COBRA SUBSIDY EXTENDED - REPORTING REQUIREMENTS
01/22/2010
As noted in Yozell Associates’ previous communication below, the 2010 Defense Appropriations Act (2010 DOD Act) signed by President Barack Obama on December 21 extends the COBRA subsidy created by the American Recovery and Reinvestment Act (ARRA) of 2009. The 2010 DOD Act adds six months to the maximum subsidy period, expanding the period from nine months to 15 months for:
There are also 2 changes to the eligibility provisions of the subsidy. First, the Act extends the eligibility period to qualify for the subsidy from December 31, 2009 to February 28. Second, the Act contains a technical correction to the original wording of the statute relative to eligibility for the subsidy. The original wording said that coverage had to be lost under the plan prior to the end date for the subsidy which currently is February 28th (previously December 31st). This created a problem for anyone who was terminated on December 15, but did not lose coverage until December 31st, as they did not qualify for the subsidy. Congress re-drafted the eligibility requirement for premium reduction to resolve this issue. Under the new wording, eligibility is simply based upon the date of the qualifying event not the actual loss of coverage. Therefore, an individual involuntarily terminated prior to February 28, 2010 with a loss of actual coverage after that date, would still qualify for the subsidy as long as they met the other requirements of the law.
Required Notices
Plan administrators are required to issue a notice describing the new subsidy rules to all individuals who were assistance-eligible individuals on or after October 31, 2009, or who are involuntarily terminated from employment between October 31, 2009 and February 28, 2010. In addition, the Act requires special notice to be sent to those assistance-eligible individuals who exhausted their nine-month subsidy, explaining that they are now eligible either to reinstate their coverage retroactively at the subsidized rate or to receive a credit or refund if they paid more than the Act would have required.
The U.S. Department of Labor issued model notices on January 13 that employers may use to describe the federal premium subsidies available to assistance-eligible individuals under ARRA, as amended by the 2010 DOD Act. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA's notice provisions, including those added by the 2010 DOD Act. These are model notices only, and may be modified to meet each employer’s needs.
The link to access these notices is http://www.dol.gov/ebsa/COBRAmodelnotice.html. There are three notices available:
Updated Model General Notice
This notice becomes the standard qualifying event notice for all qualifying events. It should be sent to all qualified beneficiaries (not just the covered employees) who experience a qualifying event at any time from September 1, 2008 through February 28, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice.
Note: Individuals who experienced a termination of employment in December 2009, but who were not eligible for COBRA coverage until January 2010, were likely not provided proper notice. These individuals should get the updated General Notice and the full sixty (60) days from the date the updated notice is provided to make a COBRA election.
Premium Assistance Extension Notice
This notice should be sent to certain individuals who have already been provided a COBRA election notice that did not include information regarding ARRA, as amended by the 2010 DOD Act. This model notice includes information about the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act. Please note the affected individuals and the associated timing requirements:
Individuals who were assistance eligible as of October 31, 2009 (unless they are in a transition period - see below) must be provided notice of the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act by February 17, 2010.
Individuals who experienced a termination of employment on or after October 31, 2009 and lost health coverage (unless they were already provided a timely, updated General Notice) must be provided notice of the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act by February 17, 2010.
Individuals who exhausted their original 9-month subsidy period are considered to be in a "transition period" beginning the first day following the end of the subsidy period. They must be provided this extension notice within sixty (60) days of the first day of their transition period. It is very important to note that the individuals must continue to meet the definition of an “Assistance Eligible Individual” in order to benefit from the subsidy extension period.
Updated Alternative Notice
This notice is the updated general notice for plans covered by Mass. Mini-COBRA. Massachusetts issuers should modify this model notice as necessary to conform it to Mass. Mini-COBRA. Issuers may also find the model Premium Assistance Extension Notice or the updated model General Notice appropriate for use in certain situations.
For more detailed information on The COBRA Premium Reduction Extension Provisions please see http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html.