Apr 21, 2010

COBRA Subsidy Eligibility Period Extended to May 31, 2010

On April 15, 2010, President Obama signed the Continuing Extension Act of 2010 (the “Act”), containing another extension of the eligibility period for the COBRA premium subsidy enacted as part of the American Recovery and Reinvestment Act of 2009 (the “COBRA Subsidy”). As explained in previous Client Alerts, the COBRA Subsidy provides involuntarily terminated individuals with a 65 percent subsidy towards the cost of their COBRA health care premiums and employers receive a credit against payroll taxes for the cost of the COBRA Subsidy provided to these individuals.

The Act extends the COBRA Subsidy eligibility period to May 31, 2010. Thus, “Assistance Eligible Individuals” who are involuntarily terminated from employment between September 1, 2008, and May 31, 2010, will be eligible for the COBRA Subsidy.

In addition, the Act creates extended election procedures for individuals terminated after March 31, 2010 and prior to April 15, 2010. If an individual was terminated during this time, and he or she declined to elect COBRA coverage due to the temporary lapse of the COBRA Subsidy on March 31, 2010, that individual will have an extended period of time to elect COBRA coverage and receive the COBRA Subsidy.

As with the previous COBRA Subsidy extensions, group health plan administrators are required to send involuntarily terminated employees notification of their right to receive the COBRA Subsidy, including their right to the extended election period, if applicable.

Commentators believe that legislation implementing an additional extension of the COBRA Subsidy – perhaps to the end of the year – is forthcoming. We will continue to monitor and provide additional information on this legislation.

For more information on the COBRA Subsidy, contact your SGR Executive Compensation and Employee Benefits counsel.

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