Third COBRA Subsidy Extension Requires Immediate Attention

April 19, 2010

On April 15, 2010, President Obama signed the Continuing Extension Act of 2010 (the “CEA”), further extending the 65% COBRA premium subsidy established under the American Recovery and Reinvestment Act of 2009 through May 31, 2010.

Extension of Eligibility Period. Prior to the passage of the CEA, the COBRA premium subsidy was only available to:

• Individuals who became eligible for COBRA continuation coverage due to an involuntary termination of employment and loss of group health coverage by March 31, 2010; or
• Individuals:
  • whose  qualifying event  was  a  reduction of  hours occurring between September 1, 2008 and March 31, 2010,
  • who subsequently experienced an involuntary termination of employment that occurred between March 2, 2010 and March 31, 2010, and
  • who were otherwise eligible for the subsidy.

The CEA extends the eligibility period for both sets of individuals, so that individuals who are involuntarily terminated from employment by May 31, 2010, can qualify for the subsidy.

Notices. Based on previous guidance from the Department of Labor (DOL):

• Plan sponsors will need to provide a general election notice updated for the extension to all qualified beneficiaries (not just covered employees) (i) who experience any type of qualifying event from April 1, 2010 through May 31, 2010, and (ii) who have not yet been provided an election notice.
• For individuals who have already been provided with election notices, plan sponsors will need to send an updated Premium Assistance Extension Notice. This notice will likely need to be provided to:
  • individuals who were eligible for the COBRA subsidy (“assistance eligible individuals”) as of March 31, 2010; and
  • individuals who experienced a termination of employment on or after April 1, 2010, and lost health care coverage (unless they were provided an updated election notice).
• Assistance eligible individuals will likely be given additional time in which to submit their April COBRA premiums.
• We  anticipate  that  the  DOL  will  provide  additional  guidance  and updated notices on its website at www.dol.gov/COBRA.