COBRA subsidy extended (again!)

On March 2, 2010, President Obama signed into law the Temporary Extension Act of 2010 (HR 4691) (TEA), extending the COBRA subsidy, yet again. The TEA extends eligibility for the subsidy to involuntary terminations occurring through March 31, 2010, and redefines “assistance eligible individuals” (AEIs) to include COBRA qualified beneficiaries that experience a reduction in hours on or after September 1, 2008, followed by an involuntary termination that occurs on or after March 2, 2010. The plan administrator must provide notice of the TEA provisions to this new type of AEI within 60 days after the termination of employment occurs. Vigilant anticipates that the Department of Labor will issue a model notice in the coming weeks.

For those AEIs who did not elect COBRA following the reduction in hours, or who elected, but subsequently dropped the coverage, the involuntary termination of employment is treated as a second qualifying event, which gives them a new chance to elect COBRA and receive the subsidy. The maximum duration of COBRA coverage in this situation, however, is measured from the date of the original reduction in hours. An AEI in this situation has no obligation to pay retroactive premiums (and presumably doesn’t receive coverage) for the period in between the two qualifying events.

Finally, the TEA also includes a provision that gives deference to an employer’s determination of whether an involuntary termination has occurred, as long as the determination is based on a reasonable interpretation of the law, and the employer maintains appropriate supporting documentation, including an attestation by the employer. For employers who participate in the Vigilant Group Benefits Trust, Vigilant will take care of this new notice requirement for you. Questions? Call Vigilant or check out our Legal Guide, “COBRA Provisions of the American Recovery and Reinvestment Act of 2009” (6015).