Additional Extension of COBRA Premium Subsidy Eligibility Period
On December 30, 2009, Snell & Wilmer published an Employee Benefits Update explaining the extension of the COBRA premium subsidy under the Department of Defense Appropriations Act, 2010 (“DODAA”). DODAA extended the 65% COBRA premium subsidy as provided for in the American Recovery and Reinvestment Act of 2009 (“ARRA”) in two ways—it extended the eligibility period for two months until February 28, 2010, and it extended the maximum subsidy period to 15 months, from nine months.
Extension of Eligibility Period
On March 2, 2009, President Barack Obama signed the Temporary Extension Act of 2010 (“TEA”). TEA extends the COBRA premium subsidy eligibility period for another month, until March 31, 2010.
Reduction of Hours Followed by Involuntary Termination of Employment
TEA also provides that individuals who experience a reduction in hours between September 1, 2008 and March 31, 2010, followed by an involuntary termination of employment between March 2, 2010 and March 31, 2010, will qualify for the COBRA premium subsidy. Under this new provision, individuals who had a reduction in hours and did not elect COBRA coverage, or elected COBRA coverage and then stopped making premium payments, will have a second opportunity to elect COBRA coverage. This group of individuals must be notified regarding their second opportunity to elect COBRA coverage within 60 days of the date of the second qualifying event (i.e., their March 2 – March 31, 2010 involuntary termination of employment). Although the 18-month COBRA continuation period runs from the date of the reduction of hours, the 15-month COBRA premium subsidy period runs from the date of the involuntary termination of employment.
Employer Determination of Qualifying Event as Involuntary Termination
Pursuant to the new law, if an employer determines that the qualifying event with respect to COBRA continuation coverage for an individual was involuntary termination of employment and the employer maintains supporting documentation of the determination, including an attestation by the employer of involuntary termination with respect to the covered employee, the qualifying event for the individual is deemed to be involuntary termination of the covered employee’s employment.
TEA includes expanded enforcement provisions, allowing the Department of Labor, the Department of Health and Human Services, or an affected individual, to bring a civil action for a violation of the COBRA subsidy requirements. TEA also permits the Department of Labor or the Department of Health and Human Services to assess a $110 per day per person penalty against a plan sponsor for a violation of the COBRA subsidy requirements.
To comply with TEA, plan administrators will need to amend their COBRA notices to reflect the new COBRA subsidy eligibility period end date (i.e., March 31, 2010). Plan Administrators will also need to provide notice to individuals who experienced a reduction in hours of employment between September 1, 2008 and March 31, 2010 followed by an involuntary termination of employment between March 2, 2010 and March 31, 2010 regarding their second opportunity to elect COBRA coverage. Hopefully the Department of Labor will quickly issue a model notice that plan administrators may use for this purpose.
If you have any questions on the subject of this article or would like more information, you may contact the authors or another Snell & Wilmer attorney at 602.382.6000.
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