsidy would be extended, and for how long. The Temporary Extension Act of 2010 makes several changes to the subsidy on COBRA besides this one month extension.

    • Extension.  The Act extends the COBRA subsidy eligibility period by one month to March 31, 2010.  The subsidy eligibility period is the period during which an employee must incur an involuntary termination of employment that results in a termination of group health coverage in order for the employee and his or her family members to be eligible for the COBRA subsidy.
    • Termination after Reduction in Hours.  The Act also provides that an involuntary termination that occurs on or after March 2, 2010 but by March 31, 2010 and follows a qualifying event that was a reduction in hours that occurred anytime between September 1, 2008 through March 31, 2010 will also be treated as a qualifying event for purposes of the subsidy.  Notice must be given to individuals who qualify during the 60-day period beginning on the date of involuntary termination of employment.
    • Procedural Recordkeeping.  The Act adds a provision to the Internal Revenue Code which deems that an involuntary termination has occurred if the employer has, based on a reasonable interpretation of the subsidy rules, determined that the qualifying event under COBRA was an involuntary termination of employment so long as the employer maintains supporting documentation, including an attestation of the employer.
    • Enforcement.  The Act adds an enforcement provision allowing the Secretary of Labor to bring a civil action to enforce its expedited review of an employer's denials of premium assistance.  The Secretary may also impose a penalty of $110 per day for each failure to comply with the Secretary's determination more than 10 days after the issuer or plan sponsor receives the determination.

    What Employers Need to Know -- and Do -- Now

    Employers will need to amend and update their notices. In addition, employers will need to notify employees who were eligible for COBRA continuation coverage because of a reduction in hours and later have an involuntary termination between March 2, 2010 and March 31, 2010 that they are eligible for a  COBRA subsidy.