On December 19, 2009, President Obama signed the extension of the American Recovery and Reinvestment Act of 2009 (ARRA) COBRA Premium Subsidy into law under the Department of Defense Appropriations Act for Fiscal Year 2010. The extension provisions are located in a House Amendment to the Senate Amendment to H.R. 3326. This amendment is effective immediately, and requires employers to notify certain current and future COBRA participants of the extended 15-month eligibility.
What Has Changed?
- Prior to this legislation, an Assistance Eligible Individual (AEI) was required to have been involuntarily terminated from employment between September 1, 2008, and December 31, 2009. Now, an AEI is required to have been involuntarily terminated from employment between September 1, 2008, and February 28, 2010.
- Prior to this legislation, only AEIs who were involuntarily terminated from employment between September 1, 2008, and December 31, 2009, and who became eligible for COBRA prior to December 31, 2009, were eligible for the subsidy. This meant that if an AEI terminated employment prior to December 31, 2009, but was not eligible for COBRA until January 1, 2010, he or she was not eligible for the subsidy. Now, an AEI is required to have been involuntarily terminated from employment between September 1, 2008, and February 28, 2010, and there is no longer a requirement that the COBRA eligibility occur between September 1, 2008, and February 28, 2010. The AEI just needs to be entitled to COBRA based on the qualifying event.
- Prior to this legislation, the ARRA subsidy was available for a total of up to nine months. Now, the subsidy is available for up to 15 months.
Handling Late Payments
Any premium due during an AEI’s transition period shall be treated as timely paid by the AEI assuming that the AEI was covered under COBRA immediately preceding the transition period, and the AEI pays his or her COBRA premiums within 60 days of December 21, 2009, or if later, 30 days after the AEI is presented with notice of this right. The COBRA premium will be the subsidized amount.
If an AEI remained covered under COBRA, but his or her ARRA subsidy expired (and he or she paid the full unsubsidized amount) during the transition period, then the AEI overpaid his or her premiums for the months in which he or she would have been eligible for the extension of the subsidy from nine to 15 months. The plan must reimburse the AEI for the overpaid premium amount.
Individuals who became AEIs on or after October 31, 2009, or who experience a qualifying event based on voluntary or involuntary termination of employment on or after October 31, 2009, must be notified regarding the extended premium assistance within 60 days after the date of enactment. Once notified, these individuals have 60 days to elect COBRA. In addition, the plan must notify individuals who were AEIs and who have paid the unsubsidized COBRA amount, or who have not timely paid their COBRA premiums regarding the extension, and the ability to make retroactive premium payments as a result of the transition period. This notice must also be made within 60 days after the date of enactment.
However, this special election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months from the employee's involuntary termination).