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Employment Law Blog

Category: Employee Benefits

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
Friday, October 10, 2008

EDD Offers Alternative To Layoffs For California Employers

Some companies are facing tough choices during the current economic downturn. Layoffs may allow the company to survive. But when the economy rebounds, those laid off workers may not be available for rehire. Hiring and training a new workforce is time consuming and expensive.

The California Employment Development Department (EDD) offers a program that may make sense for some employers.

The EDD offers what it calls a “Work Sharing Unemployment Insurance program.” The program allows eligible employers to reduce hours of workers, and offers the employees partial unemployment benefits. 

For example, if a business with 100 employees faces a temporary setback and could file a Work Sharing plan with EDD reducing the work week of all employees from five days to four days (a 20 percent reduction). The employees would be eligible to receive 20 percent of their weekly unemployment insurance benefits.

Says the EDD in a publication on the program: “Under this plan everyone benefits. The employer is able to keep a trained work force intact during a temporary setback and no employees lose their jobs.”

The catch of course is that the employer takes a hit on its EDD reserve account, which in turn would lead to higher employer contribution rates to make up for the depletion. That is, payroll taxes will increase. Of course, some increase may occur in a straight layoff too. Also consider that an employer may risk offending its entire workforce in an across the board reduction of hours, rather than offending only those who would receive the pink slip in a straight layoff.

The EDD offers a Guide for Work Sharing Employers.

Below are some FAQs offered in the publication:

Q. Who may participate in the Work Sharing program?

A. Any employer who has a reduction in production, services or other condition that causes the employer to seek an alternative to layoffs. The Work Sharing plan requires the participation of at least two employees, a minimum reduction of 10 percent of the regular permanent work force or work unit(s), and a minimum reduction of 10 percent of the wages earned and hours worked of participating employees.

Q. Who may not participate in the Work Sharing program?

A. Leased or temporary service employees may not participate.

Q. How does an employer apply for the Work Sharing program?

A. Employers must either call or write EDD’s Special Claims Office to request a Work Sharing Plan Application.

Q. How do employees qualify for the Work Sharing program?

A. To qualify for the Work Sharing program an employee must meet the following requirements for each Work Sharing week:

1. The employee must be regularly employed by an employer whose Work Sharing Plan Application has been approved by EDD.

2. The employee must have qualifying wages in the base quarters used to establish a regular California unemployment insurance claim.

3. The reduction in each participating employee’s hours and wages must be at least 10 percent.

4. The employee must have completed a normal work week (with no hour or wage reductions) prior to participating in Work Sharing.

Q. How much lead time is required to initiate a plan for participation in the Work Sharing program?

A. All Work Sharing plans begin on a Sunday. The earliest a plan may begin is the Sunday prior to the employer’s first contact date withEDD. If the Work Sharing Plan Application is submitted timely, the employer chooses the effective date. To be considered timely a DE 8686 must be submitted within 28 days of the employer’s first contact date with EDD.

Q. Can an employer with multiple locations have more than one Work Sharing plan?

A. No. Only one Work Sharing plan is approved for one California employer account number. However, units at the same or different locations may be included in the Work Sharing plan.

Q. When Work Sharing is no longer necessary, how does an employer cancel the Work Sharing plan?

A. Discontinue issuing the Work Sharing Certifications to participating employees. The Work Sharing plan will expire six months after the effective date without any further action from the Work Sharing employer.

Q. How many subsequent Work Sharing plans can an employer receive?

A. Subsequent Work Sharing plans will be approved provided the employer meets the requirements of the program. Each Work Sharing plan is effective for six months and subsequent plans may be approved until the employer’s economic conditions improve.

Q. Are Work Sharing participants required to serve a one week waiting period like regular unemployment insurance claimants?

A. Yes, like regular unemployment insurance claimants, Work Sharing participants must serve a one week unpaid waiting period. Usually the waiting period is the first week claimed after the initial claim is filed. Even though the waiting period is an unpaid week, all the eligibility requirements for the Work Sharing program must be met.

Submitted by:
{encode=“cwo@barkerolmsted.com” title=“Christopher W. Olmsted”}
Barker Olmsted & Barnier, APLC

Sunday, August 17, 2008

Sick Pay To Remain A Benefit, Not Entitlement—-For Now

Is sick pay an employee entitlement or a benefit? In California, a bill seeking to make sick pay an entitlement that all employers must provide has died in the Senate. But it will be back.

For details on the provisions of AB 2716, see our May 2008 summary here.

The bill died in the Senate because of budget constraints, noted Dean Calbreath, a San Diego Union Tribune columnist in a recent article. “The Schwarzenegger administration opposed the bill on the grounds that it would add costs to the state budget. The Department of Finance estimated that paying for the sick leave would add $600,000 to the budget, because the state would have to pay for sick leave for nurses who provide health care to elderly, blind and disabled patients in their homes.”

The cost to private employers would be much more. Although many employers offer sick pay as a benefit, most employers bristle at the thought of a state mandate requiring such pay. In a letter to the California Senate Appropriations Committee, the Cal Chamber of commerce wrote: “The ever-increasing burden of costly mandates on employers can cumulatively result in lower wages, reducing available health insurance, limiting training programs and - in the worst case scenario- job loss or reduced work hours. Job loss translates to lower tax revenues from employers and employees, as well as increased utilization of Unemployment Insurance. In an already troubled economy California should be seeking ways to stimulate job growth and avoid forcing costly mandates on employers.”


Supporters of the bill came up with all manner of public policy arguments. The pro-labor group Labor Project for Working Families argued in a fact sheet that employers should support the sick pay mandate because it would decrease employee turnover, increase productivity, and improve public health. 

The public health argument appeared to strike a chord with voters. The argument is that sick workers make more people sick. Korye Capozza,  of the UC Berkeley Center for Labor Research and Education hypothesized in a policy brief that mandatory sick pay would improve decrease food poisoning and save the elderly. “AB 2716 would have clear benefits for individual workers but, importantly, it would also have public health benefits that extend beyond the household and workplace” wrote Capozza. “Specifically, such a policy could reduce the transmission of foodborne illness, decrease disease outbreaks in nursing homes, reduce the spread of infections in childcare settings and mitigate the transmission of seasonal influenza. There is also some evidence that paid sick leave influences workers’ decisions to see a doctor, parents’ decisions to stay home and care for a sick child and patients’ decisions about treatment choices. Finally, AB 2716 has the potential to improve patient compliance with preventive health-care guidelines and chronic care management, and thus to reduce health-care spending over the long term.”

Mandatory sick pay will be back. Assemblywoman Ma has vowed to reintroduce the bill next year. It is likely to gain public support. The California Center for Research on Women and Families, a program of the nonprofit Public Health Institute, publicized a public poll finding 73% of voters would support a law to guarantee that workers receive a minimum number of paid sick days from their employer.

Similarly, the poll found that 81% agree (57% strongly) that guaranteeing paid sick day laws to all restaurant workers who handle food would increase the chances that these workers would stay home when they get sick and not infect the public. Another 76% agree (50% strongly) that paid sick days should be considered a basic worker right, like being paid a decent wage.

The text to the most recent version of the bill can be found here.


Submitted By:
Christopher W. Olmsted
Barker Olmsted & Barnier APLC