The American Recovery and Reinvestment Act of 2009, signed on February 17th, (the massive federal“stimulus” legislation) includes an important provision that affects most employers and requires immediate attention. The new law will provide for a 65% monthly COBRA premium subsidy for most employees who were involuntarily terminated between September 1, 2008 and December 31, 2009. While the intent of the law is to assist employees who were terminated in reductions in force, it appears that nearly all involuntarily terminated employees and their dependents (qualified “assistance eligible individuals”) may qualify for the subsidy. The subsidy may extend up to 9 months and applies to medical, vision and dental benefits. It applies to nearly all employers with group health plans, regardless of whether they are subject to COBRA’s continuation rules. That includes private and government employers subject to COBRA and some smaller employers that may be subject to state “mini-COBRA” laws. “Assistance eligible individuals” are qualified for subsidy payments effective at the first period of coverage, beginning on or after the bill was signed into law (February 17th). Practically, for most employers, that date is March 1st .
Significant employer notices are required to inform eligible employees of the subsidy. The Department of Labor is supposed to provide a model notice within 30 days of the law’s enactment. The law requires qualified “assistance eligible individuals” to pay just 35% of the premium. Employers would be reimbursed for the other 65% through payroll tax credits.
Additionally, employees terminated as early as September 1, 2008, who did not elect COBRA coverage, would effectively have a “do over” in the form of a new election period. These employees would have 60 days after receipt of required notices to elect to COBRA coverage at the 35% rate.
Finally, employers who already pay a portion of COBRA premiums for terminated employees may want to review their practices in light of the new legislation. The subsidy amount changes if an employer already makes payments toward the COBRA premium.
Employers should plan to immediately review and address the new law’s requirements. There are many details to this legislation so you’ll need to do some research. Please contact your insurance and/or COBRA provider, or your attorney for more information.
