Employee Benefits-EBSA Provides Guidance On The COBRA Subsidy, As Recently Extended

The Employee Benefits Security Administration (the “EBSA”) has posted on its COBRA web page an updated COBRA Premium Reduction Fact Sheet, which reflects the extension of the COBRA subsidy and related rules under the Temporary Extension Act of 2010 (the “Act”). Here are the highlights:

–The COBRA subsidy allows eligible individuals to pay only 35 percent of their COBRA premiums; the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The subsidy is available for periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

–To qualify for the COBRA subsidy, an individual must experience a COBRA qualifying event that is the involuntary termination of a covered employee’s employment. The involuntary termination must generally occur during the period that began September 1, 2008 and ends on March 31, 2010. The Act provides that an involuntary termination of employment is a qualifying event for these purposes if it:
• occurs on or after March 2, 2010 and no later than March 31, 2010; and
• follows a qualifying event that was a reduction of hours that occurred at any time from September 1, 2008 through March 31, 2010.

The Act provides a second election opportunity for an individual who had a reduction of hours qualifying event followed by an involuntary termination, if the individual did not elect COBRA continuation coverage when it was first offered OR elected but subsequently discontinued COBRA.

–A reduction of hours is treated as being a qualifying event for these purposes when the employee and his/her family lose coverage because the employee, though still employed, is no longer working enough hours to satisfy the group health plan’s eligibility requirements.

–The maximum period of COBRA continuation coverage is generally 18 months, and is measured from the date of the original qualifying event, such as a reduction of hours. However, the 15 month period for which the COBRA subsidy is available begins on the first day of the first period of COBRA coverage for which an individual is eligible for the subsidy, meaning that the individual has to experience an involuntary termination to receive the subsidy.

–Plans notify certain current and former participants and beneficiaries about the COBRA subsidy. Due to the Act, the EBSA is updating its existing model notices and creating several additional model notices to help plans comply with these requirements. As soon as the model notices are complete, they will be available on EBSA’s Web site at www.dol.gov/cobra.

–An individual who is denied eligibility for the COBRA subsidy, whether by his or her plan or employer, may request an expedited review of the denial by the U.S. Department of Labor. The Department must make a determination within 15 business days of receipt of a completed request for review. The Act has a new penalty provision, under which the EBSA may assess a penalty against a plan sponsor of up to $110 per day for each failure to comply with the Department’s determination of eligibility for the COBRA subsidy within 10 days after the date of the plan sponsor’s receipt of the determination.