COBRA Subsidy Extension Update

7/16/2010 - There is still a chance that the expired COBRA subsidy will be reinstated.  Employers have 44 days from the date of the qualifying event to send COBRA notices.  Employers should not wait to send non-subsidy COBRA notices to employees who were terminated in June 2010.  If the subsidy is reinstated, updated COBRA notices will need to be sent to employees who received the non-subsidy forms.

Employees terminated on or before May 31, 2010

COBRA Notices sent to former employees who were involuntarily terminated prior to May 31, 2010, must contain language outlining eligibility for the 15 month, 65% COBRA subsidy. These notices are available below.

Employees terminated June 1, 2010, or later

If a former employee terminated June 1, 2010 or later requests a COBRA notice, or for employers who wish to send out COBRA notices without the subsidy language to employees terminated June 1, 2010, or later, click here.

4/19/2010 - On April 15, 2010, the President signed into law an extension of unemployment benefits and the COBRA premium assistance that helps with the cost of health benefits for Americans who lost their jobs. 

This extension provides a COBRA premium subsidy for eligible individuals who are involuntarily terminated from employment through May 31, 2010.

• Certain COBRA beneficiaries may receive 65% of their COBRA continuation coverage premiums subsidized.  The COBRA beneficiary would pay the remaining 35% of the total COBRA premium.

• To qualify for the subsidy, an individual must be involuntarily terminated between September 1, 2008 and May 31, 2010.  If an individual was involuntarily terminated between September 1, 2008 and February 16, 2009 (prior to this act going into effect) but did not elect COBRA at the time, they do have the opportunity to elect COBRA and receive the subsidy*. 

  To qualify they must be able to check 'yes' for all statements:

  • The loss of employment was involuntary.

  • The loss of employment occurred at some point on or after September 1, 2008 and on or before May 31, 2010.

  • If the loss of employment was preceded by a qualifying event that was a reduction of hours, the reduction of hours took place at some point between September 1, 2008 and May 31, 2010 AND the loss of employment occurred on or after March 2, 2010.   

  • I am NOT eligible for other group health plan coverage (or I was not eligible for other group health plan coverage during the period for which I am claiming a reduced premium).

  • I am NOT eligible for Medicare (or I was not eligible for Medicare during the period for which I am claiming a reduced premium).

  The maximum duration of COBRA coverage will date from the date that they could have first elected COBRA.

• The subsidy is adjusted based on income.  Those with modified adjusted gross incomes of $125,000 or more are not eligible to receive the full subsidy ($250,000 for joint filers). 

• The employer collecting the 35% premium will obtain reimbursement from the government for the remaining 65%.  In cases where payroll taxes are not sufficient to cover the subsidy, the additional amount will be provided as a credit to the taxpayer as if it was an overpayment of payroll taxes. 

  Current COBRA Notices (includes subsidy language):

  Updated General Notice: send to all qualified beneficiaries (not just covered employees) who experienced a qualifying event at any time from Sept. 1, 2008 through May 31, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice. 

  New Election Period Notice: send within 60 days of the date of termination to those individuals who either 1) experienced a qualifying event that was a reduction in hours at any time from Sept. 1, 2008 through May 31, 2010 or 2) subsequently experience a termination of employment at any point from March 2, 2010 through May 31, 2010 or 3) either did not elect continuation coverage when it was first offered OR elected but subsequently discontinued the coverage.    

  Supplemental COBRA Notice: send to all individuals who elected and maintained continuation coverage based on the following qualifying events:  termination of employment that occurred at some time on or after March 1, 2010 for which notice of the availability of the premium reduction available under ARRA was not given; or reduction of hours that occurred between Sept. 1, 2008 and May 31, 2010 which were followed by a termination on or after March 2, 2010 and by May 31, 2010. 

  Extended Election Notice: send to all individuals who experienced a qualifying event that was a termination of employment on or after March 1, 2010, or were provided notice that did not inform them of their rights under ARRA, and either chose not to elect COBRA at that time OR elected COBRA but subsequently discontinued that coverage.

   

COBRA Notices (Terminations prior to March 1, 2010):

Step-by-Step Instructions - a step by step guide to help administrators make sure they send and track COBRA notices.

Qualifying Event Packet - for use following all qualifying events (terminations, reduction of hours, divorce, legal separation, death of employee, child no longer dependent.  Updated to include COBRA subsidy extension.

COBRA Subsidy Extension Notice - Send to former employees who previously received COBRA subsidy mailings. Include this in the COBRA packet to advise individuals of the expansion of the COBRA premium subsidy effective December 2009. This should be sent to all individuals who previously received a mailing and terminated during or after October 31, 2009.

COBRA Subsidy Confirmation Letter - send when the individual has been approved by the employer for the COBRA subsidy.

COBRA Premiums Assistance Tracking Worksheet - This spreadsheet helps administrators keep track of individuals currently receiving the premium subsidy.

End of COBRA Subsidy - Send this notice to individuals whose subsidy is ending for any reason, including eligibility for other coverage, or reaching the end of the 15 month subsidy period.

 

Other Resources:

http://www.dol.gov/ebsa/faqs/faq-consumer-cobra2.html

http://www.irs.gov/newsroom/article/0,,id=204708,00.html

http://www.dol.gov/ebsa/COBRA.html

http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html