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Employment Law Blog

Category: COBRA

Wednesday, April 28, 2010

DOL Publishes Updated Model Notices for Extended COBRA/ARRA Subsidy

Submitted by:
Christopher W. Olmsted, Esq.
Barker Olmsted & Barnier, APLC

The Department of Labor’s Employee Benefits Security Administration COBRA page now has available updated Model Notices, Application for Expedited Review of Denial of COBRA Premium Reduction, Fact Sheet, and Frequently Asked Questions (FAQs) that reflect the provisions of the Continuing Extension Act of 2010. They are available at http://www.dol.gov/COBRA.  The new model notices include the recently extended eligibility deadline of May 31, 2010. The model notices may be adapted by employers and health plans to provide notice to ARRA eligible terminated employees.

General Summary of Subsidy:

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended, provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals 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 May 31, 2010. (An involuntary termination of employment that occurs on or after March 2, 2010 but by May 31, 2010 and follows a qualifying event that was a reduction of hours that occurred at any time from September 1, 2008 through May 31, 2010 is also a qualifying event for purposes of ARRA.) The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months. (Source: DOL website)

 

Posted by Christopher W. Olmsted on 04/28 at 01:12 AM
COBRAEmployment Law
Friday, April 16, 2010

COBRA Subsidy Eligibility Extended To May 31, 2010

On April 15, 2010, President Obama signed H.R. 4851 into law. Among other matters, the new law amends the American Recovery and Reinvestment Act of 2009 (“ARRA”) to extend through May 31, 2010, premium assistance for COBRA benefits (health insurance continuation benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985).

The COBRA subsidy was originally provided as part of the ARRA in 2009. Generally, the subsidy pays for 65% of the former employee’s health insurance premium under COBRA (the employee pays the remaining 35%). Employers or the group health plan provider pay the 65% and can then apply for a tax credit.

Congress has extended the subsidy eligibility period several times. Earlier this year, the 2010 DOD Act extended the COBRA premium reduction eligibility period for two months until February 28, 2010. Additionally, the legislation increased the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). A subsequent amendment extended the coverage period to March 2010, and yesterday’s legislation extends it to the end of May.

Therefore, employees who are involuntarily terminated on or before May 31, 2010 may be eligible for the subsidy.

The text of the legislation can be found here.

<u>Related Articles:</u>

Congress Extends COBRA Subsidy

COBRA Obligations Expanded

Submitted by:
Christopher W. Olmsted, Esq.
Barker Olmsted & Barnier, APLC

Posted by Christopher W. Olmsted on 04/16 at 03:38 PM
COBRAEmployee BenefitsEmployment Law
Friday, March 13, 2009

Does An Employee Qualify For ARRA/COBRA Subsidy After Reduction In Hours Or Resignation?

Employers are scrambling to understand and implement the COBRA provisions in the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA is commonly known as the economic stimulus legislation recently passed by Congress and signed by President Obama.

In a nutshell, ARRA entitles employees involuntarily terminated between September 1, 2008 and December 31, 2009 to continue health care coverage through COBRA by paying only 35 percent of their premiums for up to nine months. The remaining 65% is paid by employers, who may deduct the cost from federal payroll taxes. Employers must immediately comply with the law by providing notice to eligible individuals, collecting 35% of the premiums from the employees, paying 65%, and filing quarterly tax returns claiming a credit for the 65% subsidized amount. See my summary here.

Question: Under “regular” COBRA, a reduction in hours such that the employee loses eligibility for benefits will trigger COBRA. What about ARRA? If a company reduces an employee’s hours to part time, must (or may) the employer offer the ARRA premium subsidy?

The text of ARRA specifies that the premium is paid as a result of an “involuntary termination.” A reduction in hours is not a termination, and therefore it would seem that ARRA does not apply.

I called a representative at the Department of Labor’s Employee Benefits Security Administration, and he stated that ARRA would not apply in such circumstances.

Certainly it would be nice if the government put this interpretation in writing. So far as I know, to date this has not happened.

Question: What if the employee quits after receiving a reduction in hours. Does she then qualify for ARRA?

Again, the ARRA premium subsidy applies where there has been an involuntary termination. Resigning would not seem to be an involuntary termination. The same EBSA representative referenced above opined that in such circumstances, ARRA would not apply. Again, no official written interpretation has been published at this time.

While I would agree with the EBSA representative, I also think about state unemployment benefits. Although in California, for example, one is generally disqualified from receiving benefits in the event of a resignation, there are exceptions where the employee had no choice but to quit (e.g., illegal treatment in the workplace, and other such unforgivable sins). So far, I am not aware of any similarly broad interpretation of the phrase “involuntary termination” when it comes to ARRA.

If you hear differently, please let me know!

Submitted by:
Christopher W. Olmsted, Esq.
Barker Olmsted & Barnier, APLC

Posted by Christopher W. Olmsted on 03/13 at 11:39 AM
COBRAEmployee BenefitsEmployment Law • • Member Discussion