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Ten Points About : Extension of the COBRA Subsidy for Involuntarily Terminated Employees
By KIMBERLY A. KLIMCZUK, Esq.
1. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows employees who lose their health insurance benefits to continue their coverage for up to 18 months under certain circumstances. Traditionally, employees who elected COBRA benefits were responsible for paying the cost of their COBRA health insurance premiums.
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| 2.The American Recovery and Reinvestment Act of 2009 (ARRA) amended portions of COBRA to provide a government subsidy for COBRA premiums to employees who left their jobs involuntarily between Sept. 1, 2008 and Dec. 31, 2009. |
| 3. Under the ARRA, the government subsidized 65% of the COBRA premiums for eligible employees for up to nine months. Employers were required to pay the subsidy up front as part of the employees’ premium payments and received reimbursement from the federal government through reduced federal payroll tax payments. |
| 4. The subsidy applies to periods of health coverage beginning on or after Feb. 17, 2009, and, under the ARRA, was to last for up to 9 months. |
5. On Dec. 19, 2009, President Obama signed the 2010 Defense Appropriations Act (DAA), which extends the eligibility period for the COBRA subsidy to include employees who involuntarily separate from employment on or before Feb. 28, 2010.
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| 6. The DAA also lengthens the COBRA subsidy period from nine months to 15 months. |
| 7. In addition, former employees who had already reached the end of their subsidy period prior to passage of the DAA may continue their reduced-premium COBRA coverage for the additional six months as long as they pay their 35% share of the COBRA premium by Feb. 17, 2010, or within 30 days of receiving notice from their plan administrator, whichever is later. |
| 8. If any such employees already paid 100% of their premium in December 2009, they are entitled to either a reimbursement of the 65% that is subsidized under the DAA’s extension provisions or a credit toward future premiums equal to 65% of the monthly premium. |
| 9. The DAA requires employers to modify their COBRA election notice to provide information about the extended COBRA subsidy to all individuals who experience a COBRA-qualifying event between Sept. 1, 2008 and Feb. 28, 2010. |
10. Information on new notice requirements, updated guidance, fact sheets, and frequently asked questions will be available on the DOL’s Web site, www.dol.gov/cobra. |
 Kimberly A. Klimczuk, Esq. is a partner in the law firm Royal & Klimczuk, LLC. She specializes in management-side labor and employment law; (413) 586-2288; kklimczuk@rkesq.com
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